The Design of a Commodity Futures Trading Program

Abstract

This article provides a step-by-step primer on how to design a commodity futures trading program. A prospective commodity manager must not only discover trading strategies that are expected to be generally profitable, but must also be careful regarding each strategy’s correlation properties during different times of the year and during eventful periods. One must also ensure that the resulting product has a unique enough return stream that it can be expected to provide diversification benefits to an investor’s overall portfolio.

Keywords: Commodity futures, Portfolio construction, Risk measures

JEL Classification: G1, G11