A "stack-and-roll" strategy makes profits from the "roll" part when
A) The market is in backwardation.
B) The market is in contango.
C) There is a sharp fall in commodity prices.
D) The correlation between long- and short-term futures prices is less than 0.5.

Question

Quizplus · Accepted Answer

A "stack-and-roll" strategy involves buying futures contracts and selling them before their expiration date to buy longer-dated futures contracts, thus "rolling" the position forward. In a market in backwardation, longer-dated futures contracts are trading at a lower price compared to near-dated futures contracts, leading to a profit when rolling the position forward.

A "Stack-And-Roll" Strategy Makes Profits from the "Roll" Part When