Trade Commodity ETFs - Play The Commodities Market Like A Pro Without The Risk



Part 4. Trade Commodity ETF’s - Great Rewards! Controlled Risks!

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Trading Commodity ETF’s is an ideal way to participate in the Commodities Market.

It allows the exposure to huge and rapid profits while offering solid risk management against loss.

Listed below are some pure play Commodity ETF’s in Precious Metals . They actually own the physical commodity.

Name of Commodities ETF Symbol
SPDR Gold Shares GLD
iShares Silver Trust SLV
ETFS Physical Palladium Shares PALL
ETFS Physical Platinum Shares PPLT
PowerShares DB Gold Fund DGL

Listed below are some of the most popular Equities Based Commodity ETFS

Name of Commodity ETF Symbol
Market Vectors Agribusiness ETF MOO
Market Vectors Gold Miners ETF GDX
iShares S&P GSCI Commodity-Indexed Trust GSG
PowerShares DB Energy Fund DBE
PowerShares DB Commodity Index Tracking Fund DBC
iShares COMEX Gold Trust IAU

Listed below are some other important Commodity ETFS.

Name of Commodities ETF Symbol
United States Oil Fund USO
NIB Barclays Plc - Cocoa NIB
CurrencyShares Euro Trust FXE
Oil Services HOLDRs OIH
UltraShort Oil & Gas ProShares (bear) DUG
Ultra Oil & Gas ProShares DIG

For a more comprehensive list of etf's, go to:

Large Cap ETFs

Small And Mid Cap ETFs

How could you participate in the volatile Futures and Commodities markets and enjoy the huge potential gains while circumventing the precipitous and dangerous pitfalls?

The answer: Trade Commodity ETFs (Exchange Traded Funds)

Before focusing on Commodities ETF’s in particular, let us take a look at some broad overall characteristics of ETF’s in general.

What You Need To Know About Etfs In General

  • ETF’s are very versatile instruments. They track an underlying product or basket of products like Indexes such as the S&P 500 and NASDAQ, regions, sectors, commodities, bonds, futures, countries and other asset classes .

  • They can even be used for shorting (selling) the market or a product. Short ETFs enable investors to profit from declines in an underlying product without directly selling short any securities.

    Rather, they just buy the Short ETF which would profit as that product declines.

  • ETF’s trade like Mutual Funds but are priced continuously through out the day just as stocks. (Mutual Funds are only priced at the end of the day.)

Some Distinct Advantages of ETF’s

  • ETFs generally provide diversification.
  • They have all the features of ordinary stocks, such as limit orders, short selling, and options.
  • Liquidity - this is important in order to get decent spreads between bid and ask and the ability to enter and exit a position easily.

  • Many have Morningstar Rating just like Mutual Funds.

ETF’s generally trade as iShares, SPDRs and ETF’s.

Because of their versatility, ETFs allow you a choice or a combination of several Strategies.

Your strategy includes:

  1. Speculation
  2. Hedging
  3. Diversification

Commodity ETFs can hold the actual product or hold a futures contract or a derivative (mainly puts and calls).

When you trade Commodity ETFs, you get both exposure to the speculative nature of the commodity and also some insulation from risk.

Commodity Funds ETF’s facilitate exposure to a wide range of Currencies, commodities and commodity indices, including energy, metals, livestock and agriculture.

Commodity ETF’s can be:

  1. Commodity Specific - Futures Based or Equity Based

  2. Pure Play - Physical commodity Holding: Hold the physical commodity and takes delivery of the commodity

Futures contracts, like option contracts expire. You must exit or roll the Futures contracts forward otherwise the cattle truck or the oil truck will show up at your door with delivery of the commodity.

When you Trade Commodity ETFs, you do not have to worry about those concerns. The Commodity ETF does that.

You Trade Commodity ETFs just as you would a stock. Use the same trading strategy to enter and exit a stock Go here to learn how.

Most Futures Based ETF’s have additional costs because they do not take or deliver the commodity and have to roll over before expiration dates of the contracts.

Stay away from those that are too lightly traded.

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