Questions about futures contracts

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23
votes
5answers
7k views

What is a good broker for HFT?

Currently I trade trough IB. I run my HFT strategies (100 roundtrips per hour) but I think that latency is killing me and my profits are shrinking. I need the fastest possible brokers out there which ...
15
votes
2answers
1k views

How to execute a large futures order?

I am currently trading futures products on some contracts that have low volumes. More accurately, the volumes of working orders in the book are fairly light. I am trying to execute a relatively large ...
14
votes
2answers
1k views

Is there a standard method for getting a continuous time series from futures data?

I would like to be able to analyse futures prices as one continuous time series, so what kinds of methods exist for combining the prices for the various delivery dates into a single time series? I am ...
13
votes
3answers
2k views

How to incorporate technical indicators into neural networks?

I plan to develop a neural network to trade commodities futures, but while messing around with some code, a question came up. If I understand correctly, people use various technical indicators with ...
13
votes
4answers
3k views

Why is the VIX futures market usually in a state of contango?

I'm a VIX newbie and I'm trying to understand why the VIX futures market is usually in a state of contango. All I can figure is that the sellers of VIX futures contracts demand high "prices" (because ...
10
votes
2answers
1k views

Where to find Greeks for futures to form delta-hedged futures portfolio of S&P 500 index/futures

I can't find S&P 500 index (SPX) futures data with Greeks to create delta-hedged portfolios. Do these data exist? I have access to most of the common data sources. In the meantime, I am trying to ...
8
votes
3answers
2k views

How can one compute the Greeks on VIX Futures

I am guessing the short answer to this question is "use the chain rule and linearity of the derivative," but I am looking for more specific advice on how to compute the derivatives of a VIX futures ...
8
votes
3answers
627 views

Price of Brent versus West Texas Intermediate

As of right now, the price of Brent Crude is $\$$111.59/bbl and the price of WTI Crude is $\$$98.36/bbl. I'm well aware that futures markets don't set the spot price for oil, but actual ...
7
votes
4answers
1k views

Can the futures market's open interest predict commodity, treasury, and equity returns?

I came across this article and became curious. Can the futures market's open interest really predict market action?
7
votes
1answer
2k views

What is the basis risk between cash and futures government bonds?

I am currently working in a team responsible for maintaining a simple risk application for our bond desk and I am interested in knowing how to provide some sort of basic basis risk metric. Our desk ...
6
votes
1answer
156 views

Pricing Treasury futures

I've recently learned that at the delivery of Treasury futures the short side can decide which of the $n$ Treasury bonds (with relevant maturities) to deliver. If the short side chooses to deliver the ...
6
votes
1answer
2k views

Implied dividend estimation

I am looking at two different ways of estimating the expected / implied dividends from market data. 1. Dividend futures I know that this asset class is not very liquid and might not be ...
6
votes
2answers
1k views

Can one use options on Treasury futures to hedge a portfolio?

Can one use options on Treasury bond futures to hedge a typical fixed income portfolio? If so, how can one estimate the duration for an option on a Treasury futures contract, and taking this a step ...
5
votes
1answer
1k views

What is the market standard for pricing VIX futures?

Pricing of VIX futures is complicated, because it is not possible to use a standard hedging argument to get a value similar to stock futures. What different approaches for pricing VIX futures exist? ...
5
votes
2answers
219 views

How does one estimate the probability of the Fed increasing its benchmark rate based on Fed funds futures?

How was this 67% probability calculated from Fed funds futures? Fed funds futures show a 67 percent chance the central bank will increase its benchmark rate by year-end from virtually zero, ...
5
votes
1answer
7k views

The difference between Close price and Settelment Price for future contracts

What is the difference between Close price and Settelment Price for future contracts? Is there a define rule for evaluating the settlement price or each instrument/exchange different rules applied? ...
5
votes
1answer
343 views

What are VIX back-month futures based on?

The VIX calculation is a weighted average of prices for front-month out-the-money options on the S&P index. So for VIX futures, this makes sense for the front month vix futures (being based on a ...
4
votes
1answer
215 views

When Fed stops QE, Treasury Futures will go down in price, so… LEAP Puts are a good idea?

I think: when Fed stops QE (Quantitative Easing), Treasury Futures prices will go down. Question 1: Am I right? So... buying LEAP Puts (in Treasury Futures) would be a good idea. Question 2: Am I ...
4
votes
1answer
270 views

Did farmers really buy options on the CBOE? [closed]

I recently become interested in finance. Many books discuss options as simple examples of derivatives. I also read some "popular books". I read in "The Poker Face of Wall Street" that almost no ...
4
votes
1answer
340 views

Do futures have predictive value?

Futures closely mirror their underlying, as can be seen in the charts below. Eventually, at expiration, they reach the value of the underlying. However, they seem to show no extra information about ...
4
votes
2answers
71 views

How to properly assess the costs of replicating an index via futures contracts?

I would like to validate this sentence, coming from a WSJ article: The cost of holding a Eurostoxx 50 future, for example, has climbed from an average of 0.07% of the contract value since 1998, ...
4
votes
1answer
231 views

Futures Contract Fair Values Accuracy

I have recently been tasked to work on fair value derivation for futures on equity indices (non-US). I know that the FVD function in Bloomberg can have a huge discrepancy from markets: where cheap is ...
4
votes
2answers
129 views

Value at Risk for Futures Contracts

I would like to know how you would compute Value at Risk on a portfolio of futures i.e rates futures, commodity futures and equity. How do you deal with the discontinuous form of commodity futures for ...
4
votes
1answer
166 views

Korean Bond futures market: is there a fundamental difference between 3yrs, 5yrs and 10yrs contracts?

I would like to model Korean government bond futures. So far I know two concepts (just a short, incomplete description) cash-settled futures (e.g. Australia): The average yield of a basket of bonds ...
4
votes
0answers
161 views

What is the most convenient data structure for backtesting a model of futures options prices?

I have an empirical model for the dynamics of futures prices in a particular market that I have implemented using a long series of the front five contracts. (I account for the roll in my model.) I ...
4
votes
1answer
113 views

How to price a futures spread option?

Let's say I have two futures contract $F_1(0,T)$ and $F_2(0,T)$ on two different correlated underlyings. If I assume that both underlying follow a GBM with volatility $\sigma_1$ and $\sigma_2$ ...
3
votes
4answers
2k views

Are Futures exactly Delta One?

Delta of Future is exactly one I thought. This post here, says otherwise. However, quoting John Hull again: $$f = \text{Value of Future contract} = S_{t=0} - K \exp(-rT)$$ where $S$ it the spot ...
3
votes
3answers
1k views

What continous adjustment methods are firms using for futures backtesting?

There are several methods available between data vendors and associated software programs to adjust futures contract data for historical simulations. Some of the methods are: 1) Back or forward ...
3
votes
2answers
419 views

Need advice on finding forward spot rates

So this is a "work homework" question. As part of my job they are sending us through sort of a training course. I'm looking for advice, or a link to a site that explains how to do this with maybe some ...
3
votes
3answers
827 views

How to normalize Futures data(different leverage) for cointegration test?

For example I want to construct 2 time series, one for ES and the other for NQ and test for cointegration. ES one point equal to 50$. NQ one point equal to 20$. If I have the following data: ...
3
votes
2answers
104 views

Do futures follow physical or risk-neutral distributions

I've spent a while looking for an answer to this question and while I feel it is a simple question I have not found an answer. I know prices of option contracts follow an implied, risk-neutral ...
3
votes
1answer
102 views

Which volatility to use to price options on futures contract?

I have some questions regarding pricing futures options and I just want to be sure that my thoughts are correct. I am trying to price options on futures for american & european style. In the ...
3
votes
1answer
199 views

How to synthesize a futures spread option?

Is it possible to synthesize a futures spread option using only the options on the spread's underlyings? If so, how? If not, is there another way? As an example, please show me how to synthesize ...
3
votes
1answer
250 views

Electricity market : how to design an optimal hedging strategy using spot and futures markets for an industrial consumer?

Here is the problem : we should adopt the point of view of an industrial company which purchases electricity as an input in its production line and which wants to achieve the following two goals : ...
3
votes
0answers
58 views

Estimating Number of “Day Trades” from Total Volume of Commodity Futures Contract

Looking at futures data I am trying to calculate/estimate the number of "day trades", i.e. positions that were initiated and closed during the same day, as distinct from those positions that were ...
3
votes
0answers
87 views

Dividend Index Futures

My question is dealing with the proportionality between Dividend Index Futures prices and Index prices. Indeed, we in the past we used to do a simple regression between these variables and use the ...
3
votes
0answers
120 views

Resources to read more about/learn how implied pricing works

I was looking at this video today: http://www.cmegroup.com/education/interactive/webinars-archived/implied-price-functionality.html on implied pricing. And am aware that implied orders/pricing ...
3
votes
0answers
101 views

Estimating two normal random numbers with one equation

Subtitle: Estimating the correlation of the shocks driving two commodities in two multi-factor models I am fitting two 2-factor models to electricity and gas futures, respectively. In order to ...
2
votes
5answers
133 views

Data provider for daily futures settlement prices

Is there a data provider that has historical daily settlement prices for download? I'm interested in a provider that spans multiple exchanges.
2
votes
2answers
4k views

How to Delta Hedge with Futures?

The theory of delta hedging a short position in an option is based on trades in the stock and cash, i.e. I get the option premium and take positions in the stock and cash. In the classical ...
2
votes
1answer
627 views

EuroDollar vs FRA

I am not quite clear about this. When people mention Eurodollar are they mean Eurodollar Futures? One of the difference between Eurodollar and Forward Rate Agreement(FRA) is basically difference ...
2
votes
1answer
144 views

U.S. Rate Hike Prediction

In a recent ft.com video an analyst mentioned that markets postponed their Fed rate hike expectation from September to around November 2015 due to the CNY devaluation, based on the "shift" of some ...
2
votes
2answers
165 views

Futures fair value with spot in different currency

The fair value, $F$, for a futures contract is $ F = S(1+rt) - D,$ where $S$ is the underlying spot price, $r$ is the interest rate, $t$ is the time to maturity, and $D$ is the dividends. What is ...
2
votes
1answer
2k views

How do Trade-At-Settlement orders work?

Can anyone explain how Trade-At-Settlement (TAS) order on futures market actually works? I have heard that it is guaranteed execution at the settlement price (or with some offset). How can it be ...
2
votes
1answer
104 views

What is the difference between full and only futures?

If you look at instrument name for listed on various futures exchange you often see Gold Only1214 Gold Full1214 What is "Full" and "Only" mean? The price listed is the same and I cannot find a ...
2
votes
1answer
379 views

How to measure contango?

Is there any unit of measure for the magnitude of the contango (or backwardation) for futures, so you can compare the contango of many symbols.
2
votes
1answer
240 views

ETFs have lower tracking error than Futures?

I used the daily returns of SPX Index, SPY US Equity, and SPA Index. I then calculate their standard deviation as hedging instruments with respect to SPX Index, i.e., (spx_ret - spy_ret) or (spx_ret - ...
2
votes
1answer
88 views

Is spoofing financially risky?

It's alleged that Navinder Singh Sarao contributed to the flash crash by placing huge, fake, order for S&P Minis. Mr. Singh Sarao then cancelled the huge orders before they were filled. The ...
2
votes
1answer
155 views

Volatility of Futures

Apparently: Under a constant interest rate, the futures price is given by a deterministic time function times the asset price (I think I understand this). This means that the volatility of the ...
2
votes
1answer
358 views

Black (1976) model: relationship between spot and forward prices

Does the Black (1976) model require the existence of the relation $F(t,T)=S(t)e^{r(T−t)}$? I studied the derivation of the Black-Scholes formula. However, although I know the Black formula, I've ...