Along with stocks and real estate, physical commodities are one of many asset classes of investment. Commodities are bought, sold, and traded in commodities markets regulated by legal entities called commodities exchanges. In the United States, the Commodity Futures Trading Commission (CFTC) oversees the commodity derivatives and futures markets.

Major commodities exchanges in the US include the New York Mercantile Exchange (NYMEX), the Chicago Mercantile Exchange (CME), and the Chicago Board of Trade (CBOT). These exchanges are part of the CME Group, which is the world's biggest financial derivatives exchange. Internationally, the London Metal Exchange and Tokyo Commodity Exchange are significant.

Individual investors may trade commodities to offset the volatility of the stock market, reduce risk, and add diversification to their portfolios. Commodities are bought and sold in a number of ways within financial markets, including via commodity futures contracts, options, exchange-traded funds (ETFs), and mutual funds. In derivatives markets, commodity prices are connected to the value of underlying assets.

Commodities Explained: 3 Examples of Commodities