Saxo Bank (Saxo Bank)
Commodities  |  January 03, 2013 13:59:33

Passive investment in commodities? Watch the scrolling effect!

Is not a commodity and not as a commodity income as income. Looking at the performance graphs of individual commodities we find that with sufficient precision can not reflect the so-called factor scrolling contracts. Commodity is traded using futures contracts with a maturity and they are regularly replaced (scrolling). Graphs can not then reflect either positive or negative difference between the price expirujícího and subsequent contract.To highlight this difference, we used the comparison of the performance of individual commodities in the DJ-UBS against performance contract with the nearest delivery date to remove the effect of scrolling.

Index DJ-USB invests in futures contracts that are close to expiration. The reason for this is to achieve the highest possible liquidity and transparency. The result is that the futures are often scrolling these contracts. This leads not only to a significant increase in trade costs index, but also affects the performance of individual commodities.

Contango and inverse market

As the situation called contango, where the price of the futures contract toward the future increases. In this case, the loss increases in the index, because of the purchase contract more expensive than the one sold. This occurs when a sufficient supply puts pressure on current prices. The opposite scenario is known as the inverse market (backwardation). It can now be seen in Brent crude oil and gasoline, where the tense situation on the physical market price increases above the current price of future contracts. This situation was more frequent during the past year, creating a positive environment for scrolling index and helped increase its overall performance.

Past contango affects the price of natural gas

As can be seen in the graph below, the name mentioned trap contango widened the gap between the different gas prices. During 2012, the price of a contract with the next delivery date has increased by 13 percent. But when we take into account the effect of scrolling on the futures contract, then the yield on long-term investment through the DJ-USB roughly minus 30 percent.

A similar example is the difference in performance types WTI crude and Brent. Due to the negative effect of scrolling index shows DJ-UBS WTI at a loss higher. In contrast, the effect of scrolling Brent positive (backwardation) and profits using the index is higher.

Scrolling effect can be seen even in the yield of soy beans, wheat, corn, gasoline or beef.

Graph: Evaluation of selected commodities in 2012

Strong blue color: contracts with the next delivery date

Pale blue color: commodities on the DJ-UBS (counted scrolling effect)

For other commodities, but we can say that returns are using both methods, more or less comparable, indicating little or no difference in the prices of futures. As an example, the price of gold or silver.

Start of 2013 brings new investment decisions. Investors who are looking for long term passive investment through one of many commodity indices, should be aware of possible differences in the performance curves and know the relationships between them.


Ole Hansen, commodity strategist at Saxo Bank


 Globální online investiční banka

Saxo Bank je globální investiční banka specializující se na online obchodování a investice na mezinárodních finančních trzích. Saxo Bank umožňuje soukromým investorům a institucionálním klientům obchodovat s FX, CFD, cennými papíry, futures, opcemi a dalšími deriváty a poskytuje i profesionální správu portfolia a fondů díky svým online obchodním platformám oceněným řadou různých ocenění.

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