I've generated roll adjusted notional futures data by adding a roll adjustment to the settlement price then multiplying by contract multiplier through time. For example, for crude oil CL, on 15 March 2013, the settlement price of the CLJ3 contract was
93.45. The cumulative roll adjustment was
-70.80 and the multiplier is
1,000. My roll adjusted notional is then $(93.45-70.80)/*1,000=22,650$.
This is great but take for example 12 Feb 2009 where settlement price was
33.98 and cumulative roll adjustment was
-33.99. This gives me a negative roll adjusted contract value of $(33.98-33.99)*1,000=-10$.
The implication of a negative roll adjusted notional value on futures is that you have literally lost money through the cost of carry for this product. I am using a method dictated by my client otherwise the ratio method, described here, may have been implemented. This person is intent on capturing potential loss due to carry, however.
I'm challenged in my attempt to compute continuous returns for the series because of the negative values. Taking the log of a negative number in MATLAB returns an imaginary number and Excel can't handle it at all.
Does anyone have experience or advice in computing continuous returns for negative roll-adjusted futures notionals?