Inverse Commodity

Inverse commodity mutual funds and ETFs are designed to offer a fixed... Inverse commodity mutual funds and ETFs are designed to offer a fixed inverse multiple of the daily returns of a particular commodity futures price. The fixed multiple can range from 1x to 3x. For example, if grain futures fall 1% on a given day, a 1.5X inverse ETF linked to grain futures should rise 1.5%. On the other hand, if grain futures rise 1%, this same fund should decline by 1.5%. To achieve their objectives, inverse commodity mutual funds and ETFs usually enter into derivative contracts with banks and other financial institutions. It's important to note that these funds are only meant for very-short term trading. Because they are rebalanced daily depending on market fluctuations, inverse funds may not produce the same result if held for weeks, months or longer. In fact, it’s quite possible that an inverse fund may fall in value over a longer period, even if the underlying commodity falls. As a result, these are attractive for short-term traders with a large appetite for risk. Last Updated: 04/23/2024 View more View less

Inverse commodity mutual funds and ETFs are designed to offer a fixed inverse multiple of the daily returns of a particular commodity futures price. The fixed multiple can range from 1x to 3x.... Inverse commodity mutual funds and ETFs are designed to offer a fixed inverse multiple of the daily returns of a particular commodity futures price. The fixed multiple can range from 1x to 3x. For example, if grain futures fall 1% on a given day, a 1.5X inverse ETF linked to grain futures should rise 1.5%. On the other hand, if grain futures rise 1%, this same fund should decline by 1.5%. To achieve their objectives, inverse commodity mutual funds and ETFs usually enter into derivative contracts with banks and other financial institutions. It's important to note that these funds are only meant for very-short term trading. Because they are rebalanced daily depending on market fluctuations, inverse funds may not produce the same result if held for weeks, months or longer. In fact, it’s quite possible that an inverse fund may fall in value over a longer period, even if the underlying commodity falls. As a result, these are attractive for short-term traders with a large appetite for risk. Last Updated: 04/23/2024 View more View less