17 replies to this topic

[linrom1]

I know there are number of people on this board who are looking to profit from Ags boom, but, is DBA the right vehicle?

 

 

 

 

DBA is not tracking these commodities proportionally. I don't know what is going with this investment vehicle, but there appears to be lots of value decay.

Edited by linrom1, 13 November 2020 - 10:43 AM.

[flyers&divers]

Beside the management fees the rollover of the futures contracts is the culprit.

When the managers of ETNs replace an expiring futures contract they have to pay a higher price for the next contract because of the carrying charges involved holding commodities (or stocks for that matter).

The carry as it is referred to may include such items as warehousing, grading, re-certifying, financing and insuring.

 

When the further out contracts are priced higher then the nearby or cash it is called contagno. That is considered to be the normal relationship.

When the nearby contract trades higher then the following ones it's called backwardation.

 

BTW a warehouse operation could not buy cash or nearby futures to take delivery of the commodity and store it profitably when there is backwardation because they would not be able to lay it off in higher price futures.

 

There were times in the seventies when most futures were in backwardation and traders had all kinds of fun constructing trades taking advantage of the unusual price relationships.

Now with options available on most futures the game is going to be even more complex and interesting for the experienced. The time is coming!

 

Regards,

F&D

Edited by flyers&divers, 18 November 2020 - 04:14 PM.

[Smithy]

F&D, what can I chart DBA against that will show its decay?

[flyers&divers]

I don't know of any but one would think that if one constructed an index of the cash prices of each commodity in DBA and adjusted

it for it's proportion of the whole then one would have something realistic.

That could get very complicated because I just looked at the fact sheet at https://www.etf.com/DBA#overviewand it does not even spell out

which commodities they are trading.

 

Also, some ag futures have wide differences between end of crop year and new crop year contracts

and DBA also includes livestock futures which don't trade like storable products.

 

F&D

 

[linrom1]

 

It looks to me that we are retracing completed WAVE 1 in leg b of abc correction. I think we could see about $15 - $14.71 to end WAVE 2.

Edited by linrom1, 05 December 2020 - 11:59 AM.

[JGUITARSLIM]

Wheat looks to me like its breaking out of 2 year base (bottom). Buying WEAT

[linrom1]

Wheat looks to me like its breaking out of 2 year base (bottom). Buying WEAT

Usually we get this kind of euphoria in wave 5. Although I might be biased, but, all the people I kind of follow are screaming "commodity bull, commodity bull".

[JGUITARSLIM]

Wheat popping big time .

[linrom1]

 

I was way too conservative with this.

[linrom1]

 

DBA could be correcting here now. The drop could be quite large.While I can't be sure of the overall wave count, we did get some kind of ending diagonal on the last wave up.