June 04, 2008 at 3:00 pm by Tom Lydon
The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) determined that exchange traded fund (ETF) investors will now be able to trade futures and options contracts on the SPDR Gold Trust (GLD). Until now, trading derivatives based on a commodity related ETF wasn’t possible, but now increased innovation and competition will allow for new products, thanks to the regulatory shift.
Mutual Fund Wire reports that Christopher Cox, Chairman of the SEC, says approval of these offers allow investors in the U.S. a more convenient and cost effective manner to manage risk. The coordinated effort with the two agencies are expected to show a clear and united voice and enhance legal and regulatory certainty. New options for gold investors who invest their money into gold ETFs will be able to order a put or a call on their investments.
According to Investopedia, a put is an option contract allowing the investor to sell a certain amount of an underlying asset at a set price within a time frame, if they decide to do so. This is usually done on speculation that the underlying asset will drop in price.
A call is an option contract allowing, but not obligating, an investor to buy a certain amount of an underlying security at a specified price, before a certain time. This is indispensable when the price of the underlying stock, or asset, appreciates.
June 5th, 2008 at 2:38 pm
SPDR Gold Trust (and their iShares analogues IAU and SLV) options may be new, but options on commodity ETFs HAVE been trading for a while (see: http://www.hardassetsinvestor.com/component/content/article/3/882-options-for-options-.html?year=2008&month=05&Itemid=39)
There just haven’t been options on commodity-based GRANTOR TRUSTS yet.
Options For Options
Written by Brad Zigler
Tuesday, 27 May 2008
A lot of people are holding their collective breath awaiting an anticipated May 30 launch of options trading on SPDR Gold Shares (NYSE Arca: GLD). They must be blue by now because it’s been a four-year wait as the Securities and Exchange Commission and the Commodity Futures Trading Commission made nice-nice over regulating the instruments. Options trading is also on the horizon for the iShares COMEX Gold Trust (AMEX: IAU) and the iShares Silver Trust (AMEX: SLV).
These launches won’t be a watershed, though. Options already trade on the PowerShares DB Gold Fund (AMEX: DGL) and on the PowerShares DB Silver Fund (AMEX: DBS), though the Deutsche Bank-sponsored products hold futures rather than physical metal in portfolio.
There are, in fact, options on 13 futures-based ETFs extant now, up from the 10 reported in our January look (see “We’ve Got Options. Sort Of”).
Broad-Based Commodity Indexes
GSG - iShares S&P GSCI Commodity-Indexed Trust
DBC - PowerShares Deutsche Bank Commodity Index Fund
GCC - GreenHaven Continuous Commodity Index Fund
Precious Metals
DGL - PowerShares Deutsche Bank Gold Fund
DBS - PowerShares Deutsche Bank Silver Fund
Energy
USO - United States Oil Fund
USL - United States 12-Month Oil Fund
UNG - United States Natural Gas Fund
UGA - United States Gasoline Fund
DBO - PowerShares Deutsche Bank Oil Fund
DBE - PowerShares Deutsche Bank Energy Fund
Industrial Metals
DBB - PowerShares Deutsche Bank Base Metals Fund
Agriculture
DBA - PowerShares Deutsche Bank Agriculture Fund