Question on WTI Contango/Backwardation for position sizing

asked by u/zeynep_s · 25d · 1 answers

Hey everyone, still trying to wrap my head around the nuances of the oil markets. When WTI futures are in contango, obviously that rolls into a negative carry if you're long. I get the basic concept, but how do you factor that decaying value into your risk sizing before you enter a trade, especially on longer-term plays? It feels like it adds an extra layer of complexity beyond just technical levels and stops.

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  • u/mpark· 1 pts· 25d

    You're right, the roll yield can significantly impact longer-term positions. One approach is to adjust your effective entry price to account for the expected contango over your holding period, essentially increasing your stop-loss or reducing your target profit accordingly. Another is to focus on spreads rather than outright futures.

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