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Resources on Commodity Pool Operators

What is a Commodity Pool Operator?

A Commodity Pool Operator (CPO) is a person or organization that manages a commodity pool, and a commodity pool is a fund that receives contributions from a number of investors in order to gain leverage when investing in commodity futures contracts (commodity futures contract- a standardized contract to buy or sell a specific commodity, like corn or crude oil, at a certain date in the future at market price).   Commodity pools give relatively small investors an opportunity to take part in a larger investment, which they normally would not have access to, in this respect they are very similar to a mutual fund.

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Commodity Pool Operator (CPO) Fee Structure

When looking to choose a Commodity Pool Operator (CPO) it is essential that one is aware and educated with regards to the types of fees that can be charged by a commodities fund.  It is important to know that nearly all Commodity Pools charge both a managerial fee and an incentive fee.

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Commodity Pool Operator (CPO) Trading Strategies

There are generally two styles of trading in when referring to a Commodity Pool, which are managed by a Commodity Trading Advisor (CTA), and there are two types of CTA's, discretionary and systematic. Discretionary CTA's are traders that use their own knowledge and experience in the industry to determine whether to enter or exit a trade. In other words, a discretionary CTA might focus on both fundamental crop reports and supply-demand patterns to determine if they will buy cotton. Systematic CTA's, on the other hand, do not transact trades based on personal knowledge or experience in the market, but are executed based on a trading signal that is generated by a computer program. While the procedures were created by human beings, these "black box" procedures (A computer program in which users enter information and the system utilizes pre-programmed logic to return output) now trade the markets without any input from human emotions, biases, and/or fundamental knowledge.

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