A commodity is a raw material that’s just like any other raw material. For example, tobacco, rice, petroleum, iron ore and cows are all commodities because they’re basically the same no matter what company “produces” them. iPods and breakfast cereals aren’t commodities because they’re processed and branded. Even though they may use commodities in their production (such as metal and wheat flour), the final product is tied to the success or failure of its particular company.

Tags: commodities, futures, options