Electronic Traded Funds offer derivatives alternative
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Electronic Traded Funds offer derivatives alternative

Electronic Traded Funds offer derivatives alternative

Commodities, ranging from oil to silver, face a brutal sell-off from the all time record values seen recently. Investors who are looking to diversify their portfolio, but would prefer not to use derivatives, might want to look at Electronic Traded Funds (ETF's).

    ETFs are 'securities certificates that state legal right of ownership over part of a basket of individual stock certificates.

    'ETF's, managed by fund managers, represent a value of the holdings and are traded at prices that closely match their underlying assets, and unwind when investors no longer want them.'

    The traded volume on most ETF's is very high and therefore easily traded on US (like AMEX).

    This gives investors the ability to buy and sell easily in a relatively cheap way. ETF's offer investors many possibilities; to diversify, to hedge or to invest.

    As well as Long ETF's, Short ETF's are also available in order for investors to profit from a fall in prices.

    For instance the Short Oil & Gas ProShares (ticker symbol DDG) tracks the inverse of the daily performance of the Dow Jones US Oil & Gas index. In other words, this ETF increases in value when the Dow Jones US Oil & Gas index drops.

    A more aggressive Short ETF is UltraShort Oil & Gas ProShares (DUG), which seeks daily investment results (before fees and expenses) which correspond to twice the inverse of the daily performance of the Dow Jones U.S. Oil & Gas index.

    Finally, I provide a few interesting ETF's for commodity investors. Note that this list is not comprehensive.

    Gold
    * PowerShares DB Gold (DGL)
    * SPDR Gold Shares (GLD)
    * iShares COMEX Gold Trust (IAU)

    Silver
    iShares Silver Trust (SLV)
    PowerShares DB Silver (DBS)

    Oil&GaS
    (Long) Ultra Oil & Gas ProShares (DIG)
    Short Oil & Gas ProShares (DDG)
    UltraShort Oil & Gas ProShares (DUG)

    More information about ETF's can be found at http://finance.yahoo.com/etf
    Author
    AMEinfo Staff

    AMEinfo staff members report business news and views from across the Middle East and North Africa region, and analyse global events impacting the region today.

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