Commodity pools are funds that trade in commodity futures investment. Futures on commodities include such commonplace items as wheat and corn, more volatile products such as oil or natural gas, and some exotic or precious items like cocoa or gold. There are many futures contracts trading on many exchanges across the world. The familiar designated contract markets – or exchanges – in the United States include prestigious financial centers such as New York and Chicago, as well as centers of grain trading in Kansas and Minnesota.

A commodity pool fund may engage in trading the same way a futures trader might. Based on their analysis of the fundamentals or technicals behind a futures market, they may choose to buy (be long) or sell (be short) a futures or options contract. They may also do a combination of both, a strategy known as “spreads”. Learn more about the way that a commodities pool operator may trade contracts with or Beginning Guide to Commodity Investment.

The term commodity pool is a term from the National Futures Association (NFA). The NFA and the Commodity Futures Trading Commission (CFTC) are the regulating bodies for commodity pools. Commodity pool operators are often commodity trading advisors, or CTAs. There are exceptions to this, scribed in the rules of the NFA.
Commodity pools are commodity funds or managed futures funds. Basically, many investors pool their risk capital to trade as a single entity. This may be done for leverage. The perceived advantages to participation in a commodity pool fund are that there may be an opportunity to achieve greater diversification without the individual responsibilities of margin calls. Each investor in the commodity pool fund will likely have a proportionate share in the profits and losses based on their level of investment.

Like managed futures funds, there will likely be incentive fees and administrative expenses, in addition to trading costs, to consider. These will normally be contained within the disclosure document the commodity pool operator provides.
Take the time to consider and review the disclosure document. It will detail the performance as well as the strategies for that commodity trading pool. The commodity pool is no less risky than other forms of futures investing.
Trading in futures and options involves a substantial risk of a loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.