Constraints to commodity trading - SS1 Commerce Past Questions and Answers - page 1
What is one constraint to commodity trading?
Market risk
Market risk
Guaranteed supply and demand
What factor can cause significant price fluctuations in commodity trading?
Price stability
Price volatility
Regulatory compliance
What is one constraint in commodity trading related to supply and demand?
Stable supply chains
Oversupply and price pressure
Limited demand fluctuations
Which factor can impact commodity trading due to planting and harvesting cycles?
Market volatility
Seasonality
Legal constraints
What is one constraint related to information and market access in commodity trading?
Limited market regulations
Reliable market data access
Explain in simple terms what market risk means in commodity trading.
Market risk in commodity trading refers to the overall risk associated with the broader market conditions. It includes factors like economic downturns, regulatory changes, and unexpected events that can impact commodity prices and market dynamics. Market risk affects all participants in commodity trading and can result in losses or reduced profitability.
How can price volatility be a constraint in commodity trading? Provide an example.
Price volatility in commodity trading can create challenges and constraints as it introduces uncertainty and risk. For example, sudden price fluctuations caused by weather conditions, geopolitical events, or supply-demand imbalances can make it difficult for traders to predict and manage price movements effectively. This volatility can lead to increased trading risks and impact the profitability of trading positions.