Master the Market with Commodity Carry Strategies

Commodity carry strategies focus on capturing roll yields generated by the price differences between short and long contracts of commodities. These strategies, like going short on an August WTI contract while going long on a November WTI contract, leverage the dynamics of commodity curves influenced primarily by storage costs. Unlike other carry strategies that may correlate more with equities, commodity carry offers a distinct advantage due to its lower correlation with traditional stock movements. Even basic implementations of this strategy across liquid markets demonstrate a high Sharpe ratio, indicating favorable risk-adjusted returns. The key design levers that affect the return process include the choice of contracts and the management of those roll yields, positioning commodity carry as an effective strategy in the financial landscape.