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Are commodities ETFs risky as commodities futures in terms of needing a large ammount of balance and margin calls and limited time to hold, or they are like stocks?

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If you're asking if you need to use margin or have a large cash balance as collateral, the answer is no.

ETFs and futures are totally different. With futures, you do not "buy" anything upfront. You make a "paper" gain or loss as the futures price moves up or down. if you have a paper loss, you are sometimes required to deposit margin to make sure that you don't lose more than you have.

A "commodity ETF" is designed to also have exposure to commodities, and may use futures or other derivatives to do so, but you buy units upfront and have a gain/loss as the commodity goes up and down. You don't need to provide margin because you own units of the ETF that still have value, so there's nothing that you "owe" the ETF. If the ETF goes to zero you just lost what you put in.

So they are "like stocks" in that way, meaning you can only lose what you put in.

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  • @D Stanley why when I want to buy a commodity etf, my broker put this warning message : "Leveraged, Inverse, and Commodity ETPs Not suitable for most investors. Investing in these types of exchange-traded products (ETPs) involves heightened risks, including higher margin requirements, leverage, derivatives, and complex investment strategies. These securities are designed for daily use only, and are generally not intended to be held overnight or long term. Learn more about trading these products"..this warning for example was for corn teucrium
    – huab
    Sep 17 at 18:09
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    @huab Margin requirements only matter if you are buying the thing on margin. The warning is explaining you might be able to buy, say, a S&P 500 ETF with 10x margin, but a commidities ETF on only 2x margin.
    – user253751
    Sep 24 at 14:05
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An ETF is a fund. A fund has managers who are paid from your expense ratio, e.g. 0.95% of fund assets annually, in the case of the FTGC commodity futures ETF.

You are paying the fund managers to manage the messy aspects of futures, such as margin and expiration.

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Every type of security has a required amount of margin and margin maintenance set by Reg T (options, stocks, ETFs, leveraged ETFs, futures) and it varies by security type. Brokers have the right to require more.

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  • when I buy stocks, stocks etfs or sell covered options I don't need margin or maintenance unlike futures, forex, shorting stocks, naked options. commodity etfs are similar to which?, The second part is that I can hold stocks and stocks etfs for ever, while there is an expiry date for futures and options.. commodoties etfs are similar to which?
    – huab
    Sep 17 at 16:57
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    I traded some futures 30+ years ago but found that it wasn't for me so my experience is limited. For reduced risk, I think that you either have to go with options (which you indicated that you don't want) or perhaps pairs trading where one side hedges the other, the margin requirement is less, and you're trading the spread b/t the two contracts. Sep 17 at 17:05

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