Difference between ETFs and futures trading?
I understand how both operate, but generally speaking – for the sake of argument – suppose an ETF only invests in soybeans. How strongly linked is the pricing between soybeans in that ETF and on the commodities market? If the price of soybeans in futures goes down 20% in let’s say a 2 month time span, will the price of that ETF (which only invests in soybeans) also follow suit and go down 20% as well?
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about 1 year ago
yes less fund expenses, generally speaking.
about 1 year ago
Ideally. But ETFs do not always track 100%, and there is a management fee.
PLUS, an ETF is normally not leveraged, which means a 10% move in beans will be a 10% move in the ETF. But futures contracts are leveraged. Let’s talk gold.
Today, gold dropped 27.70, and the ETF dropped 2.70. Based on equity of $10,000 investment in each, the gold futures would have dropped about $5000, while the ETF would be about $330