This is a McGraw-Hill Demystified self-teaching guide, not a trading system: it explains what commodities are, who trades them, and how to fold them into a diversified portfolio using modern portfolio theory. It has no entry or exit rules and its central bullish thesis was published right before commodities crashed.
The one idea
The book's actual argument is an asset-allocation case, not a trading method: commodities belong in a portfolio because they carry low or negative correlation to stocks and bonds, so adding them raises risk-adjusted return under modern portfolio theory (Harry Markowitz, 1990 Nobel laureate). Frush walks through the four primary asset classes (equities, fixed income, cash and equivalents, alternatives) and places commodities inside the alternatives bucket alongside hedge funds, real estate, private equity, and collectibles.
Beyond allocation theory, the book functions as a reference manual: 22 named participant roles in the commodities food chain, a table of global exchanges and what each trades, margin and options mechanics, and a rundown of every vehicle for gaining exposure (mutual funds, ETFs/ETNs, stocks, hedge funds, managed futures funds, direct futures and options). It closes each chapter with a 10-question quiz and ends with a full final exam, in keeping with the Demystified series format.
The strongest specific claim in the book is that finite, inelastic supply means commodity prices 'can go in only one direction in the long term: higher.' That line was written in early 2008, just before commodities entered one of their worst multi-year stretches on record.
What it actually teaches
The book's closest thing to a repeatable process is the sequence it lays out for building and running a commodities allocation inside a portfolio.
SCORE YOUR RISK PROFILE
Frush splits risk profile into three variables: willing (your tolerance), should (how much risk you need to hit your goal), and can (your capacity to absorb losses). His worked example: a $100,000 portfolio that needs to generate an extra $20,000 in a year has to earn a 20 percent return, which by itself tells you how much risk you are being forced to take on.
BUILD THE FOUR-CLASS ASSET MIX
Allocate across equities, fixed income, cash and equivalents, and alternatives before you pick individual investments. The book cites studies claiming asset allocation drives roughly 10 times more of a portfolio's long-run performance than security selection and market timing combined, which is the justification for treating the allocation decision as the whole game.
SIZE THE ALLOCATION USING CORRELATION, NOT A TARGET NUMBER
Correlation is scored from -1.0 (moves exactly opposite) to +1.0 (moves exactly together); the book defines -0.3 to +0.3 as 'noncorrelated.' Frush argues for adding commodities specifically because they sit in the low or negative range against stocks and bonds. He never gives a recommended percentage of the portfolio to hold in commodities, only the correlation logic for including some.
PICK A VEHICLE YOU ACTUALLY QUALIFY FOR
Mutual funds and ETFs need no minimum. Private managed futures funds typically require $1 million in total assets and $200,000 in annual income. Hedge funds require $200,000 in income for two years running (or $300,000 joint) and a $2.5 million net worth excluding home and cars. Trading futures and options directly through a Qualified Eligible Participant account requires $2 million in securities. If you trade futures directly, know that Section 1256 of the tax code splits gains 60 percent long-term and 40 percent short-term, versus 100 percent short-term on a stock trade held under a year.
UNDERSTAND MARGIN BEFORE YOU TOUCH A FUTURES CONTRACT
Futures margin is a performance bond, not stock-style borrowed leverage. Worked example from the book: a copper contract with an $8,100 initial margin and $6,000 maintenance margin. A one-day $1,000 loss (margin down to $7,100) generates no call since it is still above maintenance; a further $1,600 loss the next day (margin down to $5,500) drops below the $6,000 maintenance line and triggers a call for $2,600 to bring the account back to the $8,100 initial level.
REOPTIMIZE ON A SCHEDULE
The book's 'four R's' are reevaluating (checking your goals still hold), rebalancing (selling what's overweight, buying what's underweight), relocating (swapping similar assets for tax or income reasons without changing the mix), and reallocating (changing where new contributions go). Frush says do this at least annually, and that semiannual or quarterly is better.
What it looks like Monday morning
A reader who actually uses this book on Monday morning does the can/should/willing math on their own portfolio instead of picking a commodities fund because it was in the news, and checks the correlation logic against their own stock and bond holdings rather than assuming commodities are automatically a diversifier. They also stop and check which vehicle they legally qualify for: most readers who finish the managed futures fund and hedge fund chapters excited about the 'best' options will hit the $1 million net worth or $2.5 million wealth gates and have to fall back to an ETF or ETN instead.
If they trade futures directly, they get their broker's current initial and maintenance margin numbers rather than trusting the book's 2008 table, and they put a rebalancing date on the calendar instead of leaving the commodity sleeve to drift.
| Commodity | Symbol | Initial Margin | Maintenance Margin |
|---|---|---|---|
| Crude Oil | CL | $13,602 | $10,075 |
| Gold Comex | GC | $4,388 | $3,250 |
| Corn | C | $1,485 | $1,100 |
| Natural Gas | NG | $11,644 | $8,625 |
| Copper Comex | HG | $8,927 | $6,613 |
These are the book's own 2008 exchange-set values, reproduced only to show how initial versus maintenance margin works; real margin requirements move with volatility and will not match this table today.
Because of increasing demand, declining production, and finite supplies, prices can go in only one direction in the long term: higher.Scott Frush, Commodities Demystified
Where it fails
- The book's central bullish thesis was published at the worst possible moment. The 'finite supply means only-up prices' argument on which the book leans hardest (Chapter 18, defining characteristic five) went to print in 2008 just as crude oil peaked near $147 a barrel and then lost more than half its value within months. Commodities broadly then spent 2011 to 2020 in a multi-year bear market as the shale boom and slowing Chinese demand undercut the 'finite and can only run out' framing for oil and gas specifically.
- There is no trading method here despite the Forex & Futures shelf placement. The book has no entry rules, exit rules, position sizing formula, or backtested system. Chapter 16 explains what margin, options, and order types are; it never tells you when to use them. Readers looking for a futures trading edge will find only mechanics and a portfolio-allocation argument.
- It gates you toward vehicles most readers cannot legally use. The book spends real space on managed futures funds and hedge funds as ways to access commodities, but the wealth and income requirements it lists ($1 million net worth and $200,000 income for private managed futures funds, $2.5 million net worth for hedge fund investors, $2 million in securities to trade futures directly as a Qualified Eligible Participant) exclude the large majority of readers who picked up a Demystified-series introductory book.
- It never states a target allocation percentage. Despite building a whole chapter-5 case for adding commodities on correlation grounds, the book never gives a recommended weight (5 percent, 10 percent, whatever) for a commodities sleeve. A reader is left with the theory but no number to act on.
- Large sections are reference filler rather than instruction. Chapter 4 lists 22 named participant roles in the commodities trade, Chapter 4 also lists global exchanges and their commodities, and Chapter 16's margin table (Figure 16-3) is a hard 2008 snapshot of exchange margin requirements that has no relevance to current levels. Combined with a 10-question quiz at the end of every chapter and a full final exam, a meaningful share of the 351 pages is not new instruction.
- The correlation argument has weakened since publication. The book's case for commodities rests on their historically low or negative correlation to stocks and bonds. Since the 2008 financialization of commodity markets (more index and ETF flows, more macro trading), commodity correlation to equities has risen and become far less stable than the static -0.3 to +0.3 'noncorrelated' framing in Chapter 5 suggests.
Who it is for
Buy it if
You are a complete beginner who wants a plain-English tour of what commodities are, who trades them, and how futures, options, ETFs, and managed futures funds mechanically work, and you plan to read the whole Demystified series as a self-study primer with quizzes. It also works as a quick reference for margin, options, and futures-contract vocabulary.
Skip it if
You already know the basics of futures and options and want a trading method, entry and exit rules, or a specific portfolio allocation number. You should also skip it if you want the book's core commodities-supercycle thesis to hold up; it was written at the top of the 2008 commodities peak and does not account for what happened after.
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