One of the most popular commodity ETF types are those that hold and trade futures contracts for the underlying commodity. Futures are a promise to buy or sell a commodity for a set price on a date that’s in the near future. None of the ETFs that hold futures contracts claim to track the spot price of their respective commodities. [4 Commodity ETF Types.]

The majority of these funds buy the near-month contract, selling it before expiration and buying the next month’s contract, and so on. If the price of the next month’s contract is higher than the current month’s, it’s a situation called contango, and it could cost you money when the contracts are rolled over. A negative roll yield (contango) could cause the net asset value (NAV) of a fund to deviate even further from the spot price of its underlying commodity. The opposite situation is backwardation. [What Contango Means for Oil ETFs.]

One way to mitigate the effects of contango is to look for ETFs that hold contracts throughout the year. There are just two such funds now: United States 12-Month Oil (NYSEArca: USL) and United States 12-Month Natural Gas (NYSEArca: UNL).

The purpose of a 12-month strategy will help protect futures investors from the problem of contango. Two weeks before the expiration of the nearest-month contract, the fund will roll forward another month, picking up the then-12-months-out contract.

Other examples of futures-based ETFs include: United States Natural Gas (NYSEArca: UNG), PowerShares DB Gold (NYSEArca: DGL) and iShares S&P GSCI Commodity-Indexed Trust (NYSEArca: GSG). [Risks and rewards of futures-based ETFs.]

For more information on ETFs, visit our ETF 101 category.

Max Chen contributed to this article.

Gas has already crept up 5 cents a gallon, and it could go as high as $3 a gallon if those in the know are correct. Oil prices have also increased, to $82 on optimism about the economy, new tensions in oil-producing Nigeria and reports that China is building up its strategic reserves, reports Clifford Krauss for The New York Times. [Energy ETFs: Oil Industry Expands Its Horizons.]

The Nigerian rebel group have resumed attacks on oil production operations, which has diminished Nigerian production by 85,000 barrels a day, or more than 4% of normal output. China is planning on amassing reserves while prices are low, increasing the expectations that China may import as much as 15% more oil this year.

Global crude oil inventories are slowly dwindling, but domestic inventories remain above the five-year average for this time of year. It is expected that OPEC won’t be altering its supplies later this month. [How to Use HOLDRS to Invest in Oil.]

How to play these rising prices? You have an array of options with oil ETFs.

For more information on oil, visit our oil category.

• United States Oil (NYSEArca: USO): Holds futures contracts; watch out for contango, though, because this fund could get hit on the roll. If it’s present, then investigate United States 12-Month Oil (NYSEArca: USL), which is less impacted by the situation.

• United States Gasoline (NYSEArca: UGA): Holds futures contracts; as with USO, watch for contango. There is no 12-month gasoline fund, however.

• SPDR S&P Oil & Gas Equipment & Services (NYSEArca: XES): Holds stock of companies involved in oil equipment. While it won’t correlate with the spot price, it does offer industry exposure and less volatility.

• SPDR S&P Oil & Gas Exploration & Production (NYSEArca: XOP): Tracks companies involved in the exploration and production of oil and like XES, doesn’t correlate with the spot price, but gives good exposure to the industry.

• iShares Dow Jones U.S. Oil and Gas Exploration (NYSEArca: IEO): Like XOP; gives exposure to companies involved in the production and exploration of oil and other energy commodities.

• Ultra Oil & Gas ProShares (NYSEArca: DIG). If you believe those prices are going to continue to go up and you want to maximize your exposure, this is one way to do it. Just be sure you know how leveraged ETFs work before you leap. [Our Guide to Leveraged and Inverse ETFs.]

Max Chen contributed to this article.

Wall Street seems to be taking a break to pause and reflect this morning in the absence of market-moving economic reports or fourth-quarter earnings reports. While equities have had a volatile start to the year, the MSCI All-Country World Stock Index tells the story of where we’ve been and where we are now: since March 9, 2009, it’s up 73%. The Vanguard Total World Stock Index (NYSEArca: VT), which tracks the FTSE All-World Index, is up 77.2% since the low. [9 ETFs for Dollar Bears and Bulls.]

Oil prices sank to day as the dollar gained strength. The pause is likely because of profit-taking after a monthlong rally in energy prices, fueled by investor optimism and global economic growth. A stronger dollar makes oil more expensive for overseas buyers, sending demand south. United States Oil (NYSEArca: USO) and PowerShares DB U.S. Dollar Bullish (NYSEArca: UUP) are slightly down and up this morning, respectively. [4 Things Fueling the Gas ETF Rally.]

What goes down must eventually come back up, right? The rock-bottom interest rates we’ve been enjoying for the last few years aren’t going to last forever. They won’t be as necessary to help goad an economic recovery, so as the picture brightens both here and around the world, they’ll naturally have to go back up. [9 ETFs for Bullish and Bearish Dollar Sentiment.]

The catch for you, dear investors, is that bond prices share an inverse relationship with interest rates. As rates rise, the price of bonds fall. If you’re holding bonds with the intent to sell them sooner rather than later, this will impact you in the form of lost principal. This is why many investors take a “laddered” approach to bond investing and buy bonds of varying maturities, in order to mitigate interest rate risk. [It's Time to Approach Bond ETFs Differently.]

For more stories about the U.S. dollar, visit our currency ETF category.

• PowerShares DB U.S. Dollar Bullish (NYSEArca: UUP)

• iShares Barclays 1-3 Year Treasury Bond (NYSEArca: SHY): Short-term bonds tend to come in favor as interest rates rise and hit long-term bond prices

• United States Oil (NYSEArca: USO): When interest rates rise, the dollar tends to weaken, which puts various commodities priced in dollars – such as oil – back in favor

• ProShares UltraShort 20+ Treasury (NYSEArca: TBT) and Direxion Daily 30-Year Treasury Bear 3x (NYSEArca: TMV): Long-term Treasuries will be hit the hardest when interest rates are hiked. For the risk-hungry among you, consider shorting long-term Treasuries. Before doing so, though, understand how these funds work! [All About Leveraged and Inverse ETFs.]

For full disclosure, Tom Lydon’s clients own shares of SHY.

The dollar is at a crossroads, having made some decent gains in recent months (PowerShares DB U.S. Dollar Bullish (NYSEArca: UUP) is up 2.4% year-to-date). While some feel that this could mark a new era of strength for our currency, others see potholes lurking in the distance. [How to Take Advantage of the Euro's Drop.]

Jordan Di Pietro for The Money Times is one such person. It wasn’t so long ago that the dollar sagged to a 15-month low against a basket of major currencies and analysts are calling for an equally dreary 2010.

What could knock the dollar off its lofty perch?

• Interest rates are stagnant. The Fed announced that the target federal funds rate will be set at 0% to 0.25% for “an extended period.” With interest rates that low, foreign investors will continue borrowing in the United States and investing abroad, where they can get higher returns. In turn, foreign markets will rise and additional investment abroad will continue to weigh on the dollar.
• Foreign investment: The rapid influx of capital into emerging markets such as China, India, and Brazil could raise the value of their currencies, as asset prices tend to increase over time. Again, in this equation, the dollar could be on the losing end.

Where does that leave you?

If you’re among the dollar bears, one way to hedge that weakness is to diversify away from dollar assets. DiPietro says that one way to do this is by investing in domestic small-cap companies that earn at least 20% of their revenue overseas. A weak dollar makes our goods and services cheaper for foreigners. Schwab U.S. Small-Cap (NYSEArca: SCHA) could be an opportunity.

Commodities also tend to fare better when the dollar is weak; resources like oil and gold are generally priced in U.S. dollars, making them cheaper and thus more appealing for international buyers. United States Oil (NYSEArca: USO) and ETFS Gold Shares (NYSEArca: SGOL) are two funds out of many that will nab you this exposure.

And don’t forget the bearish dollar ETF, PowerShares DB U.S. Dollar Index Bearish (NYSEArca: UDN), a straightforward way to play negative dollar sentiment.

If you’re bullish on the dollar, one way to capitalize is by looking abroad. A strong dollar means greater purchasing power, but conversely, less demand for American goods. You might begin to see more goods purchased from China, more investment in emerging markets, greater imports of basic materials from major producers and  so on. And, naturally, the bullish dollar fund is a direct play on a gaining greenback. A few funds that might work in this kind of environment include:

• iShares FTSE/Xinhua China 25 (NYSEArca: FXI)

• EGS Dow Jones Emerging Markets Titans Composite (NYSEArca: EEG)

• iShares S&P Latin America 40 (NYSEArca: ILF): Latin America is one of the most resource-rich continents in the world

• Market Vectors Steel (NYSEArca: SLX): has nearly a 60% weighting to overseas markets

• PowerShares DB U.S. Dollar Index Bullish (NYSEArca: UUP)

For more stories about the dollar, visit our currency ETF category.

Obama unveiled a $1 trillion, 10-year compromise on the health care plan that would enable the government to block or scale back premium increases, reports the Associated Press. He then demanded a “yes or no” vote on this plan, or something resembling it. The plan is very similar to one already passed by the Senate. Health care ETFs seem little moved by the new plan; Health Care Select Sector SPDR (NYSEArca: XLV) is down about 0.25% this morning.

Lingering concerns about Greece’s sovereign debt are pulling down the euro in early trading. A German finance ministry spokesperson said no decision about Greece’s debt has been made, and that Greece’s government will meet with a group that includes the International Monetary Fund (IMF), European Central Bank and the European Commission, reports Fabio Alves for The Wall Street Journal. Currency Shares Euro Trust (NYSEArca: FXE) is flat this morning.

Crude oil prices are retreating from six-week highs as watchers eye a refinery workers’ strike in France. Workers are striking at Total’s refineries on plans to cut back on processing capacities. The strike has many concerned that gas supplies could be restricted, raising prices, reports Claire Rangel for The Wall Street Journal. PowerShares DB Oil (NYSEArca: DBO) is flat so far today.

Read the disclaimer, as Tom Lydon is a board member of Rydex|SGI.

The Federal Reserve’s move yesterday is having ripple effects throughout Europe and Asia. At first, the markets got a case of the jitters before they took the move for what it was intended to be: a vote of confidence in the U.S. economy, say Jack Ewing and Sewell Chan for The New York Times. European stocks are gaining for the fifth consecutive day. [Italy Forecast for Growth, But Dangers Lurk.]

• BLDRS Asia 50 ADR Index (NASDAQ: ADRA) is down 1% so far today

• SPDR DJ Euro Stoxx 50 (NYSEArca: FEZ) is down 0.25% so far today

Oil prices have shot up 11% in the last two weeks, and they’re showing no signs of stopping today. A refinery strike in France and concerns about Iran’s nuclear program are threatening to make supplies tight in the future, reports Chris Kahn for the Associated Press. United States Oil (NYSEArca: USO) is up 6% in the last five trading days. [How to Harness Energy Using ETFs.]

Inflation seems to be in check, if today’s government report is any indication. Consumer prices rose a scant 0.2%; excluding food and energy, prices actually fell 0.1%. It’s the first decrease since 1982, says Javier C. Hernandez for The New York Times. Nevertheless, investors shook it off and the dollar continued to strengthen. PowerShares DB U.S. Dollar Bullish (NYSEArca: UUP) is up 0.3% so far. [What Fed Rate Hike Means.]

As gasoline prices rise and natural gas prices go through the roof, there is a way to hedge your increasingly exorbitant utility bills. An ETF can help investors hedge rising energy prices, capitalize on profits big oil is making and also give some padding to a portfolio. [For more stories about commodities, visit our commodity category.]

Commodity ETFs vary in their construction: some hold futures contracts, others track a basket of equities. With futures-based ETFs, there are tax consequences to be aware of. Contango and backwardation can affect these funds, as well. [How Contango Affects Oil ETFs.]

Please note how commodity ETFs work, as many are invested in a futures contract rather than actual shares. Some of the futures-invested funds are producing either a positive or negative yield roll, and may not yield the proper results intended. [ETFs to Play the Clean Energy Push.]

Rich White for Investopedia has some ideas:

• United States Oil (NYSEArca: USO): You can own oil through this ETF without incurring the costs normally associated with storage or transport. USO holds futures contracts. The only costs that you will pay include brokerage fees to buy and sell shares plus a modest management fee. This ETF falls under the “single contract” category of energy fund, although some don’t consider it a pure single contract fund because it invests in other energy contracts, as well.

• iShares S&P GSCI Commodity-Indexed Trust (NYSEArca: GSG): The ETF has about two-thirds of its total weight in the energy sector and the remaining one-third in other types of commodities. It tracks one of the oldest diversified commodities indexes, giving investors a certain confidence. The underlying index is a basket of futures contracts on 24 different commodities, and energy is the largest allocation with 67% of the holdings. This fund falls under the “multi-contract” category of energy funds. You’re sacrificing a bit of pure play ability for some broad diversification and, it’s hoped, a little less volatility.

• Energy Select Sector SPDR (NYSEArca: XLE): If futures-based energy ETFs aren’t for you, perhaps an equities ETF might be a better bet. Wild price swings in oil, natural gas and gasoline may take awhile to become evident in these funds, making them slightly less volatile.

For more energy investing ideas, please sign up for our special report on energy ETFs.

The Greek government has one month to prove they are making large budget cuts aimed at keeping their debt crisis within their borders. The Associated Press reports that Greece’s previous plans that masked their debt are under investigation. The country has a deadline of March 16. [Hope in Sight for Greece, Spain and Portugal?]

Simon Property Group (NYSE: SPG) has made a $10 billion bid for General Growth Properties (NYSE: GGP), which is trying to come out from under bankruptcy protection. The New York Times DealBook reports that Simon said in a statement that its offer, made a little over a week ago, would accelerate General Growth’s emergence from Chapter 11 protection and would offer creditors a full cash recovery for their holdings. iShares FTSE NAREIT Retail (NYSEArca: RTL) is up more than 2% this morning; Simon is 21%.

Crude oil prices are up as the dollar weakens and renewed Iranian tensions are dominating the energy markets. David Bird for The Wall Street Journal reports that light, sweet crude oil is up more than 2% to $75.75. [For more stories about oil, visit our oil category.]

• United States Oil (NYSEArca: USO)

Roger Runningen for Bloomberg reports that President Barack Obama said expanding U.S. nuclear power production will add jobs. This will also help the cleaner energy movement and help our economy recover. If the plan is to go into effect, this new nuclear plant will be the first one to be built in more than a decade in the United States. [6 ETFs to Play Obama's Clean Energy Push.]

• Market Vectors Nuclear Energy (NYSEArca: NLR)

The five funds are:

• FactorShares S&P 2x US Equity Premium: Holds a long position in the S&P 500 while shorting 30-year Treasuries.
• FactorShares S&P 2x US Anti-Equity Premium: Holds long positions on Treasuries, short on stocks.
• FactorShares S&P 2x US Equity Anti-USD: Goes long on the U.S. dollar and short on the S&P 500.
• FactorShares S&P GSCI 2x Crude Oil Premium Offers long exposure to crude oil while shorting the S&P500.
• FactorShares S&P GSCI 2x Crude Gold Premium: Offers long exposure to gold while shorting the S&P500.

Nadig brings up some great points about these ETFs: the commodity funds will hold futures contracts, so backwardation and contango will have an impact, and like all leveraged and inverse ETFs these funds will reset daily. Each fund comes with a 0.75% expense ratio.

Leveraged and inverse ETFs are not for everyone, so be sure you’ve read all the caveats before you buy. [Everything You Should Know About Leveraged and Inverse ETFs.]

For more stories aboutnew ETFs, visit our new ETFs category.