Tag Archives: backwardation
Getting Dynamic with Commodities – Part 1
Launched just over 10 years ago, the S&P GSCI Dynamic Roll was the first dynamically rolling commodity futures index to be offered by a major index provider. What does it mean to dynamically roll? Exhibit 1 describes the process in detail. Employing a flexible monthly futures contract rolling strategy, the S&P GSCI Dynamic Roll is…
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VIX Back to Normal? Not Really
The U.S. equities market had a wild start in 2020. Following the March 2020 sell-off, the S&P 500® posted its largest monthly gain (12.8%) since 1987. Meanwhile, VIX® went from its long-term median to an all-time high within a month before it settled around 30. One thing that has been debated lately is whether VIX,…
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- Equities
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Why the S&P 500® VIX® Short-Term Futures Index Rose More than VIX in March
Markets are down over 20%, COVID-19 is a global pandemic, negative global growth is looming—all of that just in the first 20 days of March! During same time period, VIX rose 65%, while the S&P 500 VIX Short-Term Futures Index jumped 175%. With a long-term beta of 0.7 to spot, a question might be—why did…
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The VIX Futures Curve Is in Backwardation
Backwardation is incredibly uncommon in the VIX® futures curve. While the reason behind this term structure is not perfectly understood, the conclusion is clear: long and hold does not work for VIX futures, as the roll cost burns. There are different ways to measure VIX futures backwardation: by using the relationship between the VIX level…
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September Splits Commodities, Led By Strong Energy
The energy fundamentals, helped by Hurricane Harvey, are now in place for solid rebalancing and for potentially continued strong performance. Metals have reflected bullish sentiment but have recently been hindered by Chinese growth and credit concerns. Agriculture has been well oversupplied on better than expected weather and from improving farming technologies. In September, three of…
- Categories Commodities
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- Commodities
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Energy Posts Its Best July Since 2004
The S&P GSCI Energy Total Return gained 8.1% in July, the most for a July in 13 years, led by petroleum that was up 9.2%. Finally the fundamentals may be showing the oil market is starting to rebalance with the rest of the commodities. The S&P GSCI Total Return had its best month this year, gaining…
- Categories Commodities
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Energy Just Had Its Worst Start in 19 Years
Commodities just had their worst start in seven years. The S&P GSCI Total Return lost 10.2% year-to-date (YTD) ending June 30, 2017, logging its worst first half (H1) performance since the first six months of 2010 when it lost 11.2%. However, it’s not the bloodbath it may seem to be. Half, or 12 of the…
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Commodities Ex-Energy Are Fine Despite Contango
Energy is back in a bear market now led by oil’s slide mainly due to rising output from Libya and Nigeria, two OPEC members exempt from cutting supply. The S&P GSCI Energy Total Return is on pace for its worst quarter since the fourth quarter of 2015 losing -13.4% quarter-to-date (through June 19, 2017.) This is driven…
- Categories Commodities
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Commodities Mixed in May Might Pay
No single sector dominated commodity performance in May, which means the supply-side is currently more potent than macro factors like global aggregate demand, the dollar, interest rates or inflation. Each commodity is being driven by something in its own supply/demand model, mostly unrelated to one another. That is not just lowering the intra-commodity correlation that can create buying…
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Regime Change? Not according to the VIX term structure…
Since the U.S. election, a degree of optimism over potential business-friendly legislation – ranging from tax reform to infrastructure spending – has played a significant part in sending benchmarks such as the S&P 500 to new all-time highs. Whether this optimism will be justified by actual legislation, of course, is a different issue. At a minimum, recent…
- Categories Equities, S&P 500 & DJIA, Strategy
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- Equities, S&P 500 & DJIA, Strategy
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