Questions tagged [futures]
For futures contracts, instruments which compensate the trader for price changes, may be used to hedge price risk (i.e. lock in a price), and are in zero net supply, standardized, exchange-traded, margined, marked-to-market, netted, and centrally-cleared.
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Why do we use the risk-free when pricing futures on stocks? [closed]
If I'm not mistaken, the standard formula for pricing futures on stocks would be:
F=S*e^(rt)
Where F is the value of the future, S is the spot price and r is the risk-free (we assume that there are no ...
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Pricing non-vanilla options on EuroStoxx50 dividend futures
Liquid vanilla EuroStoxx50 dividend futures options quoted on Eurex are calls or puts whose expiries are the same as the expiry of the underlying futures contract.
Is there any "simple" ...
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How can a future exhibit both normal backwardation and be in contango?
My understanding is that "contango", when describing the forward curve, describes forward prices that are above the current spot price, i.e. $F_{t+1} > F_{t} > S$. This is directly ...
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Delta across futures markets vs respective micros
I short term trade futures markets, and I use the DOM (depth of market) and various volume indicators, like cumulative delta, and footprint charts. I used to trade MES, but I switched over to ES, and ...
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How does unwinding of long BTC futures positions prevent further downside risk/decrease in prices of BTC/Crypto?
This seemed like the most appropriate stack exchange for this question even though the question isn't strictly quantitative, but I hope it's ok.
I read an article(Article Below) and can't seem to ...
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Does Quandl offer raw futures data?
I am interested in downloading price data for individual futures contracts. For example, the price of the CBOT (CME) Wheat future ZWU3, which is the September 2023 contract for wheat, which will stop ...
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Convexity Adjustments Futures - Sensitivity
If the market prices of SOFR futures are obtained from CME, do we still need to compute convexity adjustments when computing the sensitivity of the IR future?
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Carry/slide on Treasury CTD basis position
I'm trying to understand whether a long CTD basis position needs to incorporate slide/roll when computing basis net of carry (BNOC).
I am told the answer is no but I am not sure why. I am well aware ...
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Best Method (Or Just a Good Method) of Predicting Intraday Volatility in Real Time?
I apologize if this is a stupid question, I'm a complete neophyte in academic finance but I am trying to learn.
I am trying to create an estimate of how likely indexes are to rise/fall by x% by the ...
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What is your preferred API/source for historic futures (ES) options pricing data and if possible, the Greeks? [duplicate]
Crowdsource question: What is your preferred API/source for historic futures (ES) options pricing data for the greeks? (NOTE: Over ten years ago, there was a similar question with several suggestions, ...
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Futures and Forward prices under the Heston model and their spread
This might seem like a very trivial question but I am really not so sure about it so I thought I post it here.
Assuming a Heston model of the form
\begin{eqnarray}
dS &=& (r-q)Sdt + \sqrt{v}...
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Quantitative trading strategies with a focus on low-frequency dislocations
I am looking for references that are specific to quantitative trading strategies that exploit low-frequency dislocations in markets, which lend themselves as overlays for a strategic asset allocation ...
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Can Fed Funds Futures be seen as a Forward Rate Agreement?
Fed Funds Futures trades the average Fed Funds rate for the contract month. Following the paper mentioned in this answer, the rate implied by the contract can be compared to the term (forward) rate ...
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Why does forward price equal spot price at delivery? [closed]
Disclaimer: I understand this is a basic question that gets
addressed in most 101 textbooks. Yet I have reviewed many of them
not finding a satisfactory answer. Please bear with my
ignorance.
Suppose ...
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Gross Basis - Bond Futures
Just want to confirm - Gross Basis for Bond A, deliverable into a Future:
Gross Basis [A] = Clean Price [A] - Futures Price x CF [A]
where CF [A] = Conversion factor of Bond A.
Is this due to:
Gross ...
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Why do exchanges apply a fixed interest rate as part of the funding rate for perpetual futures?
Some exchanges, such as Binance, charge a fixed interest rate as part of the funding rate. Having longs pay shorts doesn't quite make sense to me because it causes spot to trade rich to perpetuals ...
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Cost of carry proof
I'm currently review Arbitrage Pricing in Continuous time by Bjork and am stuck on this concept:
Honestly I'm not too sure where to start as this chapter makes no mention of the Cost of Carry formula ...
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Questions on options cost of carry, and relationship to futures cost of carry
I'm trying to grasp what exactly the effects of higher ongoing interest rates are on holding calls/puts. I am not asking what the effect of a change in interest rates is on call/put prices.
I'm ...
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Trade price and settlement price
I recently came to know about TAS: Trade at Settlement. In that context, as a layman, I'm tyring to make sense of why the settlement price matters in a trade.
Perhaps these betray my ignorance:
What'...
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Predicting Bank of Canada Future Rate Changes Based on 3-month CORRA Futures [duplicate]
Earlier I asked a general question about how probabilities are derived from futures prices for derivatives related to the Bank of Canada's policy rate.
I have been advised the Overnight Index Swaps (...
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How to calculate expected value for an underlying contract and expected value for an option?
In Sheldon Natenberg's Options Volatility & Pricing, he writes:
There is an important distinction between an option position and an underlying position. The expected value for an underlying ...
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ETF Market Making Hedging
Suppose I am a market maker making a market on an S&P ETF. Suppose that I have calculated a fair ETF price of $395. My market therefore is 394.90 (bid) and 395.1 (ask). After my bid is posted I ...
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How to calculate returns for interest rate futures
Say we have the active German government bond future, RXH3 and we wanted to calculate a series of returns for the active contract.
Would we calculate returns on the daily price difference? And if so, ...
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How do you define the NAV of a leveraged ETF?
I understand the NAV to be the sum of all assets minus the liabilities divided by the total number of shares.
Would the assets include the financial derivatives held by the ETF? And if so, how is this ...
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What shall I do to make my delta neutral? [closed]
Suppose that yesterday I shorted some call and put option contracts of an underlying and I had a neutral delta. This morning, I have a positive delta, and I want to keep my delta neutral. What do I ...
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what is the rationale behind CTD (Cheapest to Deliver) mechanism in bond futures
why doesn't futures contract just stipulate a specific contract to be delivered. Is it because the futures seller cannot readily buy specific bond contracts?
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Calculate Value at Risk for a futures contract or option position [closed]
How could we calculate VaR for a futures contract or a option position? I know that a VaR is calculated by the return multiply the investment amount, but how could we calculate the investment amount ...
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Why does Natenberg say that when future options with future-type settlement are traded, no money changes hands?
I feel I am fundamentally misunderstanding something when it comes to options on futures. On the bottom of page 98 of 2nd edition Option volatility and Pricing by Natenberg he says:
"In the US, ...
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Calculate Dv01 of SOFR futures position
may I know how to arrive at $3.8m/DV01 SOFR futures based on the net long 3M SOFR as at 13 Dec. The net long is 23,333.
Original Text: Hedge funds were net buyers in around \$3.8m/DV01 SOFR futures ...
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Intuitive way to think about Bond Futures in a long only cash portfolio
I think this is the intuitive way to think about specialness in bond futures, at least to my mind; therefore, I am wondering if my logic is correct:
Cash Bonds have a forward price that is totally ...
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Open Interest Change in Futures Trading
To Problem 2.22 in Options, Futures, and Other Derivatives (8th edition) below:
When a futures contract is traded on the floor of the exchange, it may be the case that the open interest increases by ...
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Cost of Carry of a Steepener using Treasury futures
I want to get a sense of the cost of carry (pure carry in this sense - no rolldown) embedded in a dv01 2s5s steepener in treasury futures. The horizon is 3 months, or 0.25 years.
The implied-repo rate ...
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Question regarding the accuracy of CME FedWatch Tool
I just accessed the CME FedWatch Tool at 10:27am ET.
It reported mid price of ZQZ2 as 95.8788 and a corresponding probability of 74.7% of 50bp hike at Dec FOMC meting (vs 75bp).
For December, as this ...
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How the margining system worked in this situation?
In Section 2.5 of Options, Futures, and Other Derivatives (8th edition), there is a paragraph discussing the credit risk associated with the operation of margins:
The whole purpose of the margining ...
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FX exposure in foreign equity index futures and commodity futures [closed]
For an US investor, buying an European index futures contract doesn't generate EURUSD exposure to the portfolio, since this trade is equivalent to borrowing EUR and buying the underlying.
Can I follow ...
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How does one put on a 2s10s trade using 2 and 10 year treasury futures contracts when the CTDs are not 2 and 10 year bonds?
The CME describes how to put on a 2s10s trade in this screenshot:
https://i.stack.imgur.com/2yPzW.jpg
Looking at current 2 and 10 year futures the CTD is roughly a 2 year and 7 year respectively.
Am I ...
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Futures roll implied financing implications
I often see commentary saying, for example:
‘Last weeks sep/Dec SPX roll VWAP traded at FedFunds + 32bps’ and
‘Dec/Mar SPX rolls currently imply a Year End premium of FedFunds + 49bps.’
But what does ...
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How to choose limit prices on IR futures when targeting a specific 2s10s spread?
I understand the concept of DV01s and when doing an interest rate future trade I need to use about a 2:1 ratio when trying to trade the 2s10s. This is explained here:
https://www.cmegroup.com/...
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Crypto perpetual futures contracts- How does the exchange fund the leverage?
Am I correct in saying that with the leverage system in crypto perpetual futures contracts, the user does not borrow from the exchange and the exchange does not have to borrow from external sources ...
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Pricing Risk Parity w/ Futures
I want to be able to price a risk parity index using the following prompt expiry futures contracts available from ECBOT and GLOBEX. Using a synthetic portfolio priced by adding the CASH VALUE of the ...
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MonteCarlo Value At Risk for futures portfolio
I wanted to ask, suppose I have a portfolio of futures of gasoline and other oil products eg ULSD (Ultra Low Sulphur Diesel), WTI (West Texas Intermediate) for different months. I want to compute the ...
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pros and cons of hedging oil contracts with options or futures
I work for an oil trading company. We sell petroleum products indexed on the Brent and hedge our fixed price sales using futures to offset price fluctuations. We do not engage in speculation. I was ...
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Why aren't the prices discounted when futures are marked-to-market? [closed]
I am a complete novice with a background in physics, currently self-studying derivatives. My primary reading resources are John Hull's book and "Introduction to the Economics and Mathematics of ...
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VIX/VSTOXX futures data in quantmod [duplicate]
To download financial data, I am using the R library quantmod - which uses Yahoo Finance data.
I want to download the future prices with shortest maturities for VIX and VSTOXX.
Nevertheless, on Yahoo ...
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Market value of futures [closed]
What is the market value of an (index) futures?
I guess the market value is either:
quantity * contract size * price
zero, if the daily unrealized PnL is ...
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If the interest rate is constant, then the forward price and the futures price are equal? [closed]
I was going through the proof about the equality of forward and futures price (assuming constant interest rate) in a book. Somewhere, the authors used the fact that suppose we start with two capitals -...
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Convexity adjustment for futures/FRA under T+D measure
In an internal document in my company, the convexity adjustment for Futures is defined as:
where and P(0,T+D) is the ZC bond maturity at T+D.
I don't understand why is not equal to 1 as I thought ...
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How would you build a yield curve for a cryptocurrency with only a perpetual futures market?
Assuming that hourly/daily funding rates are autocorrelated and revert to a long term mean, then perhaps the following would work:
Use the average of the last N day funding rate as as predictor of the ...
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how to calculate the implied interest rates using STIRs futures?
I saw a post of trader sharing his expectations of implied interest rates on different meetings dates of different Central banks using STIRs ScreenShot and am trying to figure out how he did it ?
my ...
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Convergence of crypto perpetual futures
Perpetual contracts are supposed to track the spot prices through the funding mechanism. Typically, if the future has traded above the spot in the last averaging period used to compute the funding, ...
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