Commodity Funds

This chapter discusses how commodity futures is speculative, highly leverage, and subject to speculative position limits, being illiquid in some cases. Commodity futures prices are highly volatile. Price movements of commodity futures contracts are influenced by changing supply–and–demand relationships. Most U.S. commodity exchanges limit the fluctuations in commodity futures contract prices during a single day by regulations referred to as the “daily price fluctuation limit” or “daily limit. The low–margin deposits normally required in commodity futures trading permit an extremely high degree of leverage. The Commodities Futures Trading Commission (CFTC) and certain exchanges have established limits referred to as “speculative position limits” or “position limits” on the maximum net–long or net–short futures position that any person may hold or control in particular commodities.