AdvancedMAD Academy0:46Derivatives

Losing Money in a Rising Market

Roll yield can make a commodity fund fall over a year in which the underlying commodity rose, and the futures curve is where you see it coming.

0:46 · 6 scenes

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What the Lesson Covers

  1. 0:00Oil rose twelve percent. The fund tracking it fell. Both are true.
  2. 0:05The curve. Contango means later months cost more. Every roll sells low and buys higher.
  3. 0:15The compounding. A three percent step, twelve times a year, is a very large annual drag.
  4. 0:24The other direction. Backwardation reverses it, and the roll adds to returns instead.
  5. 0:33What to check first. Look at the curve before buying any commodity fund you intend to hold.
  6. 0:41Read the curve, because it prices the cost of waiting.
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Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Losing Money in a Rising Market — MAD Academy Training Video · MadStockAlerts