Commodity carry

Checked October 2026

Commodity carry buys the futures whose nearer contract is rich relative to the next one, and sells the futures where that gap goes the other way. Koijen, Moskowitz, Pedersen and Vrugt published it in the Journal of Financial Economics in 2018. Backtoast could not run it, because the roll needs the next contract's price and the data has only the front contract.

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Commodity carry

Carry here is the gap between the front contract and the one behind it, divided by how many months apart they expire. When the next contract is cheaper, a long gains as it rolls if prices stay put, so the rule buys the markets with the highest carry and sells the lowest, weighted by rank and rebalanced monthly.

Backtoast's futures data has one front-contract series per market, so the second contract's price, and with it the carry, isn't there.

The currency version ranks by interest rate instead, in G10 currency carry.

When it works

Carry does well when curves hold their shape, so markets in backwardation, often the ones with tight inventories, keep paying the roll, and it does worst in global recessions, when the paper found carry did poorly in every asset class at once. Traders run it because it earns the roll even when prices go nowhere, which is a different source of return from trend following. In seasonal markets like natural gas and grains the curve swings through the year, and the paper's 12-month average carry is the fix for that.

Origins

Koijen, Moskowitz, Pedersen and Vrugt reported 11.22% a year for commodity carry across 24 commodities from 1980 to 2012. A version using the 12-month average carry, which damps seasonal swings, did a little better.

Backtoast did not run this one.