Which Strategy is better for 6-month view/position on WTI

Discussion in 'Commodity Futures' started by NewlyElite1, Apr 27, 2017.

  1. Hi

    First post - hope not a stupid question!

    Lets say I expect WTI to reach $55 by year end and I am not an active trader.

    Is it better to buy December futures (expiring in November) now and sleep on it

    Or

    Buy June futures and keep rolling forward every month

    Thanks
     
    murray t turtle likes this.
  2. I personally don't know the answer to this question, however I did ask this question to a mutual fund salesman for the Rogers Commodity Index on how they manage this issue since I was considering buying the index when I worked as an investment analyst.

    According to him, if you buy too far out into the future, you're spending way too much on the spreads. If you buy the current month and keep rolling it over, you're paying too much for contango. Since contango is unavoidable, the way they minimize it is buying not the current contract, but the next one, and then roll that over. So you'd be buying July, and rolling that over to August next month, and so on.

    I have to admit that I have no idea if this strategy reduces contango/spreads most efficiently, but that's how Jim Roger's peeps are managing his index/fund, and I have tremendous respect for Jim Rogers. Hope that helps.
     
    murray t turtle likes this.
  3. wintergasp

    wintergasp

    Look at the spread between the two months (e.g. plot it on a chart), if you think it will get higher in the future, buy Dec, otherwise buy Nov.

    If you have a Long or Short view on WTI, buying Dec or Nov+Rolling probably won't change much to your p&l.