Source:
http://article.wn.com/view/2011/02/11/ETF_Investing_in_the_Oil_Gas_Market_Part_2/
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Friday, February 11, 2011
ETF Investing in the Oil & Gas Market: Part 2
<< Return to Part 1 Understanding the future — not just the present — is very important to ETF returns. And this is where the two basic questions for investors get answered. What is the timeline of the trade? The real question here is, how many times does the ETF have to “roll” its futures contracts between now and that trade date? Use oil as an example. Because the ETF issuers never want to physically own the oil, they must sell their futures contract before it expires, at which point they would need to take possession. So they sell it and buy a longer-dated futures contract — either the next month or several months out. This buying and selling of futures...
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