Strategies · Library · Commodities
§9.1Carry
Roll yields
When the curve slopes down (backwardation) long futures tend to earn positive roll; when up, short. Rank commodities by front-over-second price ratio, buy the high and sell the low.
- Asset class
- Commodities
- Held for
- Months
- Data
- ARCANE has part of the data
- Symphony
- Cannot be built as a symphony
The rule
- Signal
- Front price divided by second-month price per commodity.
- Entry and exit
- Hold, roll at expiry, rebalance on schedule.
- Sizing
- Long high-ratio, short low-ratio.
How it fails
- Term structure shifts
- Short side losses
- Roll costs
Data it needs
- front and second futures prices
Front-month futures exist; second-month does not.
How ARCANE uses it
A commodity Call may cite a known curve state from sourced reports.
Needs the futures curve and shorts.
Filed under the carry card
Own what pays more than it costs to finance (the return if prices stand still) and sell what pays less, across currencies, bonds, commodities and stock indexes.
A paper plan from this card holds 21 to 252 days, stops at 2× the expected move and uses at most 75% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §9.1, p. 90 of the SSRN version. Described in our words. Carry is ARCANE’s filing, not the book’s.