In a Nutshell
- Commodities are physical assets such as corn, oil or gold.
- There are two main ways to bet on commodities—fixed odds and spread betting.
- Due to large changes in supply and demand and dependence on several real-world factors, commodities betting is more volatile and risky than many other financial markets.
Many of the best offshore sportsbooks allow you to bet on much more than just sports. While online betting certainly has its roots in sports, as the industry has exploded in popularity, so have the number of different markets available for gambling. Bettors can wager on the next pope, world news current events, politics, entertainment award shows and the financial markets.
Betting on financial markets like stocks and commodities may seem redundant, since many investors feel like putting money in those markets is already a gamble, but it’s an ever-changing environment that can be accurately measured. This makes it ideal for online gambling.
Sites now offer the opportunity to bet on market futures, such as a stock’s closing price on a given date in the future or the prices of various stock indices, like the Dow Jones or S&P 500. You can even bet on seemingly random financial outcomes like the last digit in the Dow’s closing price.
The commodities markets, however, are an even wilder ride.
What Is the Commodities Market?
A commodity is any physical asset. Unlike stocks, which are nebulous shares in a company, a commodity is something that exists in the real world and can be touched. Popular commodities for financial investors are oil, precious metals like gold or silver, grains such as corn, and livestock such as cattle. They fall into three main categories:
- Agricultural
- Metals
- Energy
In the market, investors buy and sell bushels of corn, barrels of oil or various amounts of gold. They don’t actually take possession of them and have to find somewhere to store several thousand head of cattle, for instance. The market is essentially betting on the future price of that commodity going up or down.
Risky Business
Supply and demand for commodities tends to change much faster and much more extreme than the stock market. There are also real-world impacts to commodities. For instance, severe weather in the Midwest may threaten this year’s corn crop, causing a sudden change in that particular commodity’s price. Anyone who puts gas in their car has seen that the price of a gallon—and of the barrel of oil that is needed to produce that gas—can change on a moment’s notice, due to chaos in the Middle East, a problem with a pipeline, or any number of other factors. That means that investing, or betting, on commodities markets is more volatile than more traditional financial markets.
How to Bet on Commodities
The two most common ways to bet on commodities are fixed odds and spread betting.
Fixed odds is the most common financial bet to place. You’re essentially given odds that the price of a commodity will finish above or below a particular benchmark. For instance, on one random November day at BetOnline (visit our BetOnline Review), you could get -120 odds that the price of a barrel of oil will be over $83.50 by the end of the month. Sites will often offer similar futures on the price of gold or silver.
Usually, precious metals like gold and silver don’t change quite as much as oil, so the future date you’d have to bet on would likely be farther out. A year from now, perhaps, instead of the end of the month.
With spread betting, you are betting on whether the price of the commodity will increase or decrease. The amount of the payout is linked to the change in the price, so, if you guess right, the bigger the change, the more you get.
Example
For example, let’s say you bet that the price of oil will go up from its current price of $80 a barrel, and you are betting $10 per cent increase. If the price goes up to $82, you win 200 (the number of cents it increased) times your $10, or a $2,000 payout.
Obviously, there is the promise of very large payouts in this form of betting, although there is also significant risk, since the amount you lose is also based on the size of the change.
