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Can you show an illustrated example of the effects of a roll-over?

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Can you show an illustrated example of the effects of a roll-over?

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Here is a simple step-by-step Contango example using the table below:

 

Day 0 
the ETF enters into the 1st nearby futures contract at the level of 100.
1 month later from Day 0 
the ETF closes out the position by selling the 1st nearby futures contract at 110 then enters into the 2nd nearby futures contract at 113, i.e. the ETF has a negative roll yield of -3 from this rollover trade.
2 month later from Day 0 
the ETF closes out the position of selling 2nd nearby futures contract at 115.
Calculate the ETF profit  from Day 0  
When we calculate the profit of the ETF, we must take count negative rollover yield, -3. Therefore, the profit of the ETF is 115 – 100 – 3, which is 12.

 

  Day 0 1 month later (rollover trade)

2 months later

1st nearby futures 100 110  
2nd nearby futures 102 113 115

 

(The table is for explanatory purpose only and prepared by Samsung Asset Management (HK) Ltd.)

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Any factors leading to contango or backwardation?

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What are the differences between Spot and S&P GSCI Crude Oil Index ER?

As the S&P GSCI Crude Oil  Index ER(Excess Return does not mean any additional return on the Sub-Fund's performance) is based upon WTI Futures Contracts but not on physical WTI crude oil, the performance of the Index may differ from the current market or spot price performance of the WTI crude oil. The price movements of a futures contract are typically correlated with the movements of the spot price of the referenced commodity, but the correlation is generally imperfect and price movements in the spot market may not be reflected in the futures market (and vice versa). For example:    During the one-year period from 1 January 2009 to 31 December 2009, the Index underperformed the spot price of WTI crude oil by 71% (the level of the Index increased by 7%, while the spot price of crude oil increased by 78%).Large differences between the spot price and the futures price can exist because the market is always trying to look ahead to predict what prices will be. Futures prices can be either higher or lower than spot prices, depending on the outlook for supply and demand of the asset in the future. You can find historical performance of Spot and ER indices at this link

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