I agree that there is serious money to be made from emerging markets like China etc and commodites look very interesting
Futures contracts – probably the best, but out of my league. You would need to spend a minimum of $10-$15k for the commodities above. Crude oil is traded in 1,000 barrel contracts… a nice $66,000 purchase.
Exchange Traded Commodities – I hold some of these e.g. Deutche Bank ETC baskets (DBA, DBC) which is performing as I would expect. However, ETF securities on the LSE are not performing as well as I would have expected. These ETFs invest in futures and have to roll contracts; dealing with contango (longer-dated futures are more expensive than near-month contracts) in a very basic fashion - see USO (United States Oil) Fund for example poor performance. However, I am continuing to build my investments here.
Spread Trading/Betting Commodity spot price – This was recommended in Shipman’s book. I have never liked the idea of spread trading, but I am open to all ideas.
I would be interested in people’s experience in the spread betting commodities:
-[FONT="] [/FONT]Can you roll your bet from quarter to quarter – taking a long term position? i.e. 5 years +
-[FONT="] [/FONT]What are the commissions percentages like over an annual period?
-[FONT="] [/FONT]Who is the best spread betting provider for this type of operation?
You don't need to pay the entire contract up front! The balance is only due on the settlement date. You need only put up a margin. However, if the price changes significantly your broker may request you add more to cover your margin or they may decide to close the contract. You can buy long-dated contracts (up to six years for oil) but these are not as liquid as front and near month contracts. Nymex also offer mini-contracts.
You don't need to pay the entire contract up front! The balance is only due on the settlement date. You need only put up a margin. However, if the price changes significantly your broker may request you add more to cover your margin or they may decide to close the contract. You can buy long-dated contracts (up to six years for oil) but these are not as liquid as front and near month contracts. Nymex also offer mini-contracts.
I would add also that imo, if you ever have to worry about margin then your trade sizes are too big for your account. Just to be very clear lest the op have any doubt, futures contracts are " marked- to- market " ie profits or losses on futures contracts are actually settled each day and not on a net basis on expiration of the contract.
Thanks Room305; that is very helpful and informative... The Shipman and Rodgers books are short on the detail of actually trading commodities (despite claims to the contrary) - Are there any on-line sites or books that you would recommend that provide good quality further reading on these points above?
hi,
just read the shipman book and currently reading the rodgers one. They seem to have two very different approaches, shipman being the trader and rodgers in for the long haul.
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