Compare Commodities Brokers

What is a commodities broker?

A commodities broker provides access to commodities markets such as gold, oil, and corn for trading, speculation, and hedging.

The different ways commodities broker provide access to the market

Commodities broker provide access to the commodities markets via:

• Futures
• Options
• CFDs
• Spread Betting
• ETFs

The different types of commodities brokers

Commodities Future Brokers

Commodities futures are used by agricultural firms and speculators. Commodities futures allow traders to buy or sell a specific amount of a commodity at a specific date in the future. A farmer may use them to lock in the current market price and sell a harvest of corn before it has been grown, whereas a trader may use them to speculate on the price of corn moving higher or lower in the hope of making a profit.

A commodities futures broker will provide access through futures trading to commodities exchanges such as the CME or CBOT. Our guide on how to trade futures explains the risks and rewards of futures trading.

Commodities Options Brokers

Commodities options are traded on exchange-like futures and can be used for physical trading or speculation. Commodities options differ from commodities futures in that you are trading the right to a certain amount of a commodity at a certain point in the future, not the obligation. Here's how options trading works.

CFD Commodities Brokers

Trading commodities via CFDs enables traders to speculate on the price of commodities with leverage. Leveraged trading enables traders to enter into a "contract for difference" based on the opening and closing prices of a trade. The user of margin means that traders only need to deposit a small percentage of the value of the commodities they are trading through a commodities broker which increases their exposure to the market.  Commodities CFDs are an OTC (over the counter) derivatives product which means that traders never actually own the underlying commodities, they are simply speculating on the price.

Spread Betting Commodities Brokers

Spread betting on commodities is another form of OTC margin speculation and allows traders to bet on the price movement of commodities. The key advantages over CFDs are that in the UK there is no capital gains tax on spread betting profits. Because of this commodities spread betting is unique to the UK. Commodities spread betting should not be confused with futures spread trading which is speculating on the divergence between different monthly futures.

Commodities ETF Brokers

Trading commodities through ETFs can be done through most stockbrokers and investment platforms.  Commodity ETFs are traded on stock exchanges like shares and can be held in normal accounts, ISAs and SIPPs. The price of commodities ETFs tracks the price of underlying commodities so provide a simple way for investors to get exposure to commodity markets without having to enter into traditional derivatives contracts.

How commodities brokers make money

Commodities brokers make money through fees and financing charges. Commodity broker costs can be broken down depending on how a commodity is traded.

The costs involved in trading with a commodities broker

• Futures - commission charge on a per lot basis
• Options - commission charged on a per lot basis
• CFDs - the bid/offer spread is widened and overnight interest is charged on positions
• Spread Betting - the bid/offer spread is widened and overnight interest is charged on positions
• ETFs - commission charge on buys and sells, plus an account maintenance charge