They can be a good asset class for diversification and act as an inflation hedge, but investors should be prepared for wild swings dependent on supply and
demand of the given commodity.
An ETF that employs a basic strategy of investing in the front - month futures
contract of a given commodity, for example, will either see its returns decrease in the case of contango, or increase in the case of backwardation.
Out of the struggle between individual companies there arose through absorption and truce the great corporations and vast trusts that moved steadily toward monopolistic
control of a given commodity or service.
Before the advent / history of futures trading, any
producer of a given commodity (e.g. a farmer growing wheat, soy or corn) often would be at the mercy of a commodity dealer when it came to selling his product at his / her desired price level.
(2) In speaking of price relationships between different delivery
months of a given commodity, one is said to be «'' trading at a premium» over another when its price is greater than that of the other.
Nevertheless, both the government regulations and the commodity exchange rules aim to amend contract grades in a manner that allows an investor to remain aware of the current
status of a given commodity, clarifying whether or not investing in that commodity is a viable option.
Open Interest The total number of futures or options
contracts of a given commodity that have not yet been offset by an opposite futures or option transaction nor fulfilled by delivery of the commodity or option exercise.