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CommoditiesMarkets, Performance, and Strategies$
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H. Kent Baker, Greg Filbeck, and Jeffrey H. Harris

Print publication date: 2018

Print ISBN-13: 9780190656010

Published to Oxford Scholarship Online: March 2018

DOI: 10.1093/oso/9780190656010.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 16 October 2021

Commodity Trading Strategies, Common Mistakes, and Catastrophic Blowups

Commodity Trading Strategies, Common Mistakes, and Catastrophic Blowups

(p.383) 20 Commodity Trading Strategies, Common Mistakes, and Catastrophic Blowups

Hilary Till

Oxford University Press

Becoming an expert in the commodity markets has traditionally required a novice to seek an apprenticeship at an established commodity firm. This chapter provides an alternative approach: a reader is provided a reasonably comprehensive tour of the always dynamic and frequently opaque commodity markets, including views on (1) commodity trading strategies, (2) common mistakes, and (3) catastrophic blowups. The specific commodity trading strategies covered are trend-following and calendar spreads. The common mistakes that the chapter includes are (1) targeting returns rather than risk metrics, (2) establishing inappropriate trade sizing, and (3) failing to fully appreciate the psychological discipline required for trading. The chapter also provides case studies on the catastrophic derivatives blowups at both Amaranth and MF Global.

Keywords:   commodity trading, commodity market, risk, Amaranth, MF Global

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