Monthly Commodity Futures Strategy Using Roll Returns

Summary

This strategy ranks commodity futures by roll return each month, buys the highest-return group, and shorts the lowest-return group. The groups are equally weighted, and positions are held for one month. The implementation calculates roll return from the prices of the nearest and next-nearest available contracts, then rebalances when it detects a new month. It uses a broad commodity universe spanning agricultural, energy, metal, livestock, and other futures.

The document supplies algorithm code and settings, including a five-quantile ranking scheme, daily data, and a 60-day warmup period. It does not report backtest results or explain the economic rationale in depth. Its code uses a particular data source, contract-selection procedure, and fee assumption, so results may depend on data quality, roll handling, execution, and the available universe. The described monthly long-short method is therefore a strategy specification rather than evidence of profitability.

Key ideas

• The strategy ranks commodity futures monthly using the price relationship between nearby contracts.
• It goes long the highest roll-return group and short the lowest group.
• Positions within each group receive equal weights and are held for one month.
• The implementation selects the nearest and next-nearest unexpired contracts for its calculation.
• The document provides code but no reported performance results.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.