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In the context of energy commodities trading, volatility refers to the degree of variation in the price of a commodity over a certain period of time. It is a statistical measure that represents the tendency of the price to rise or fall sharply within a short period. High volatility implies that the price of the commodity is subject to rapid and significant changes, often due to market conditions such as supply and demand imbalances, geopolitical uncertainties, weather events affecting production or transportation, or changes in regulatory environments. Low volatility, on the other hand, indicates that the price is relatively stable over time.

Volatility is a crucial concept for traders because it can impact both the risks and opportunities in trading. A highly volatile market could mean greater prospects for profit, as the price swings can be substantial. However, it also means there is a higher risk of losing money if the price moves against the trader’s position. Various financial instruments, such as options and futures contracts, are often used in energy commodities trading to hedge against or speculate on the volatility of commodity prices.

**Further Reading and Information on Volatility:**

1. Investopedia – Volatility
Investopedia provides detailed articles on financial concepts including volatility, and it is a widely respected resource for financial information. Here, you can find extensive explanations and examples that delve into what volatility is, how to measure it, and its implications for traders and investors.

2. CME Group – Understanding Volatility in the Energy Markets
The CME Group is one of the world’s leading derivatives marketplaces, offering a wide range of futures and options products for all major asset classes, including energy. Their educational resources provide an in-depth look at volatility, especially as it relates to energy commodities trading.

This A.I.-generated glossary is intended to provide a convenient means to understand terminology used on this website in the context of physical commodities trading. Some terms may have alternative and/or expanded definitions that may not be relevant here and thus not included. Sources provided are for reference and not intended to be an endorsement of the broader content on that website. Suggestions, questions, or corrections can be provided in the comment box on definition pages.