Long-only Commodity ETFs vs. Futures- July 2012

It’s time for our monthly look at how the long-only commodity ETFs are performing versus simply holding the December futures contract and rolling annually.

Crude oil and natural gas both climbed higher in July, but the real story of the month was in the grain markets. Corn shot higher as crop outlooks worsened, and the weather forecast brought little relief. ETF underperformance against the December futures contract narrowed for crude oil and natural gas, but nearly doubled for corn.

Futures trading is complicated, presents a risk of loss, and isn’t for everyone – especially since past market performance doesn’t necessarily indicate future results – but given the numbers, we’re left scratching our heads. Ultimately, we prefer a commodities investment strategy that can benefit from both rising and falling prices (like managed futures). But if you’re going to adopt a long-only strategy… we’ve yet to receive a good answer to the question: why invest in an ETF when you can just roll December futures contracts annually?

Read ‘em and weep:

Disclaimer: past performance is not necessarily indicative of future results.










Comments

  1. Good idea on the Dec roll. Unfortunately the ETFs can’t pile into the Dec contract given the volume they’re doing.

    Are these returns just looking at a single Dec contract’s returns? It would be interesting to see comparative 5-year rolling returns (to account for any contango/backwardation in the Dec rolls).

  2. matt weingardt says:

    Here is the best and only reason……. Etfs are SIPC and futures are not. Who cares if I under perform a few percentage points or even in the double digits. At least it is not a triple digit loss.
    I would like to thank the Attain group for all they have done and not make me feel like I’m in this alone. Maybe they the sooner I get my funds the sooner we all can start making some money, I’m still in

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Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.

The entries on this blog are intended to further subscribers understanding, education, and – at times- enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex, and is not intended as investment advice, or an offer or solicitation for the purchase or sale of any financial instrument. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.

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Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.