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Special Report on

Commodities, Roll Yield and Contango

commodities roll yield and contango special research report Photo by
   Most of the time, investing in commodities means investing in futures contracts. That's the accepted wisdom. And trading commodity futures means getting into the mysteries of contango and backwardation.    We cover this all the time here at , and with good reason. Rolling forward a futures contract can be a tremendous source of loss or gain for an investor, often overwhelming the returns that changes in spot price might imply.    Usually, we’re worried about contango – the crippling headwind faced by most commodities these days, where it costs more to buy next month’s contract than it does today’s. ...
The graph to the right depicts how the price of a single forward contract will behave over its life if in contango or backwardation. A contract in contango will decrease in value until it equals the future spot price of the underlying. This is not to be confused with a contango forward curve which depicts the prices of contracts for different maturities and is upward sloping. Cite error: There are tags on this page, but the references will not show without a {{Reflist}} template or a tag; see the .
2010's Best Commodity Investments So Far
came in third. It’s actually the exchange-traded note tracking coffee’s price, the iPath DJ-UBS Coffee Subindex Total Return ETN (NYSE Arca: JO). Surprised? Well, the second quarter was full of surprises for commodity investors. Unfortunately, most of them were unpleasant. Of 17 single-commodity or narrowly focused products, only four turned a profit. The winners netted an average 12.1 % gain, while the average loser gave up 9.9 %. We sought out the most liquid single-commodity exchange-traded products to see how well they tracked the spot market over the last three months. And where we couldn’t find ... market research, surveys and trends
Exploiting Commodity “Yield Curves” - CXO Advisory
Is there information useful to investors in the “yield curves” of commodity futures? In their December 2009 paper entitled “Structural Properties of Commodity Futures Term Structures and Their Implications for Basic Trading Strategies” , Rolf Duerr and Matthias Voegeli investigate the informativeness of price progressions across commodity futures contracts with different maturities (term structures or yield curves) over rolling 12-month windows. Specifically, they focus on trading commodity futures contracts based on the current slopes of these curves and on the stabilities of the shapes of the curves ... market research, surveys and trends


Oil funds set for growth as contango goes | Reuters
(Reuters) - Passive long-only oil funds are likely to see a surge in volume later this year as a change in market structure provides an extra source of income for investors from what traders call "roll yield". Tens of billions of dollars have been spent on oil funds over the last 18 months as investors have tried to cash in on surging prices, buying passive securities such as exchange-traded products (ETPs) and commodity index funds. But many investors have been disappointed by returns because the price of oil for use now has traded at a deep discount to forward futures in a market pattern known as a contango. Rolling ... industry trends, business articles and survey research
A Survey Of Hard Asset Investing Vehicles: Part 1 - Hard Assets ...
Neither assumes any liability for any content on a third party website or material prepared by a third party. It's not an easy decision to make. The explosion of interest in commodities investing has been accompanied by an explosion in the types and styles of financial products available to investors. And though many of the products appear similar, they can be quite varied in their risks and reward profiles. Choosing one product type over another can dramatically influence both performance and tax considerations. This article aims to help you understand the options. Why Do Commodity-Linked Vehicles Exist? ... industry trends, business articles and survey research
Is Your Commodity ETF/ETN Influenced By Contango? (UNG, USO, OIL)
“As the appeal of exchange traded funds (ETFs) has magnified, so has that of commodity based ETFs and exchange traded notes (ETNs).  One inherent characteristic of many commodity based ETFs  and ETNs is contango.  Contango arises when the front-month futures contracts are cheaper than second-month futures contracts.  To simplify it, it is when the price of a commodity for future delivery is higher than the spot price (the opposite phenomenon occurs as well, and this is known as backwardation),” Kevin Grewal Reports From Smartstops. Grewal goes on to say , “This affects ETFs and ETNs that are futures based ... market trends, news research and surveys resources
Commodities investment – know your options, manage your risks
Events over the past three years have generated extreme levels of volatility in the commodities arena. In this article, Standard Chartered provides companies and investors with some keen advice on hedging against these sharp moves, and the clear advantages of commodities investment over the long term Commodity prices have witnessed extreme levels of volatility during the past three years. What are the best techniques for companies and investors to hedge against the most extreme elements of these price moves? Arun Murthy, Global Head of Commodities Trading: I think all clients need to pursue a systematic hedging strategy. I would ... market trends, news research and surveys resources


Commodities -- Does it Take Two to Contango - ETF
Conversely, when the slope is positive (“contango!”), the roll yield is negative . With that primer in hand, let's return to the Gorton and ... technology research, surveys study and trend statistics
SR Amex 2006-53 - Notice of Filing and Immediate Effectiveness of ...
May 24, 2006 ... commodity is greater in the near term. 8. “Contango” refers to a condition ... roll yield over the next 13 months. The maximum implied roll ... technology research, surveys study and trend statistics
Slide 1
Mar 6, 2007 ... No control over roll yield returns: may be positive (backwardation) or negative (contango). – Does not provide exposure to commodity classes ...
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WikiAnswers - What is roll yield in futures investing
Investment in a commodity index generally entails (i) the bulk of the investment's being put into secure instruments such as Treasury bills and (ii) the remainder of the investment going into futures. The most liquid futures tend to be those in the very near term, and they usually have short maturities, typically 1 month, so investment in liquid futures means investing in a contract that is likely to mature in the near future. Given that the investment term in the index is open-ended, the futures investment component is going to move from one future to the next succeeding future during the life of the underlying index ...
Is a long-term oil ETCs investment affected by the negative "roll ...
A lot is being written about the big, negative effect the current contango market is having on the performance of oil ETCs, such as USO and USL in the US and CRUD in the UK (see links below). My question is: Are long-term returns affected by the contango effect? E.g. say the spot price is $40 and I want to invest with the assumption that oil is likely to recover to $100+, within the next few years. Is the 150%+ return this would give decreased because of the money lost on the "roll yield" (see link 1 below). I can imagine that with a recovering economy -whenever that might happen-, the contango will flatten or reverse into ...