People have been trading oil, gold, wheat, and cattle for centuries. What has changed is how you access these markets. You no longer need a seat on the Chicago Mercantile Exchange or a warehouse full of soybeans. You can trade commodities online through half a dozen instrument types, each with its own cost structure, risk profile, and learning curve.
This guide covers every major way to get commodity exposure online: stocks, ETFs, CFDs, futures, options, and spread betting. By the end, you will know which instrument fits your capital, experience, and goals.
Why Traders Are Drawn to Commodities
Inflation hedge. When currencies lose purchasing power, hard assets like gold and oil tend to hold or increase in value. Institutional investors routinely allocate to commodities during inflationary periods.
Supply and demand fundamentals. Commodity prices are driven by physical supply and demand. A drought hits Kansas, wheat rises. OPEC cuts production, oil goes up. These dynamics are tangible, researchable, and tradable.
Diversification. Commodities often have low correlation with stocks and bonds, reducing overall portfolio volatility.
Volatility. Natural gas can move 5-10% in a day. Coffee can spike 30% in a month on frost reports. For active traders, this creates opportunity, though it also amplifies risk.
The Four Major Commodity Categories
Commodity Categories and Key Markets
| Category | Key Markets | What Drives Prices |
|---|---|---|
| Energy | Crude Oil (WTI, Brent), Natural Gas, Gasoline, Heating Oil | OPEC decisions, geopolitics, inventories, seasonal demand |
| Precious Metals | Gold, Silver, Platinum, Palladium | Interest rates, USD strength, safe-haven demand, industrial use |
| Base Metals & Industrials | Copper, Aluminum, Zinc, Nickel, Iron Ore | Construction demand, manufacturing data, China GDP |
| Agriculture & Livestock | Wheat, Corn, Soybeans, Coffee, Cocoa, Sugar, Live Cattle | Weather, crop reports, export data, disease outbreaks |
Each category behaves differently. Understanding what drives prices matters more than the instrument you choose to trade them with.
Six Ways to Trade Commodities Online
The same commodity (say gold) can be traded through completely different instruments. Each has trade-offs in cost, complexity, leverage, and suitability.
1. Commodity Stocks
Instead of trading gold directly, buy shares of Barrick Gold or Newmont Mining. For oil, look at ExxonMobil or Shell. For agriculture, Archer-Daniels-Midland or Bunge. The stock price correlates with the underlying commodity, but company-specific factors (management, debt, production costs) also matter.
Best for: Investors who already have a brokerage account and want commodity exposure without learning new instruments. Also useful for earning dividends, which raw commodities do not provide.
Watch out for: Correlation between a mining stock and its commodity is not always tight. A gold miner can drop even when gold is rising due to company-specific risk.
2. Commodity ETFs and ETNs
ETFs offer a middle ground between stocks and direct commodity trading. Some hold physical commodities (like SPDR Gold Shares, GLD, which stores actual gold bullion). Others use futures contracts to track prices (like the United States Oil Fund, USO). Broad basket ETFs give diversified exposure across energy, metals, and agriculture in a single ticker.
Best for: Beginners who want straightforward commodity exposure that trades like a stock. No futures account needed, no rollover to manage.
Watch out for: Futures-based ETFs suffer from contango, where the cost of rolling contracts forward erodes returns over time. Oil can be up 20% over a year while USO is flat or negative. Always check whether an ETF holds physical assets or futures before buying.
3. Commodity CFDs
Contracts for difference let you speculate on commodity prices without owning the underlying asset. Most online brokers outside the US offer CFDs on gold, silver, oil, and natural gas. You might put up 5-10% margin to control a full-size position, magnifying both gains and losses.
Best for: Short-term traders who want leveraged exposure with easy long and short access. Popular with day traders and swing traders in Europe, Australia, and the Middle East.
Watch out for: Between 70-80% of retail CFD accounts lose money, a statistic brokers are required to disclose. Overnight financing costs also add up if you hold positions for weeks or months.
4. Commodity Futures
Futures are the backbone of commodity markets. A futures contract is an agreement to buy or sell a specific quantity at a set price on a future date. Standard crude oil (CL) controls 1,000 barrels, but micro contracts (MCL, MGC) make futures accessible to smaller accounts.
Best for: Serious traders who want direct market access, transparent pricing, and the most liquid commodity markets. Also essential for spread trading or hedging physical commodity exposure.
Watch out for: Contract expiration and rollover. If you forget to close or roll a position, you could theoretically end up obligated to take delivery of 5,000 bushels of corn. Most brokers have safeguards, but you need to understand the contract calendar.
5. Options on Commodities
You can buy options on commodity futures (CME, ICE) or on commodity ETFs. Options give you the right, but not the obligation, to buy or sell at a specific price. Your maximum risk is the premium paid, but time decay works against you constantly.
Best for: Intermediate to advanced traders who want defined-risk trades, hedging, or income generation through selling premium. Options on commodity ETFs are simpler than options on futures.
Watch out for: The learning curve is the steepest on this list. Options pricing involves multiple variables (delta, theta, vega, gamma), and most beginners lose money while learning. Paper-trade first.
6. Spread Betting on Commodities
Spread betting, available primarily in the UK and Ireland, works similarly to CFDs but with a key tax difference: profits are currently exempt from Capital Gains Tax and Stamp Duty in the UK.
Best for: UK-based traders who want tax-efficient leveraged commodity exposure. Mechanics are nearly identical to CFDs.
Watch out for: The same leverage risks as CFDs apply. Losses are also tax-free, meaning you cannot offset them against other gains. Not available in most countries outside the UK.
Comparing the Instruments Side by Side
Here is how the six instruments stack up across the factors that matter most.
Commodity Instruments Compared
| Instrument | Leverage | Min Capital | Complexity | Go Short? | Best Timeframe |
|---|---|---|---|---|---|
| Commodity Stocks | None (1:1) | $200 | Low | Via short-selling | Weeks to years |
| Commodity ETFs | None (1:1) | $50 | Low | Via inverse ETFs | Weeks to years |
| Commodity CFDs | 10:1 to 20:1 | $200 | Medium | Yes, easily | Hours to weeks |
| Commodity Futures | 5:1 to 15:1 | $2,000+ | High | Yes, easily | Days to months |
| Commodity Options | Defined risk | $200 | High | Yes, via puts | Days to months |
| Spread Betting | 10:1 to 20:1 | $200 | Medium | Yes, easily | Hours to weeks |
Practical Tips for Getting Started
Start with what you understand. If you already trade stocks, commodity ETFs are the lowest-friction entry point. If you are comfortable with leverage, adding gold or oil CFDs is straightforward.
Learn the contract specs. Know the tick size, tick value, margin requirements, and trading hours before entering any commodity trade.
Follow the supply data. The EIA publishes weekly oil inventory reports. The USDA releases crop reports. Free data is abundant in commodity markets. Use it.
Respect seasonality. Natural gas spikes in winter. Gasoline demand peaks in summer. These patterns provide a framework for analysis.
Size positions conservatively. A 2% risk rule is a reasonable starting point. Many experienced commodity traders use 1% or less.
Risk Management for Commodity Trading
Commodity markets move fast and gap hard. A geopolitical event, inventory surprise, or weather shock can send prices sharply in either direction.
Always use stop-losses. A natural gas position without a stop can blow through your account in a single session. Set stops based on technical levels and actual volatility, not arbitrary dollar amounts.
Be careful with leverage. Many successful commodity traders use 3:1 to 5:1 effective leverage, even when 20:1 is available.
Diversify across commodities. Oil and gold behave differently, and agriculture has its own drivers entirely. Spreading risk across categories reduces the impact of any single surprise.
Commodities reward traders who do their homework on supply, demand, and seasonality. The instrument you choose matters less than understanding the market you are trading.
Key Takeaways
- Commodities offer diversification, inflation hedging, and volatility-driven opportunities across energy, metals, and agriculture.
- Six instruments give you access: stocks, ETFs, CFDs, futures, options, and spread betting. Each has different cost, leverage, and complexity trade-offs.
- Stocks and ETFs are the simplest entry point. Futures and options offer direct exposure but require more knowledge. CFDs and spread betting suit leveraged short-term trading.
- Futures-based ETFs can underperform due to contango. Check the fund structure before buying.
- Risk management is non-negotiable. Use stop-losses, keep leverage conservative, and size positions to the commodity's volatility.
Disclaimer: This content is for educational purposes only and does not constitute financial advice. Trading involves substantial risk of loss. Past performance does not guarantee future results.
