The derivatives commodity market is becoming an increasingly popular investment trend in Vietnam. Products on this market not only provide profit opportunities but also help investors manage risk effectively. With a variety of product types and trading methods, the derivatives commodity market has great expansion potential, creating opportunities for both individuals and businesses to capitalize on. In this article, let SFVN introduce you to the prominent products and common contract types on the derivatives commodity market.

The derivatives commodity market offers profitable investment opportunities and risk management tools for investors

What is the Derivatives Commodity Market?

The derivatives commodity market is where investors conduct transactions based on the value of basic commodities, including agricultural products, metals, fuel, and energy. It is an ideal environment for investors to mitigate risks and leverage price volatility through financial instruments such as forward contracts, futures contracts, options contracts, and swap contracts.

The development of the derivatives commodity market connects parties needing risk protection with investors seeking profit from price fluctuations, contributing positively to market liquidity and transparency

Product Groups Traded on the Derivatives Commodity Market

Agricultural Products Group

Agricultural products include soybeans, corn, coffee, rubber, sugar, wheat, oats, cotton, and various other grains. Investing in the agricultural market helps mitigate risk while generating profits from seasonal price fluctuations and market demand.

• Soybeans: A primary ingredient in food and animal feed, soybeans hold high value and profitability. Derivative investment in soybeans via futures contracts provides price volatility protection.

• Corn: A staple for livestock feed and ethanol production, corn prices often fluctuate due to weather and global output, making it a popular derivative commodity.

• Coffee: With high liquidity and widespread trade, the coffee market is greatly influenced by international production and demand, making it a popular choice for derivative investment.

• Wheat: A vital commodity in the food industry, wheat prices are heavily impacted by weather and agricultural output in major growing regions like Russia and the U.S.

• Sugar: Widely used in food and beverage production, sugar prices fluctuate due to weather, import-export policies, and market demand

Investing in agricultural products helps mitigate risk and profit from price volatility

Metal Products Group

The metal group includes gold, silver, copper, platinum, and aluminum. These commodities are often viewed as effective inflation hedges, providing stability and diversification for investment portfolios.

• Gold: A safe-haven asset during economic instability, gold is the most popular derivative product, offering asset protection against financial risks.

• Silver: With its value tied to industrial and investment demand, silver's high liquidity makes it an attractive choice for derivative investors.

• Copper: Widely used in construction and industry, copper helps investors hedge against price volatility in manufacturing.

• Platinum: Used in jewelry and industrial sectors, especially automotive manufacturing, platinum prices fluctuate based on industrial demand and investment markets.

• Aluminum: A common metal in industries from construction to household goods, aluminum prices are influenced by global production and supply-demand dynamics.

Metal derivatives are effective tools for inflation protection and asset security

Energy Products Group

The energy products group includes crude oil, natural gas, gasoline, diesel, and coal. Prices in the energy market are significantly impacted by geopolitical, economic, and environmental factors, creating numerous investment opportunities.

• Crude Oil: The world’s most traded commodity, crude oil prices are heavily influenced by politics, economics, and production from major producers.

• Natural Gas: Widely used in industry and daily life, natural gas prices fluctuate based on supply-demand and extraction, creating hedging investment opportunities.

• Gasoline: An essential derivative product, gasoline prices depend on crude oil prices and consumption demand, particularly in the transportation sector.

• Diesel: Mainly used for transportation and industrial machinery, diesel prices are impacted by energy market demand and global crude oil prices.

• Coal: As a primary energy source in many countries, coal prices depend on mining output, environmental policies, and industrial demand.

Energy derivatives are heavily impacted by geopolitical factors

Industrial Raw Materials Group

Industrial raw materials  group includes rubber, cotton, timber, wool, and other manufacturing materials. These products are essential due to their wide applications and potential profitability from price volatility.

• Rubber: A key material for tires and other consumer goods, rubber prices depend on industrial demand and major rubber markets such as China and India.

• Cotton: Essential for textile and clothing production, cotton demand is influenced by the fashion industry and climate conditions.

• Timber: Used in construction, furniture, and paper production, timber prices are impacted by supply-demand, trade policies, and weather.

• Wool: Used in the textile industry, wool prices vary based on output from major producers such as Australia and New Zealand.

• Leather: Primarily used in footwear, bags, and furniture production, leather prices are influenced by animal skin supply and demand in the fashion industry.

Industrial raw materials meet production needs and price fluctuations

Types of Contracts in the Derivatives Commodity Market

Forward Contract

A forward contract is an agreement between two parties to exchange a base commodity at a predetermined price at a specific future date. This tool helps participants minimize price volatility risk and is especially suitable for producers, farmers, or large commodity-consuming businesses.

Example: A food manufacturing business can use a forward contract to buy soybeans at a pre-determined price to stabilize production costs.

Futures Contract

A futures contract is a standardized version of a forward contract, traded publicly on exchanges. This contract has high liquidity and is commonly used for commodities like crude oil, gold, and silver. A unique feature of futures contracts is the requirement for margin deposits and daily settlement procedures, making it easier for investors to manage capital and capture short-term profit opportunities.

Example: An individual investor interested in crude oil may buy a crude oil futures contract expecting price increases, profiting when oil prices rise.

Options Contract

An options contract grants the holder the right (but not the obligation) to buy or sell a base commodity at a specific price on or before a set date. This tool gives investors flexibility to limit risks and leverage price volatility, suitable for both hedging and speculative strategies.

Example: An investor anticipating a coffee price increase may buy a coffee call option. If prices rise, they can exercise the option to profit. If prices drop, they can forgo exercising the option, losing only the option premium.

Swap Contract

A swap contract is an agreement between two parties to exchange cash flows or debts from different financial instruments. This contract is often used to hedge interest rate or exchange rate risks, stabilizing cash flows for large businesses and banks.

Example: A business may use an interest rate swap contract to stabilize loan interest costs, switching from a floating rate to a fixed rate.

Derivative contracts offer flexible solutions, helping investors manage risk and maximize profits

Conclusion

The derivatives commodity market presents a wide range of investment opportunities with attractive products and high profit potential. Each product group on the market, such as agricultural, metal, and energy, provides tailored solutions for various investor needs, from risk management to speculative profits. Open a derivatives commodity trading account with SFVN today to make the most of investment opportunities on the derivatives commodity market.