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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How to calculate point value for live cattle futures contract?
I am trying to understand how to calculate point value for each live cattle futures contract by looking at the contract's spec on CME website.
I understand that 0.00025 * 40,000 = $10 which is tick ...
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Do perpetual futures have initial and variation margins?
When trading perpetual futures (for example, on crypto), do the concepts of initial and variation margins take place?
I'll expand on my point:
Perpetual futures without leverage. For example, we want ...
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How to predict where STIR futures should be trading?
I had a interview question recently and a trader asked me , if we know the next 3 meetings date for BOE is Sep/24 , Nov/24 , Dec/24, how do I predict where futures should be trading if I personally ...
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Conversion Factor Weighted or Dv01 Weighted Treasury Futures Hedge
When trading the US Treasury Basis, why is a conversion factor weighted number of futures to your bonds the convention over DV01 weighted number of futures? why does one prefer the conversion factor ...
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How is yield calculated for a portfolio?
If you have a portfolio of US government bonds and treasury futures, and you want to calculate the yield of the portfolio, how would you do this?
Would you say $\sum_{i=1}^n w_i y_i$ where $w_i$ is ...
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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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impact of bond futures conversion factor on calendar spread trading
i have a quick question about conversion factor and his implication in calendar bonds roll trading.
I go short on a calendar roll (short front+long back) which has the same cheapest to deliver.
The ...
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Why do people speak of yields on bond futures when their expected return is 0?
There are several questions on this site asking about the "yield" of a bond futures contract.
See e.g. How do I calculate yield from a bond futures contract?
However, the expected return of ...
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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 no-...
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US Treasury Futures Wildcard Option
How does the conversion factor for bonds impact the valuation of the wildcard option?
In the WN contract, bonds with lower coupons/conversion factors, have higher wildcard options and I am wondering ...
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Quantlib - Clarification on iborStartDate in FuturesRateHelper
I'm currently working with QuantLib's FuturesRateHelper and I'm a bit confused about the iborStartDate parameter. According to the documentation and some code snippets, iborStartDate is used like this:...
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futures exposure targeting (spot vs futures price)
I'm confused over if I should use spot or futures price when targeting a certain exposure. There are many websites that state you should use the contract size * futures price. Other websites, however, ...
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Bond Futures why CTD driven by yields?
Can you please explain with a numerical example why long duration bonds (low coupon, long maturity) are CTD when yields are significantly greater than the contract standard coupon and when yields fall ...
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Best way to lock in margin rate via hedging
I'm currently paying a 1.25% margin rate. This rate is based on the Fed Funds rate plus a margin. I would like to hedge against the possibility of this margin rate increasing. What is the best/...
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How to construct continuous futures contracts with multiple maturities
I am trying to replicate the Schwartz-Smith (2000) model and having an issue understanding what the data is and how to generate it. Specifically, the authors use a table of continuous futures with ...
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How to calculate average entry price for perpetual swap contracts?
I'm trying to calculate the average entry price for perpetual swap contracts for use in back-testing a trading strategy, as per Bitmex's documentation:
A Perpetual Contract is a derivative product ...
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Future Rollover - which price to use?
In order to generate continuous future contract price, i adopt the proportional adjustment. Suppose rollover date is t.
If I have tick data of the spot month ...
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Under what circumstances is hedging a portfolio by shorting index futures profitable? (John C. Hull 11e Practice Questions 3.25)
This question is based on a claim made in both practice question 3.25 and section 3.5 of Options, Futures and Derivatives by John C. Hull, 11th edition.
The question
On July 1, an investor holds 50,...
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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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SOFR Curve with Meeting Dates Jump Modelling
When building SOFR curve with meeting dates, i include 1m SOFR Futures and 3m SOFR futures to imply jumps from FOMC meeting dates, but two meeting dates might fall within the same quarterly futures ...
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Using Quandl Continuous Contracts
I am trying to use Quandl data futures for backtesting some trading scenarios, specifically
Wiki Continuous Futures.
Following the documentation, I understand that the data-set contains continuous ...
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How to value 3mo SOFR Spreads one year out, 2yr out
How does one value a 3mo spread spread in the far out future from present if fomc meeting schedule is only published for one year, and even with fomc's dot plot, it just shows the median expectation ...
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Where can I find implied rates for central bank decisions?
Sometimes I'll see sources online say things like markets are pricing in a certain amount of bps rate cuts/hikes by the Fed or ECB (or some other central bank) for a certain monetary policy meeting ...
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Eurodollar futures volatility
Considering each point is 2500, how can I get the volatility of the jun 24 contract? On tastyworks I'm seeing a 0.7% iv for the contract, how can I translate it to standard deviation? Ex:sp500 15%...
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How to correctly postion size back adjusted 'continuous' data while back testing?
I'm running into issues using back-ad'justed continuous data from IQFEED while back-testing. For example, with my data, HO is priced at \$-0.002 and at a later date HO is trading around \$2.50. If the ...
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variation margin affecting futures price
A quote from Natenberg's Option Pricing and Volatility, on stock index futures and how variation margin can change their price.
Ignoring dividends, the fair value of a stock index forward contract
is ...
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A quant job interview question about (toy) futures
On Monday, you receive prices for each day of the week: $X_{1,1}, \ldots, X_{1,5}$.
On Tuesday, you receive prices for Tuesday, Wednesday, Thursday, and Friday: $X_{2,2}, \ldots, X_{2,5}$.
On ...
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Why are FRA/futures convexity adjustments necessary?
This would be my explanation for the reason that convexity adjustments must exist:
Futures are margined daily, such that if a trader is paid a future and rates goes up then money is paid into their ...
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Options on Futures, akuna question
From the below question, I am unsure why the option expiring in November is given by the January future. I thought it was a graphical issue, but it is supposed to look like it’s shifted to the right.
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How to Bootstrap a daily compounding future in QuantLib
Hi I am currently tying to bootstrap the F-TIIE curve for mexican swaps
In the short term it uses the F-TIIE Futures.
These F-TIIE futures are 1 month futures that start on the first day of the month ...
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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 ...
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Treasury Futures Roll Hedges
When you trade the US Treasury futures roll, why do you hedge with SOFR futures contracts for TU and FV and why do you hedge the stub (with SER futures weightings)?
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Expected return on treasury basis trades
There have been a lot of articles on Treasury basis trades. What types of levels are targeted in this trade? Am I correct in seeing that the basis seems to be less than 10 cents in the dollar so ...
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Calculating Implied rates from OIS and Futures
I've been trying to figure out how to calculate the implied rate for interest rate decisions by central banks using OIS and came across an explanation that I can't quite wrap my head around:
Apart ...
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Spread Duration of a Fixed Rate Corporate Bond, with offsetting Futures Position
My question is relatively simple with respect to the below scenario:
I take a $5m long position in a vanilla fixed-rate corporate bond with a spread of 1.50% for a YTM of 5%. These coupons are paid ...
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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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General conventions in Futures prices for commodity
When I look into different Futures quotes of commodities in CME, all of them are based on Expiry month e.g. Dec-2024 etc.
However on the other hand, for fixed income e.g. Swaps, Swaption etc rates are ...
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Why do unleveraged VIX ETPs have large beta relative to VX futures, with much faster decay?
I hope the title explains it fairly adequately.
To add a little more detail, it's my understanding that VIX ETPs such as VXX and VIXY hold VX Futures as their underlying assets. I believe that this is ...
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Basis for Forwards
Does the concept of a "Basis" for a forward based product make sense, or is it only ever explicitly for Futures? I understand the concept could mean the Forward Spot - Spot, but am not aware ...
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Two types of hedge : impacts on position carry
Think of an IG bond purchase, financed at 3M Euribor, in an inverted curve environment.
The yield on the bond, Y, is below the 3M Euribor, at purchase.
The investor is looking to lock in a spread over ...
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Futures: how is the orderbook computed?
I'm interested in CME futures, for example the SP500. And I wonder if the orderbook is just an aggregation of STOP and LIMIT orders?
For example the following fictive orderbook:
...
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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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Constructing a monthly option from quarterly options and monthly futures
Say we have quarterly options and monthly futures where the strike price is based on the average price of spot during the corresponding period. There are no monthly options.
Can I effectively ...
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Switch and wildcard option in WN
I am trying to get a better understanding on the switch option for the WNM4 contract. Usually the wildcard is the only option that’s important for WN but now it’s complicated by the wildcard option. ...
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Long Bond & Interest Rate Futures Hedge - is it carry negative?
The situation is the following :
A bank treasury book, finances its cash bond liquidity portfolio at Euribor 3m flat.
The Euribor curve is deeply inverted.
The bank invests in bonds with a positive ...
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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 ...
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How to Correctly Price Currency Forwards/Futures [duplicate]
I am trying to understand how to price a forward contract on the GBP/USD currency pair and then compare my answer with current future prices on GBP/USD. If my understanding is correct I believe we ...
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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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Future Contract Value
Soybean future on Bloomberg's security description, I see
Contract size = 5,000 bushels
price = 1,200 usd/bushel
contract value = $60,000
How is the contract value of $60,000 derived?
Isn't the ...
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Open interest when closing out a position [duplicate]
According to CME's definition of Open Interest, if Trader A is long 3 contracts, and decides to sell 1, then the open interest decreases by 1.
What I don't understand: if Trader A sells their contract,...
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