Commodities ETFs - How To Trade Commodities Using ETF's

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Commodities ETFs (Exchange Traded Funds)

The Futures Market also known as the Commodities Market is a place of extremes like no other. This market is peerless in its extremes in volatility and in prices.

Another of its extremes is its potential for profit. Yet another extreme is its potential risk.

Is there a way to participate in this potentially profitable market while properly managing your risk?

The answer is a resounding yes! An effective way to do this is through Commodities ETF’s.

To effectively trade Commodities using ETFs, it is necessary to have a good understanding of the enormous potential for profit, the risks involved and the best way to trade in this volatile market.

Explore the following content for a better understanding.


  1. Introduction to the Commodities Market
  2. Commodities Market Potential Profit And Dangers Explained
  3. How The Commodities Market Has Morphed
  4. How to Benefit From the enormous opportunities in the commodities market without enduring the risks
  5. All you need to know about ETFs

Introduction To The Commodities Market

The Commodities Market is where global raw materials, currencies and other instruments are bought and sold mainly for future delivery. It is built on pure leverage.

Many traders love, and some are even addicted to this leverage because of the potential for gargantuan profits quickly. However, where there are humongous profits to be made, the potential for severe loses and heart aches exist.

If we can use a metaphor to describe the stock market as the fast lane on a busy highway, then the commodities market is the Indy-500 Racetrack.

It behooves one, therefore, to arm oneself with sufficient knowledge before plunging into the Commodities Market.

Some Specifics Of Trading Commodities

  • All Commodities have expiration dates
  • They all trade on margins making them outrageously leveraged and even more volatile. This is a two- edged sword.
  • You assume the full profit or loss of the entire contract even though you only put up a small amount as margin to purchase the entire contract.

  • You can buy the contract for the physical commodities or you can buy a derivative (an option or call). In any case, you will have to exit your position before the expiration because you cannot take or provide delivery.

  • Your initial position in the commodities market can be a long or a short position.

  • There has been a rapid upturn in activities in the commodities markets in recent years. A contributing factor is the activities of massive hedge funds which are attracted by the potential for huge gains and the liquidity in some products like currencies.

    Not all commodities trade with enormous volume though; some are lightly traded.

Two other observations about the Commodities Market that are not helpful for the retail investor to make timely and informed decisions are:

  1. There is not enough transparency with some commodities
  2. There is not enough information on some commodities

Commodities ETFs provide both opportunity and cover in such cases.

A Little History Of The Genesis Of The Commodities Market

Believe it or not, the initial design of the Commodities Market was to add stability to business projections in agricultural commodities.

The Commodities Market has since grown to accommodate almost all raw materials, currencies and indexes worldwide. The products include Indexes as the S&P 500, commodities (e.g, metals, agriculture, energy, livestock, etc), bonds, currencies, and other asset classes .

Commodities ETFs have become effective trading vehicles for those who want to participate in these markets while sheltering under the cover of a mutual-fund-like protection without the limitations.

Click here to continue to Commodities Market Potential Profit And Dangers Explained

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