February 21, 2024

The Domestikated Life

One Passion

Stock Market Commodities – What Are They?

Ever so often Internet search engines receive hits for stock market commodities. No doubt, these hits come from well meaning people who are probably looking for investment advice. The trouble is, there are no such thing! How this misinformation ever got started is a footnote in the annals of urban legends and rather than try to trace the source of such misinformation, this article seeks to clear the matter up and put the issue to rest.

Commodities are unprocessed, raw goods such as oil, gold, silver, beef, corn, wheat, and certain financial instruments which are bought and sold in bulk for delivery on a future date certain at an agreed upon price. These goods are bought and sold over commodities exchanges and not over stock or securities exchanges. There are 10 such exchanges in the United States, the Chicago Board of Trade being the oldest. The New York Stock Exchange is not a commodities exchange – it is a stock or securities exchange where you would go to buy stocks and bonds and some financial instruments.

Commodities are tangible goods whereas stocks are intangible items attesting to one’s ownership interest in a corporation. Bonds are debt instruments secured by the assets of a corporation and bond holders are considered creditors of the corporation. When you buy commodities, you are buying actual goods which could be delivered to you, although usually you buy and sell contracts so you do not actually take delivery of the goods.

Stock market commodities do not exist. It is unfortunate that searchers continue to look for information on a concept which is a misnomer and which creates more confusion than it resolves. This article has shown that commodities are traded over commodities exchanges and stocks are traded over stock exchanges. The two do not mix.