[surkocign]

Can I explain how managed futures hedge funds manage the roll yield when trading futures contracts?

 

[tylorrina]

Managed futures hedge funds manage the roll yield when trading futures contracts in a number of ways, including:

• Rolling contracts: The most common way to manage roll yield is to roll contracts. This involves selling out of a near-month contract and buying a back-month contract before the near-month contract expires. The difference in price between the two contracts is the roll yield.
• Using spreads: Another way to manage roll yield is to use spreads. This involves buying and selling futures contracts in different months or in different commodities. The difference in price between the two contracts is the spread. Spreads can be used to offset the negative impact of roll yield.
• Using options: Managed futures hedge funds can also use options to manage roll yield. Options give the holder the right, but not the obligation, to buy or sell a futures contract at a specified price on or before a specified date. Options can be used to hedge against the risk of adverse price movements in futures contracts.

The specific way that a managed futures hedge fund manages roll yield will depend on a number of factors, including the fund's investment strategy, the market conditions, and the fund's risk tolerance.
Here are some specific examples of how managed futures hedge funds manage roll yield:

• A managed futures hedge fund may roll a long position in a near-month S&P 500 futures contract into a long position in a back-month S&P 500 futures contract to avoid the negative impact of roll yield.
• A managed futures hedge fund may buy a spread of a long position in a near-month gold futures contract and a short position in a back-month gold futures contract to profit from the difference in price between the two contracts.
• A managed futures hedge fund may buy a put option on a near-month S&P 500 futures contract to hedge against the risk of a decline in the S&P 500 index.

By managing roll yield effectively, managed futures hedge funds can improve their returns and reduce their risk.
It is important to note that roll yield can be both positive and negative. When the front-month contract is trading at a premium to the back-month contract, this is known as contango. When the front-month contract is trading at a discount to the back-month contract, this is known as backwardation.
Managed futures hedge funds can use roll yield to their advantage by taking positions in markets that are in backwardation and avoiding positions in markets that are in contango. For example, a managed futures hedge fund might buy a futures contract in a market that is in backwardation because they expect the price of the underlying asset to rise.
Overall, roll yield is an important factor that managed futures hedge funds need to consider when trading futures contracts. By managing roll yield effectively, managed futures hedge funds can improve their returns and reduce their risk.

 

[humykazu]

Managed futures hedge funds manage the roll yield when trading futures contracts by using a variety of techniques, including:

• Rolling contracts: Managed futures hedge funds will typically roll their futures contracts on a regular basis, such as monthly or quarterly. This involves closing out expiring contracts and opening new contracts with a longer expiration date. Managed futures hedge funds will try to roll their contracts at a time when the roll yield is positive, meaning that the longer-dated contracts are trading at a premium to the expiring contracts.
• Using futures spreads: Managed futures hedge funds can also use futures spreads to manage the roll yield. A futures spread involves buying or selling one futures contract and simultaneously selling or buying a different futures contract. Managed futures hedge funds can use futures spreads to create a position that is less sensitive to the roll yield.
• Using options: Managed futures hedge funds can also use options to manage the roll yield. An option gives the holder the right, but not the obligation, to buy or sell a futures contract at a specified price by a specified date. Managed futures hedge funds can use options to protect themselves from adverse roll yields.

The specific techniques that a managed futures hedge fund uses to manage the roll yield will depend on a number of factors, including the fund's investment strategy, the current market conditions, and the fund's risk tolerance.
Here are some specific examples of how managed futures hedge funds may manage the roll yield:

• A managed futures hedge fund that is bullish on oil may roll its oil futures contracts from the December contract to the January contract if the January contract is trading at a premium to the December contract. This will allow the fund to maintain its exposure to oil while also benefiting from the positive roll yield.
• A managed futures hedge fund that is bearish on the US dollar may use a EUR/USD futures spread to reduce its exposure to the roll yield. The fund may buy EUR futures and sell USD futures. This will create a position that is less sensitive to the roll yield on either currency.
• A managed futures hedge fund that is concerned about a potential negative roll yield on its interest rate futures contracts may buy a put option on the interest rate futures contract. This will give the fund the right to sell the futures contract at a specified price by a specified date, which can help to protect the fund from losses if the roll yield turns negative.

It is important to note that managing the roll yield is a complex task and requires a deep understanding of the futures markets. Managed futures hedge funds have the expertise and resources to manage the roll yield effectively, but individual investors should carefully consider their risk tolerance and investment objectives before investing in managed futures funds.