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Tuesday, September 29, 2009

Trading Energy ETFs

Energy Exchange Traded Funds (ETFs) tracking energy company stocks are becoming increasingly popular. Energy ETFs are widely traded by all types of traders - short-term and long-term conservative and risky traders. These are ETFs with a great diversity in themselves. There are oil ETFs which track oil and gas exploring, producing and distributing company shares or are commodity pools investing in oil derivatives like futures and options contracts.
  • There are gas ETFs which track gas companies and companies dealing with other refined products.
  • There are ETFs which track companies dealing with alternative energy (wind, solar, nuclear, etc) or electric utilities.
  • There are ETFs which track energy sector stocks of major US markets, international markets and/or a blend of both.
  • There are ETFs that track only some specific sub-sectors like nuclear energy, coal, biological sources, etc.
  • There are ETFs which track stock prices, markets and those which track spot/future prices of the commodities.
  • One can also find many inverse ETFs which make profits when prices of the commodity/index fall.
Different energy ETFs may have different weightings for specific stocks/sectors/counties/indexes. The increased demand for green energy is also giving rise to many ETFs tracking these companies. Investing in energy ETFs, because of their intraday trading, low tracking error, diversity and liquidity, is now considered a better option than investing in similar mutual funds. But they can be risky investments as the prices can fall/rise within a short-period of time - with economical, political and natural changes.

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posted by NobleTrading at 8:50 AM

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