"A short-term contract strategy, by design, allows the manager to adjust the hedge each time the contracts mature. Therefore, short-term contracts may generate higher commission costs than longer term contracts, but they may reduce the number of transactions necessary to adjust the hedge. Why would the "Reduce the number of transactions necessary to adjust the hedge?
I guess b/c you will be making small adjustments overtime, vs waiting for it to get way out of line and having to make more/bigger adjustments ???
my guess… long term contracts will constantly need to be added or sold to maintain the hedge. short terms you’re likley to roll over (why buy or sell them to adjust when they simply expire in a week) so although the commisions would be higher from constantly rolling over, your number of transactions might be less? my guess…