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ETFs 113: Commodities Exchange-Traded Funds

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1.
Commodity ETFs based on which type of security are likely to be impacted by capital markets factors such as movements in the stock market or industry regulation?
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Equity based. An equity security can be affected by a company's operations or stock market movements that do not stem from fluctuations in the targeted commodity.
2.
Which of the following is NOT a method by which ETFs can/will offer exposure to commodities?
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Dividend based. The three types are equity-, physically, and futures-based exposure.
3.
Why do physically-backed commodity ETFs deal in precious metals as opposed to other commodity subsectors?
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Low storage costs. It would be unwieldy and inefficient to store corn for its use as a fund's physical base because its value is very low relative to its size. Large values of precious metals can be stored in a relatively small area.
4.
What is the term/classification for futures markets in which contract prices become progressively more expensive at later expirations?
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Contango. As futures contract prices become more expensive at later expirations, they create a negative implied roll yield. These markets are said to be in contango.
5.
One driver of futures contracts is the spot return. This is _______.
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The change in the price of the target commodity. Under most circumstances, the change in price of the underlying commodity is the primary driver of the futures return.