Rob McEwen is the original founder of Goldcorp, where he grew the tiny $50 million mining company to over $10 billion in total value. Given such an amazing achievement, and his 29 years of experience in the natural resources space, we turn to the entrepreneur for a calm voice. McEwen says:
Futures are really nothing more than IOUs. Futures contracts are just standardized agreements to deliver a specific commodity, in an agreed quantity, at an agreed price, on an agreed date, someday in the future. They are traded like stocks on numerous commodities exchanges around the world. They differ from buying stocks in that you agree to a transaction at some point in the future.
Derivatives are contracts or securities that derive their value from other assets. In other words, derivatives don’t have value in and of themselves; they get their value from something else—an index, a commodity, or anything else of value. This gives derivatives an interesting characteristic: an infinite number of them can be created.
The tangible things that we eat, use and/or buy. Commodities that are traded include Cattle, Cocoa, Coffee, Copper, Corn, Cotton, and Crude Oil, just to cover the Cs. Gold, silver and platinum also are traded on the commodities exchanges as futures contracts.
Exchange-Traded Funds (ETFs) are securities that trade like stocks but are supposed to track the price of an index like the Dow or S&P 500 instead of an individual company, or they may be designed to track the price of a commodity like oil, gold, or silver.
A market in which the primary price trend is upwards