Commodity ETF Ideas: Profiting From Backwardation

By now, most investors are well aware of certain nuances of futures-based investment strategies that are capable of having a significant impact on the returns of exchange-traded commodity products. A select few of the 70+ commodity ETPs on the market offer exposure to natural resources by physically buying and holding the commodity; these “physically-backed” commodity ETFs generally focus on assets with high value-to-weight ratios–such as precious metals. But for the vast majority of commodities, exposure through a physically-backed structure simply isn’t possible–there are obvious hurdles to funds that invest in live cattle or barrels of crude oil. Most commodity ETFs implement futures-based strategies, offering exposure to everything from corn to gold to tin by investing in contracts that generally exhibit very high correlations to movements in spot prices. Since the commodity ETF boom began a few years ago, many investors have learned about the potential pitfalls of futures-based strategies–including the adverse [...] Click here to read the original article on ETFdb.com. Related Posts: Best Performing ETFs Of 2009 ETF Plays For A Falling U.S. Dollar Half Year In Review: Six ETF Stories From The First Six Months of ‘09 Basics of ETN Investing Commodity ETFs Get No Love From Investors