CT10Gov
Registered: Sep 2012
Posts: 438 |
10-26-12 07:47 PM
You really can't - without taking on some other form of risk. If it were possible, then you can construct an arbitrage trade where you can capture the roll yield without being exposed to price risk.
Quote from nicbizz:
Hi cdcaveman,
Much thanks for the quick response!
I have a basic understanding of what a ratio backspread is as it relates purely to options (I hope!).
What I'm unfamiliar with is how you could use it to reduce rollover cost/risk in futures.
Say for example, I think Crude Oil is going up in the next 1-3 months, exactly when, I don't know. Now, I can buy CL Dec'12 @ 86.18.
CL Jan'13 is @ 86.72 and CL Feb'13 is @ 87.30, both presenting a contango risk if I have to hold further than the front month.
So, how would I use a ratio backspread to mitigate the rollover cost?
Appreciate your help on this.
-Nick
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