Exchange traded funds -- ETFs -- tracking the value of precious metals have been a big hit with investors. The idea of investing in the value of a particular metal has been expanded to cover the price of copper. The available copper tracking ETFs allow you to profit from either an increase in the price of copper or a decrease if you expect the industrial metal to fall in value.
Verify or deposit the money you want to use to buy a copper ETF into your brokerage account. The buying and selling of ETF shares is accomplished in the same manner as for stock shares -- placing buy or sell orders through your brokerage account.Step 2
Decide whether you want to hold a copper position for a longer period -- longer than a week -- or trade short term. If you think copper will decline in value you can buy an inverse copper ETF. At the time of publication, there were five copper tracking ETFs available. The funds with the symbols JJC, CPER and CUPM directly track the price of copper as it trades on the commodity futures markets. The fund trading under LCPR generates price value changes at two times the price change of copper and SCPR changes value in the opposite direction of copper prices with twice the value change. LCPR and SCPR are suitable for short-term trading.Step 3
Purchase shares of your selected copper ETF by placing a buy order with the stock symbol and number of shares through your online brokerage account. ETF shares trade on the stock exchange, and your order will be filled almost immediately during market hours. Confirm that the order was filled by checking your account summary page, which should list the copper ETF shares and the purchase price.
- The funds tracking copper are technically exchange traded notes -- ETNs -- rather than ETFs. An ETN tracks the value of a particular security or asset price, but the note sponsor does not actually hold assets to back an ETN. ETF and ETN shares provide a similar function and are bought and sold in the same manner.
- At the time of publication, four out of the five copper funds had very small asset bases. Check the trading volume and bid/ask spreads for sufficient liquidity before buying any of the funds except JJC.
- LCPR and SCPR are classified as leveraged, inverse funds. The Financial Industry Regulatory Authority -- FINRA -- warns against using leveraged and inverse ETF/ETNs as longer-term investments. FINRA states the use of these types of funds should be limited to short-term trading.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.