Sorry titron i have got confused by a trader vis a vis contango and backwardation.

This is what i think occurs you buy a contract and every day the spot price is adjusted by the future price to give you an up or down rate fo your return. If your in Contango your doing good and if your backwardation well you have a negative return . Other than that i am not entirely sure the mathematical formulae they use to working out the price.

Equally i am not sure how collateral return works .

I know you have explained this to me before but could you go through the buying process and explain how the pricing works etc .

regards

Sorry Nick,

but I am not exactly sure about ETF's as far as how pricing is concerned and don't want to give you any false info.

All I know is that they will mirror the index or commodity they track and they are traded on exchanges just like stocks.

Basically, if you have an ETF which tracks brent crude on the ICE you ETF is supposed to mirror the performance, if brent goes up your ETF will go up and vice versa or if you have an ETF which tracks the S&P500 your ETF will mirror that performance. I could be wrong about this but I don't thing that contango and backwardation are the main drivers when it comes to the price of your ETF. I think to get the most accurate information you should contact a broker who offers ETF's.

My field of expertise is equity trades/investments.

Here is the definition of Backwardation and Contango:

Backwardation describes a condition were more distant future contracts have a smaller value then near contracts.

Contango describes a condition when distant delivery months are higher priced then the current spot price.

Are there any ETF's that you are particular interested in?

Well due to my research i see good things for next year for Cotton , silver and corn . What do you reckon i think the ETFs on the london stock exchange track the dow jones indice.

Interesting research you must have conducted to conclude corn and cotton as a good investment. Time will tell if you were right...

I know there is a broad range of commodity ETFs on the LSE. There should be a decent selection of index ETFs as well.

i can give you my reasoning behind them if you would like

Sure, if you would like to share that info.

well cotton is in demand by urbanising nations . Less cotton is being planted by the USA as its all going in to corn. Cotton is historically undervalued too.

Corn equally will go up due ot excessive demand in biofuels and food stuffs from urbanised world.

I would say buy platinum due to plethora of uses but i cant see it going up higher than it is .

What do you base your assumption on that cotton is undervalued?

I think the cotton market is well supplied and a short-term stabalization or even a rally in the U.S. Dollar will cause commodity prices to drop. Currently there seems to be more down-ward pressure on cotton then there is up-side potential.

Normalized weather, as forecasted in the U.S. next year, will provide further downside pressures on cotton or at least severly limit the upside potential.

But maybe you have good contacts in the cotton pits that give you different indicators.

Corn and the ethanol for which it is used is clearly not the answer to solve the oil addiction problem.

Corn is actually among the worst commodities used for ethanol production and does more harm then good. It forced feed prices higher which led to an overall increase in food prices which fuel inflation and inflationary expectations.

Ethanol plants across the U.S. have shut down as it is not economically sensitive.

I also want to add that by your own reserach you said that more corn will be planted, that will force prices lower. Next year is expected to be a good crop season which will provide more downside pressure on corn and any upward movement in the U.S. Dollar will force prices lower as well.

It is very dangerous to bet on commodities if you don't fully understand the market and what moves prices. To assume that all commodties will rally due to gloabl growth is a very dangerous strategy as well.

Would I put my money on corn or cotton or would I advice investors to do so?

No, not at all.

Like I said maybe you have very good contacts in the industry which paint a bullish picture for those two commodities in particular.

Don't get me wrong, I don't want to discourage you from an investment in those two commodities, the above is just my personal opinion on it.

well i will keep researching should come up with a plan in a month or 2 i shall share with you

Sounds Good.