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