Recently, while researching commodity investments, I noticed an interesting phenomenon: many retail investors are paying attention to commodities like crude oil. Honestly, crude oil is indeed one of the most heavily traded commodities worldwide, and it is an important driver of the economy.

When it comes to investing in crude oil, most people think of futures or spot trading, but there are actually more convenient options. Crude oil ETFs are one such option. They first appeared in 2005 and are considered a relatively new investment tool. Their operation is to track crude oil prices by investing in crude oil futures, forward contracts, or other derivatives, rather than directly holding physical crude oil. Trading is as simple as buying stocks—you can buy and sell them directly on the exchange.

In Taiwan, there are actually not many crude oil ETF options. Yuanta S&P Oil ETF (00642U) is Taiwan’s only ETF that tracks crude oil. Its management fee is 1%, with an additional custody fee of 0.15%, and it tracks the S&P Goldman Sachs Crude Oil Index, with a correlation of as high as 0.923 to spot prices. There is also JKoop Brent Oil Bull 2 (00715L), the first 2x leveraged Brent crude oil ETF, which is suitable for investors who want to amplify returns.

If you look at oil ETFs in the U.S. market, the choices are much more abundant. MLPX tracks oil and natural gas pipeline companies, with an annual dividend yield of 10.1% and assets under management of $506 million. IXC is the iShares Global Energy ETF, tracking large global energy stocks. Its top constituent holdings include ExxonMobil, Chevron, and others, with an annual dividend of 11.88%. XLE is the Energy Select Sector SPDR Fund, the largest by size at $8.33 billion in assets. It has an annual dividend of 15.57% and a management fee of only 0.13%, and it consists entirely of stock holdings of large U.S. energy companies.

Besides ETFs, there are other ways to invest in crude oil that you can consider. Crude oil futures have the highest trading volume, but the entry threshold is high, so they are not really suitable for retail investors. Investing in crude oil stocks requires in-depth research into company fundamentals. Major companies in the market include Sinopec, ExxonMobil, Royal Dutch Shell, and others. Options trading mechanisms are similar to futures—essentially, you are buying insurance for futures contracts. If the price movement does not go as expected, you can choose not to execute the contract.

There are also contracts for difference (CFD). This allows investors to trade using margin and leverage. For example, you can open a position by paying only 5% of the total trade amount as margin, which greatly lowers the initial cost. CFD platforms usually do not charge commissions; you profit from the spread, and they are not limited by standard futures contract lot sizes. The minimum can be as low as trading 10 barrels. However, keep in mind that leveraged products carry very high risks—be sure to set take-profit and stop-loss levels.

The advantages of crude oil ETFs are still quite clear. First, they are easy to operate: you do not need to open a separate futures account, and you can trade directly on a securities exchange. Second, they have good liquidity, allowing frequent intraday trading to capture short-term opportunities. They also have tax advantages—capital gains tax is generated only when you sell. Management fees are typically 0.3%-0.4%, which saves about 2%-3% compared with futures and stock investments. Moreover, they support two-way trading, so you can go long or short.

But risks should not be ignored. Crude oil prices are highly volatile and are heavily influenced by global political events and environmental policies. During the pandemic, oil prices even fell into negative territory—this is the best lesson. If you choose an ETF that tracks companies like small shale gas producers, these firms have weaker competitiveness, and falling oil prices may accelerate their collapse. Also, ETFs that track futures prices have very high roll-over costs, making them unsuitable for long-term holding. For less experienced investors, the risks are even greater.

In terms of investment strategy, you can consider diversified allocation. If you want to hedge risk, you can sell a crude oil ETF to reduce downside exposure. You can also buy an inverse ETF to short crude oil, but inverse ETFs carry extremely high risk—when oil prices rebound, you may end up losing everything. When choosing, be sure to clearly verify which index is tracked; do not buy blindly. It is best to choose products issued by large, capable institutions, so that the research framework is more complete, market capture is more sensitive, and capital safety is better protected.