ABSTRACT
In this chapter we delve into equity and commodity markets, identifying the defining characteristics of each. We begin with an overview of the market structure, and then proceed to introduce what drives the futures curves in each market. An emphasis is placed on futures curves of difficult or impossible to store assets, lessening the arbitrage argument between spot and futures. We then provide an overview of the characteristics of volatility surfaces in each asset class, and the most common exotic options. We then conclude by considering several potential investment structures in both markets, including harvesting the roll yield in a commodity futures curve and trading dispersion by trading an option on an index against options on the index components. Finally, we consider two case studies, one in equity markets related to the implosion of an inverse volatility ETP, and another in commodities, related to a short squeeze in Natural Gas.
