Performance of Commodities

This chapter discusses the history of commodity trading, commodity trading basics, commodity futures, the basics of commodity exchange-traded funds (ETFs), and commodity investing via managed futures. It also examines contango and backwardation and their associated roll yields and, finally, the intermediate-term outlook for commodities. The chapter focuses on how to trade commodities through futures, ETFs, and commodity trading advisers (i.e., managers of managed futures accounts). In particular, the following areas are discussed: costs of carry; margin accounts; leverage issues, especially as they occur in ETFs; the hows and whys of spreading; delta-neutral hedging; nondirectional trading; and trading programs such as trending and market-neutral strategies.