How to Short Commodities using ETF
In my last post we talked about how to make money from increased food prices and looked at the impact these prices would have on livestock such as Live cattle and Lean Hogs. I mentioned that for the more adventurous amongst you you might also wish to look at shorting the grains as they have risen very far very quickly.Shorting Commodities has traditionally been very difficult until the recent advent of Contra ETF's.
These ETF's will move higher when the price of the commodity goes lower allowing you to benefit from declining prices by buying the ETF.One of the most forward thinking of the companies involved in these Contra ETF's is ETF Securities http://www.etfsecurities.com/csl/short/index.asp ETF Securities will allow you to go short a number of the major traded commodities and since you are buying and not selling they should be tradable in most accounts.
A major shortcoming of many brokerage accounts has been the inability to make money when markets are doing anything but going up, now with these new ETC/ETF that is no longer a problem.It also allows for some quite sophisticated trades to be placed-for example if you are bought in to the story of the last two posts of mine and you are an aggressive trader you might consider going long livestock and short grains by buying one of the livestock ETF's such as CATL (Live Cattle) and buying one of the Short ETF such as SWEA (Wheat).
The volatility in the stockmarket currently is very difficult to invest in and is being driven back and forward by news and by the manipulations of the big boys, the commodity markets however are more fundamentally driven by supply and demand and so are easier to predict in the medium term.
Best Wishes
Alan
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