Barclay's iPath offers the Dow Jones-UBS Platinum Subindex Total Return ETN (PGM), which owns a single,
nearby futures contract. It has assets of about $82 million and a 0.75% annual fee.
New York: The New York Mercantile Exchange's benchmark, the West Texas Intermediate light sweet crude
nearby futures contract, continued to decline even as Brent sweet and Gulf heavy sours gained last week.
They have "put on a spread" by buying the nearby futures contract and selling the faraway contract.
When the temporal spread becomes smaller than normal, the arbitrager will "put on reverse spread" whereby he or she simultaneously sells the nearby futures contract and buys the faraway futures contract.
The purchasing manager (Figure 2- A) has arranged for particular items to be priced on a cost-plus formula from the nearby futures price for each raw commodity, where the
nearby futures contract is the futures contract month closest to expiration.
The run to the intraday high of $75.40 (for the
nearby futures contract) was not clear cut and would eventually fall back into a loose range between $75.20 and $74.50.
And therefore, the March delivery month
nearby futures contract for West Texas Intermediate light sweet on the New York Mercantile Exchange, after reaching $43.44/barrel, closed the week at $41.75/barrel, a gain of $4.04/barrel for the week.
reverse spread--a simultaneous position that involves having a sell position on the
nearby futures contract and a buy position in a more distant futures contract.
The
nearby futures contract for Nymex crude reached $142.99 a barrel before closing out the week at $140.21, a gain of $0.57 on the day, and up from $134.62 for the week.
It can be seen that backwardation is higher for the far month's futures contracts than that of the
nearby futures contracts. This is applicable for both weak and strong backwardation.
(1) We use four different
nearby futures contracts, i.e., with deliveries one, two, three and four months ahead of the placing of the hedge.
The Dynamic Long VIX Futures Index tracks the performance of the combination of a hypothetical money market instrument and a dynamic strategy that is designed to provide efficient long exposure to the first five
nearby futures contracts on the CBOE Volatility Index VIX.
