The New York Mercantile Exchange is a futures exchange dealing in physical commodities. It is probably best known for its trade in oil futures that allow investors to either gamble upon, or attempt to protect themselves against, fluctuations in global oil prices. Since 1994, the New York Mercantile Exchange has incorporated COMEX, which deals in metal futures.
Physical commodities are things that are traded on financial markets but exist as physical goods rather than purely on-paper financial products, such as company stocks. Commodities can include food products such as livestock and grains, but these aren't traded at the New York Mercantile Exchange. Instead, it deals with metals and fuels.
There can be some confusion over the name New York Mercantile Exchange. Originally, it was the name of a separate exchange, sometimes known as NYMEX, dealing in fuels plus palladium, platinum, and uranium. In 1994, it formally merged with COMEX, which deals with aluminum, copper, gold, and silver. Technically, NYMEX and COMEX are two divisions of the New York Mercantile Exchange, though NYMEX is also widely used to refer to the exchange as a whole.
Traders at NYMEX do not buy and sell commodities. Instead, they trade future contracts, which give the holder the right to buy a set quantity of the commodity at a set price on a set date. The difference between this set price and the prevailing market price of the commodity on that date will determine how valuable the contract turns out to be; advance expectations of this difference will determine the market price of the future contract itself at any particular time.
Most people who buy and sell futures contracts will never physically handle the commodity. Even the person who holds the contract on its due date will usually sell the commodity before taking possession of it. This means the commodities traded on the market can be treated as fungible. This is a term that means that any two units of the commodity are treated by traders as identical, with no need to physically inspect them for quality.
Unlike most financial exchanges, NYMEX was still using the open outcry trading system as of 2010. This means there is no computerized system for bringing together buyers and sellers. Instead, traders make offers and complete deals through a combination of shouting and hand gestures. This can create an intense atmosphere that leads many people to refer to the trading floor as a pit.