Commodity Futures

…commodity traders may be able to enhance returns by focusing on those commodities for which term structures (yield curves) exhibit stability over past years.

“On a day after a large decline in equities, it might be appropriate to look at managed futures.”

…Carly Garner’s A Trader’s First Book on Commodities is a well-calibrated introduction (as advertised) to trading commodity futures and options, but readers will have to dig deeper for robust investigations of trading strategies.

…evidence from detailed, but somewhat aged data, indicates that a typical futures speculator makes money by taking a position opposite that of hedgers in aggregate.

…evidence from a limited sample period indicates that information in Commitments of Traders reports regarding aggregate positions (hedging pressure) of commercial and non-commercial futures traders may support successful timing of commodities and equities markets.

…gold is generally a hedge and safe haven for stocks in developed markets, but not in emerging markets.

CXOadvisory.com generally focuses on U.S. equities for this kind of analysis.

…ETNs offer investors easy access to alternative asset classes, but holding them is more like lending money to issuers than holding assets.

…traders may be able to exploit information on hedger and speculator net positions in the Commitment of Traders report to time positions in associated commodity futures.

…commodity futures trading strategies that combine momentum and roll return may offer strong performance largely uncorrelated with those of stocks and bonds.

…simple analyses indicate that the crude oil-natural gas price ratio has little (no) predictive power for natural gas (crude oil) price at forecast horizons of one to a few months.

…the reactions of aggregated commodity futures prices to surprises in macroeconomic indicators (up and down with inflation and real activity) are most reliable during recessions.

…large speculators in commodity futures generally do make money by exploiting risk premiums derived from the theory of storage (and perhaps from momentum trading).

…physical inventory levels are the critical determinants of commodity future price variations and returns, intermediating both backwardation (positive roll) returns and momentum returns. After accounting for inventory effects, there is no evidence that the aggregate position of traders (hedging pressure) predicts commodity futures risk premiums.

…aggregate S&P 500 index futures positions by trader category, as reported in weekly Commitments of Traders reports, may in recent years have lost any significant power to predict the behavior of the stock market.