Commodity Covered Calls

Evaluating a Covered Call ETF based on commodities can be tricky, especially if you aren’t familiar with the quirks of the commodity markets.

goldExamples of commonly traded commodities are corn, cocoa, wheat, cotton, wool, lean hogs, crude oil, propane, gold, platinum, palladium, copper, and rubber.

You are unlikely to find a Covered Call ETF that is actually storing vast amounts of cotton, gold bars or any other commodity in their office. Instead, the fund covers its call options buy investing in various financial instruments linked to these commodities.

Before one invests in a commodity based Covered Call ETF, it is a good idea to learn a bit about commodity trading and commodities exchanges. At commodity exchanges, the bulk of trade is usually made up by futures contracts on commodities.