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Does DBA have a time decay?

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  • Does DBA have a time decay?

    I have a small investment in DBA, which I've been holding for about 2 years. And it seems that the price just keeps declining relentlessly, regardless of what's going on in the market.
    Is DBA subject to a price decay with time, same as let's say USO?

  • #2
    Re: Does DBA have a time decay?

    Just quickly reading the prospectus, it seems the DBA is an index of single commodity indices rebalanced annually to the benchmark weights. The underlying single commodity indices are rolling futures at expiry from the nearby contract to the next on-the-run. You'll get roll down tracking error when there is a strong contango in the underlying. Then there is the 0.85% annual expense fee.

    I didn't have a look at the tracking error in detail though. Hope that helps a bit.


    • #3
      Re: Does DBA have a time decay?

      DBA is down because the current crop is at record levels. Prices of all agricultural commodities have dropped and may not rise for while. If we potentially get a hot, dry 2014 you could see a bottom in DBA.

      It might not be tracking error as much as discounting the record crop production.


      • #4
        Re: Does DBA have a time decay?

        As Chris notes you will get tracking error due to futures roll, if they are in contango.

        I just bought DBC yesterday. I intend on writing a OTM call to offset the contango effect. By doing this if the price spikes, I will not partcipate. If the price increase is slow and unrelenting, I can roll by calls up and forward.

        I just pulled the fact sheet here.

        Seems like the index the DBA is compared to, has been crumby too, which support vt's statement that crop yields are doing really good.
        3 yr return of index is 1.89, 1 yr is -10.58
        Last edited by charliebrown; 08-09-13, 05:14 PM.