THE HAnDbOOk Of TECHnICAL AnALySISpremiums actually resulted in a loss if traders rolled over continuously. We see the
U.S. Natural Gas Fund experiencing excessive negative roll yield as it seriously un-
derperforms gas prices. It should be noted that very short‐term traders who trade
individual contracts without having to roll over positions are not affected by nega-
tive roll yields, nor do they profit from positive roll yields.
Figure 3.37 clearly shows the underperformance of the U.S. Natural Gas Fund
with respect to prices in the natural gas market.
As we have already seen, there may be a premium or discount gap between the
nearby and the next contract. As far as traders are concerned, this only requires
a payment or receipt of payment with respect to the price difference and number
of contracts held at rollover. But for the chartist, the challenge is to find a way to
preserve the continuity of prices across such price gaps. There are many ways to
figure 3.35 Convergence of Spot and Futures Prices at Expiration.
figure 3.36 Comparing Performance on the Continuous Daily Chart of Natural Gas
and the U.S. Natural Gas Fund.
Courtesy of Stockcharts.com