Dow Jones adds contango-reducing strategy to its index suite

Dow Jones adds contango-reducing strategy to its index suite

rollercoaster
Dow Jones' index series seeks to roll into contracts with the least amount of contango or the most backwardation

The Dow Jones-UBS Roll Select Commodity Index aims to mitigate the effects of contango on index performance by rolling into the futures contracts showing the least amount of contango, or the most backwardation, selecting them from contracts with nine months or fewer until expiration.

"Contango has a negative impact on the roll yield," says Jamie Farmer, executive director at Dow Jones Indexes in New York. "When something is in contango as you're rolling, you are selling a cheaper contract and bu

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