A contract for differences (CFD) is an arrangement made in financial derivatives trading where the differences in the settlement between the open and closing trade prices are cash-settled. There is no delivery of physical goods or securities with CFDs. A contract for differences (CFD) is a financial contract that pays the differences in the settlement price between the open and closing trades. CFDs essentially allow investors to trade the direction of securities over the very short-term and are especially popular in FX and commodities products

Contracts for differences can be used to trade many assets and securities including exchange-traded funds (ETFs). Traders will also use these products to speculate on the price moves in commodity futures contracts such as those for crude oil and corn. Futures contracts are standardized agreements or contracts with obligations to buy or sell a particular asset at a preset price with a future expiration date. CFDs trade over-the-counter (OTC) through a network of brokers that organize the market demand and supply for CFDs and make prices accordingly.

A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. Traditional examples of commodities include grains, gold, beef, oil, and natural gas. For investors, commodities can be an important way to diversify their portfolio beyond traditional securities. Because the prices of commodities tend to move in opposition to stocks, some investors also rely on commodities during periods of market volatility. Commodities that are traded are typically sorted into four categories broad categories: metal, energy, livestock and meat, and agricultural.

For investors, commodities can be an important way to diversify their portfolio beyond traditional securities. In the most basic sense, commodities are known to be risky investment propositions because their market (supply and demand) is impacted by uncertainties that are difficult or impossible to predict, such as unusual weather patterns, epidemics, and disasters both natural and man-made. There are a number of ways to invest in commodities, such as futures contracts, options, and exchange-traded funds (ETFs).