Corporations who want to invest in rubber can put up a huge amount of capital or cash to fund rubber processing. But for average investors who want to get some portfolio exposure to financial gains in the rubber industry, they can look at investment products in the securities market, such as commodities, stocks or futures. A single trader can buy the shares of companies that work in the rubber industry or trade rubber commodities on the futures market.
This is one direct way in which local investors can gain exposure to rubber products. A futures contract allows for the delivery or the acceptance of the underlying rubber product at a particular date in the future. Tire companies, for example, buy rubber futures contracts to lock into a price for raw materials. Speculative traders also buy rubber futures contracts, but only to close out soon afterward before the contract expires or is due. This is because they only want the profit opportunities of trading rubber contracts without ever receiving the delivery of actual rubber or rubber products.
Investors usually turn to the Tokyo Commodities Exchange to trade rubber futures contracts. Asian economies are one of the biggest producers of rubber, the main ones being China, Malaysia, Indonesia and Thailand. The prices of futures contracts on the TOCOM exchange are denominated in the yen currency. This means that for the U.S. investor or trader, fluctuations in the dollar can affect the return on their investment. Rubber products become more expensive against the yen if the value of the dollar falls.
Buying Into Stocks
Another option for local investors to gain some exposure to rubber is to invest in rubber companies. They can buy shares of companies that produce rubber, rather than the rubber futures contract itself. One commonly known rubber company is Goodyear Tire and Rubber Co. Other examples include Cooper Tire & Rubber Co., Carlisle Companies and A. Schulman Inc., many of which trade on either the New York Stock Exchange or the Nasdaq. Traders can access shares in similar rubber companies at affordable prices rather than buying futures contracts.
An exchange traded fund is good for investors who want exposure to multiple rubber companies without having to invest in each particular company. An ETF is a financial security that tracks a basket of stocks, similar to an index. This means an investor who buys into an ETF would benefit from the returns of similar companies within the rubber industry. Although some rubber ETFs may not contain solely rubber companies, they can contain company stocks that have a high percentage of their operations dealing with rubber.
- The Options Guide: Rubber Futures Trading Basics
- Trading Economics: Rubber
- Global Rubber Market: Rubber Near 16-Month Low as Yen Gains After Fed Cut Bond Buying
- Benzinga: Top 4 Stocks in the Rubber and Plastics Industry With the Highest Cash
- ETF Database: ETFs With GoodYear Tire & Rubber Co. (GT) Exposure
Victor Rogers is a professional business writer who started his career as a financial analyst on Wall Street. He later expanded his experience to content marketing for technology firms in New York City. Victor is an alumnus of St. Lawrence University, where he graduated with honors in economics and mathematics.