Commodities

Question 1

Common factors for commodities:

Answer 1

Quoted in USD
Seasonality
Trends
Volatility
Curve Slope

Question 2

How is a Contango curve in commodities?

Answer 2

Upward slope

Question 3

Why would we have a Contango curve in commodities?

Answer 3

Upward slope because of the cost of maintenance, like warehousing, insurance

Question 4

How is a Backwardated curve in commodities?

Answer 4

Inverted/downward slope

Question 5

Why would we have a Backwardated curve in commodities?

Answer 5

Short term shortages / expected future surplus

Question 6

Can all curves be arbitraged in commodities? Why?

Answer 6

Contango yes (if it is too steep), backwardation no. Because you cannot short a physical asset

Question 7

Usual strategies for commodities?

Answer 7

Statistical Arbitrage (Commodity vs. Commodity)
Momentum strategies
Seasonality
Curve slope arbitrage

Question 8

What can be considered the commodity carry?

Answer 8

The convenience yield, always better to hold now, than in the future.