With the commodity market dwarfing the stock market in size, I do not understand why there are not more commodity ETFs. We have USO, UNG, GLD and SLV each dedicated to a specific commodity. But why isn't there a pure corn, soybean, wheat, coffee, cocoa, sugar, lean hog and live cattle ETF? It seems like they would be instant successes.
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Why aren't there more commodity ETFs?
- Thread starter DrPepper
- Start date
There are actually several of these things. Take a look at JO, BAL, JJG, SGG, LD...and there are several others. Problem is that they are thinly traded. I think in a couple of years, things will be different. It takes time for these things to catch on and get a following.
To see all ETFs/ETNs, go to morningstar.com, click on etfs and then on etf performance table. You can sort them by size, type, or whatever.
To see all ETFs/ETNs, go to morningstar.com, click on etfs and then on etf performance table. You can sort them by size, type, or whatever.
Quote from drcha:
OK, fair enough. Not sure what you meant by commodity ETFs, then. ETFs dealing in equities related to a specific commodity? E.g. MOO, CUT?
I like trading commodities due to the edge sometimes provided by the seasonal tendencies and the COT report. However, the leverage of the commodity market often keeps me out of good trades. Despite their drawbacks, I prefer to trade ETFs that follow a single commodity, such as GLD, SLV, USO or UNG. Even the currencies have ETFs dedicated to a single currency, such as FXA, FXC, FXS, etc. However, there is not a single ETF dedicated to corn or wheat or soybeans or sugar. Something like DBA includes all of these together. The problem is that each commodity has different seasonal tendencies and COT reports, so trading DBA does not help me if I get a set-up with corn. As large as the corn, soybean and wheat markets are, it would seem to me that there would be an ETF dedicated to each one. DBA certainly gets plenty of volume.
Devin Brady
ET Sponsor
Volume is the main reason.
Quote from DrPepper:
I like trading commodities due to the edge sometimes provided by the seasonal tendencies and the COT report. However, the leverage of the commodity market often keeps me out of good trades. Despite their drawbacks, I prefer to trade ETFs that follow a single commodity, such as GLD, SLV, USO or UNG. Even the currencies have ETFs dedicated to a single currency, such as FXA, FXC, FXS, etc. However, there is not a single ETF dedicated to corn or wheat or soybeans or sugar. Something like DBA includes all of these together. The problem is that each commodity has different seasonal tendencies and COT reports, so trading DBA does not help me if I get a set-up with corn. As large as the corn, soybean and wheat markets are, it would seem to me that there would be an ETF dedicated to each one. DBA certainly gets plenty of volume.
If there were a market, there would be a product. If there is a lack of ETFs like that, it tells you something. The institutions are not unaware of what the market might want. They launch bizarre ETFs all the time.
Devin Brady
ET Sponsor
Quote from DrPepper:
However, the leverage of the commodity market often keeps me out of good trades.
The mini corn contact is 1000 bushels, so with corn trading at $4 this would make the size of the contract $4000 in dollar terms.
The performance bond/margin for 1 mini corn contract is just under $300 per contract giving you over 10-1 leverage, but if you had $4000 per contract in your account then you wouldnt have to worry about being over leveraged.
Quote from Devin Brady:
The mini corn contact is 1000 bushels, so with corn trading at $4 this would make the size of the contract $4000 in dollar terms.
The performance bond/margin for 1 mini corn contract is just under $300 per contract giving you over 10-1 leverage, but if you had $4000 per contract in your account then you wouldnt have to worry about being over leveraged. [/B]
Thanks, that is reassuring. I have not considered trading the minis before, but another poster also recommended them in a different thread. He stated that the fills are good but the commission is higher, which is not surprising. I can check with my broker, but do you know off-hand what other agricultural and softs futures contracts have minis? Like corn, wheat, soybeans, sugar, cocoa, coffee, live cattle or lean hogs? Also are the fills good in all of them? Thanks.