Commodity ETF

You want to invest in the trend of rising oil prices, but you can’t actually purchase 100 options contracts of physical oil and take delivery of oil barrels in your backyard. The more popular way to invest directly into commodity prices is to buy electronic-trading funds that attempt to replicate the price movements of the underlying physical commodity.

These funds trade like stocks; however, there are risks due to the fact that they utilize derivatives contracts to mimic the performance of commodity prices. For example, oil ETFs can experience significant losses should the futures contracts in which they invest fall into contango.

Some commodity ETFs, like the SPDR Gold (GLD), actually purchase physical gold, and stores it in vaults in London. Maybe that will make you feel better about replicating gold prices, but you never actually own any of the gold yourself unless you have 100,000 shares of GLD. So...you really own a piece of paper, or a number on a screen.

Then there's the United States Oil Fund (USO), an energy ETF, which attempts to replicate U.S. oil prices by buying and rolling over WTI futures contracts. That comes with its own set of risks and costs that might not lead to higher gains while oil prices are rising in the short term.

Yeah, these things aren’t as simple as the people selling them make them out to be.

Related or Semi-related Video

Finance: What Are Commodities?74 Views

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owed And this is my monnet ease And neither of

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them have anything to do with commodities though if you

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say them fast enough well you'll never mind A commodity

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is something that is common like it's everywhere See the

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com o there for the big hand Like gold is

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a commodity it's everywhere oil is a commodity it's everywhere

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a commodity and yes we can't resist clueless politicians are

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a commodity as well Well a commodity is basically the

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same thing no matter where and how you buy it

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That copy of moby dick is the same copy whether

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you get it at your local bookstore If a physical

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book stores even exist anymore or on amazon the serial

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killer of those aforementioned book stores So if something is

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the same everywhere well what would be the opposite Well

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how about a swim lesson from michael phelps You know

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you can't buy that on amazon Not yet anyway Or

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say you want to be the proud owner of a

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three headed dog Well you might be able to find

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one somewhere but it's going to cost you a whole

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lot of kibble Or what if you were looking to

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buy a blouse like one that was worn by j

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edgar hoover Well those are pretty uncommon and or unique

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commodities Well the basic idea is that most commodities can

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be sold by lots of people so their profit margins

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are generally low They may sell an extreme volume but

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if you have thirty people competing to sell you that

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last guy just desperate to get it off his shelves

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will drop the price really low and you'll take it

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Yeah unfortunately then you have to read that book That 00:01:41.357 --> [endTime] book really will be your way

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