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Commodities for Stock Traders

Commodities for Stock Traders. A look at commodity-based exchange-traded funds. Exchange-Traded Funds (ETF’s). Similar to mutual funds Pooled investment with a stated goal Traded like a stock on an exchange Famous examples: QQQQ SPY. Commodity-based ETF’s. Composed of futures contracts

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Commodities for Stock Traders

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  1. Commodities for Stock Traders A look at commodity-based exchange-traded funds.

  2. Exchange-Traded Funds (ETF’s) • Similar to mutual funds • Pooled investment with a stated goal • Traded like a stock on an exchange • Famous examples: • QQQQ • SPY

  3. Commodity-based ETF’s • Composed of futures contracts • Specific commodity or group of similar commodities • Oil or Energy • Gold or Precious Metals • Track changes in the commodity, basket, or index

  4. Gold • GLD - streetTRACKS Gold ETF

  5. Advantages • “Direct” exposure to commodities • Simpler than futures (no months, rollover, etc.) • Traded in standard stock brokerage account (including IRA) • Optionable (in most cases) • Non-correlated to stock market

  6. Disadvantages • Volatility • Liquidity • Leverage • Pricing • Long-only in IRA • Not redeemable

  7. Examples • GLD streetTRACKS Gold Shares • USO United States Oil Fund • DBA PowerShares DB Agriculture Fund • DBC PowerShares DB Commodity Index Fund • DJP iPATH Dow Jones AIG Commodity Index • TLT iShares Lehman 20yr Bond Fund* *typically not considered a commodity, but a good example of a non-correlated security class

  8. Please do your due diligence before investing or trading in an ETF. Courtesy of: Dorsey Wright & Associates

  9. To learn more • PowerShares • iShares • streetTRACKS Gold Shares • United States Oil Fund

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