Exchange-traded funds can use futures as the assets that make up the fund. Futures ETFs give investors access to the futures market without having to trade on the futures markets. A futures contract is an agreement between a buyer and a seller based on an underlying asset.
What is an ETF & how does it work?
An ETF (a company) will purchase futures contracts and then offer a securitized version to investors. The ETF doesn't take possession of the underlying asset but continues to trade contracts to keep the futures ETF running. The fund will purchase contracts so that it mirrors the index that it is designed to track.
What is an exchange-traded fund (ETF)?
An exchange-traded fund ( ETF) tracks an underlying asset. The asset might be a commodity, an index, or even a currency. For ETFs to be effective, they need to correlate pretty closely to the asset they are tracking. To do that, many funds utilize derivatives.
Which ETF should you invest in?
Those looking to invest and hold long-term may choose an ETF that invests primarily in blue-chip firms. Short-term investors may choose an ETF that invests in new startups that have high growth potential for the near future. How Many ETFs Are There Globally?
