Is buying commodity futures called direct investment in commodities or indirect investment in commodities ? Have fun 
Tricky one…I will side with direct.
Well, you aren’t actually buying a commodity, but the right to acquire a commodity at a fixed price. So that would suggest Indirect. BUT, the value of the future at a given time is a direct function of the spot price, which would suggest Direct. ?
^don’t talk like a politician (double hedging), which one??
If I had to call it, I would say Direct.
I would say direct on the basis that buying a future is not as removed as investing in a company with exposure to a commodity. There are numerous factors that could influence return on the company. Although a commodity future is subject to interest rates and future commodity prices, i wouldnt put that on the same level as investing in the company. But that’s my two cents for what it’s worth.
i’d say direct.
Direct
I am going to say indirect. At t=now you do not directly own the commodity. You have a contract to purchase it.
I’ll go with direct, indirect would be something like investing in an oil & gas co/miner’s equity? I read this like a week ago, it’s already a distant memory!
So what is the answer ? I’ don’t have my books with me
I recall the reading and I remember being confused. …derivatives are considered direct investment in commodities. I just now grasp the concept that buying a company that deals in the commodity is indirect vs. owning the commodity or a derivative on the commodity = direct. it is like a light bulb just went off. silly los, I hope it is tested.
What is actually buying the wheat? Really direct?
I agree with clouiscar’s explanation. Futures provide direct investing. Buying a share of a company that invests in commodities would be indirect investment.
Good question…and great way to think about it Maratkus
From my notes: Direct: Entails cash market purchase of physical commodities, or exposure to changes in spot market values via derivatives, such as forwards and futures Indirect: Involves the acquisition of indirect claims on commodities, such as equity in companies specializing in commodity production (i.e. buying a share of BHP, SQM)
indirect
jbisback Wrote: ------------------------------------------------------- > From my notes: > > Direct: Entails cash market purchase of physical > commodities, or exposure to changes in spot market > values via derivatives, such as forwards and > futures > > Indirect: Involves the acquisition of indirect > claims on commodities, such as equity in companies > specializing in commodity production (i.e. buying > a share of BHP, SQM) I agree. Add one point: indirect investment in commodity may not offer the same exposure as that direct investment can provide, because many companies hedge price risk of commodity production.
Direct.
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