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Questions tagged [futures]

Questions about futures contracts

11
votes
1answer
1k 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 ...
2
votes
1answer
1k views

Price of bond future, given a specific interest rate?

I'm interested in calculating what a theoretical price of the ZB or UB(Ultra Bond) futures would be priced at, given an interest rate of 1%. Or 0% If the 30Y interest rate is around 1%, what will ...
20
votes
2answers
3k 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 ...
11
votes
2answers
5k 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, ...
9
votes
1answer
6k 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 ...
8
votes
1answer
654 views

Theoretical limits for contango and backwardation

What do you think would be the theoretical limit for contango? What about backwardation? This was asked in an interview. I am still not so sure about the answer.
32
votes
5answers
12k 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 ...
22
votes
5answers
11k 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 ...
20
votes
2answers
2k 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 ...
10
votes
4answers
4k 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 ...
8
votes
4answers
14k 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 ...
6
votes
1answer
3k views

Convexity Adjustment for Futures

Let $B_t$ be the cash account numeraire. The future and forward prices at time t are expressed as: $$ Fut = E_t^Q\left[S_T\right],$$ $$ Fwd = \frac{E_t^Q[S_T/B_T]}{E_t^Q[1/B_T]}.$$ Where $$ \frac{...
14
votes
2answers
491 views

How is this probability (45%) of Fed raising rates 3 times in 2017 calculated from Fed Funds market?

The probability of the Fed raising rates 3 times in 2017 is above 45%. What data and formula is used to calculate this probability? This Financial Times article is published on 17Dec2016. She ...
2
votes
3answers
163 views

How does one price the market value and estimate the fair value of a bond futures roll?

Consider the current situation: we are entering December, meaning that the December futures are being rolled into the March futures (i.e. traders are selling their holdings of December futures ...
1
vote
1answer
1k views

How to trade interest rate futures calendar spread?

This has always been difficult to understand for me. How is the second futures contract valued in relation to the front month contract? My understanding is there are carry considerations (3 more ...
8
votes
2answers
206 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 ...
4
votes
2answers
502 views

How did traders calculate that the expected number of rate hikes is 4 based on eurodollar futures on 15Feb2018?

https://www.bloomberg.com/news/articles/2018-02-14/bond-traders-swarm-2019-fed-hike-bets-after-inflation-surprise After a Wednesday report showed consumer prices rose in January by more than ...
7
votes
1answer
17k views

The difference between Close price and Settelment Price for future contracts

What is the difference between Close price and Settlement Price for future contracts? Is there a defined rule for evaluating the settlement price or different rules are applied for each instrument/...
7
votes
2answers
913 views

Why is stock futures price much lower than spot?

What might be the reason for a futures price on a stock being much lower than the spot, i.e. stock price? Spot = 8.30 Futures M17 = 7.45 U17 = 7.23 The company does not pay dividends. No-arbitrage ...
4
votes
2answers
533 views

Convergence of Spot and Futures prices

Any explanation I've found explaining why future and spot prices converge over time seem to only focus the explanation on why the spot and future price must be equal at maturity. I understand that if ...
4
votes
0answers
412 views

Optimal f (position sizing) without look ahead bias

My goal is to identify a systematic way to position sizing in the futures market. Let assume that I'm an investor with log utility. In addition, let assume that I'm reluctant in estimating the ...
1
vote
2answers
114 views

Nature of short VIX strategies

By now, we all pretty much know that the recent upsurge in the VIX Index caused the spectacular failure of some Exchange-Traded Products (ETPs) or Exchange-Traded Notes (ETNs) written on it. An ...
1
vote
1answer
99 views

Return on investment in spreads

I have a hard time getting my head around this. Let's say you have a strategy that consists in buying one future spread, for instance CL Z7-Z8 (crude oil dec17 minus dec18). It's easy to calculate the ...
-1
votes
1answer
1k views

Calculating arbitrage- S&P 500 stocks vs S&P 500 Index future?

How exactly would I go about investigating whether the S&P 500 stocks were currently over-valued compared with the price of the S&P 500 Index futures contract? Is it just a case of taking each ...