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Questions tagged [futures]

Questions about futures contracts

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112 views

Modelling roll-over and roll yield in a forward strategy

This is a post which serves as a follow-up question to Nature of short VIX strategies. I am trying to understand where the change in value in a synthetic strategy constructed from futures comes from: ...
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1answer
101 views

Confusion in forward contract pricing on a stock using the binomial model

In the financial engineering course I am taking we are studying how to use the binomial model to price derivatives, one of which is the forward. For this question it is related to a forward contract ...
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1answer
216 views

Manipulation of VIX

Having finished my reading on CBOE's method of calculating the VIX on out of the money call and put options written on S&P 500,I have a thought about the ability of market making firms to ...
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2answers
110 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 ...
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84 views

Monte Carlo Simulation of Spread Strategy. Two correlated assets vs One spread simulation?

I am trying to simulate paths of a certain spread strategy such as a calendar spread between two futures ( May Crude vs Aug Crude) using a Monte Carlo simulation. My questions is there a difference ...
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49 views

Why is most active futures contract often May?

I was wondering why commodity contracts are often quoted as being "Most Active" in the month of May. In Bloomberg for example there are commodity tickers that only have May. For another example, in ...
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1answer
47 views

Constructing a long futures hedge

I'm taking a financial engineering course through coursera and on a slide one of the lecturers talks about how a long hedge is used in the futures market. Here is the text: Today is Sept 1st. A ...
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4answers
2k views

Why are stock index futures not used to forecast how much the stock market will rise, given that interest rates futures are used for this purpose?

In news articles, the reader often read interest rates forecasts calculated based on interest rate futures. An example is here; How did traders calculate that the expected number of rate hikes is 4 ...
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2answers
444 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 ...
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60 views

Price futures option via replication

I ran into some difficulties when trying to price a futures option via replication in a simple one-period binomial model. I am quite aware that this is easy with risk-neutral probabilities and ...
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39 views

Why do different brokers have different settlement price?

I've noticed forthat CME, thinkorswim ,trading view and even WSJ all show different closing prices. If I wanted to make an algo what price do you use? I've heard that the CME prices aren't that ...
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Can any tell me how the VIX spike in Feb 2018, might have been caused my manipulation of $SPX options or VX Futures? [closed]

Looking for ways to back track evidence of manipulation in the trading or SPX options, ES Futures, or VX Futures to cause the spike that destroyed the vol ETFs (XIV, and SVXY), and caused small ...
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1answer
110 views

At some intermediate time $t$, does money actually change hands in the trading of a futures contract?

Assuming that the asset underlying a futures contract pays no dividends or associated (storage, etc) costs, I have the following formula for the price $F_t$ of a futures contract at time $t$: $$ F_t = ...
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2answers
2k views

Determine the carry of a treasury bond futures contract?

Hi fellow financial market enthusiasts. I'm trying to understand my options as a retail investor. I want to leverage a cash bond portfolio but my broker does not allow that, so I want to use futures ...
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1answer
104 views

Data on Options on US-Treasury Futes

I am working on an assignment on the Implied Volatility Surface for the options on US-Treasury futures (ZB, ZN, ZF, etc.). I need data on bid and ask, Imp. Vol, Price of underlying etc. Do you know a ...
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159 views

Free Intra-day futures data API?

Does anyone know of a free or very inexpensive intra-day futures data provider? I know there a quite a few of them for equities (Alpha Vantage, google etc) but can't seem to find any on the futures ...
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2answers
90 views

EuroStoxx50: long index and short futures

If you look at a cumulative return of a very simple portfolio, consisting of long EuroStoxx50 total return index and short EuroStoxx50 futures, you can see that over the last 10 years this portfolio ...
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1answer
29 views

Impact of the maturity date of a future on its risk

At work we use a system called FIS APT for risk management. I am trying to get my head around it and I noticed that futures are set-up by simply telling the system what is the underlying index (for ...
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1answer
324 views

Bitcoin CBOE futures listed today. Why its premium to cash product?

Today, CBOE Bitcoin futures were listed. I checked the price and was surprised that it has a premium to the cash price (Gemini exchange price from product specification) and am very shocked. I ...
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1answer
242 views

How to calculate a future contracts price?

I have the following question from Hull, problem 6.17: On August 1 a portfolio manager has a bond portfolio worth $10 million. The duration of the portfolio in October will be 7.1 years. The December ...
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1answer
540 views

How does one calculate the Libor future contract price?

I have the following question from Hull, problem 6.16: Suppose that it is February 20 and a treasurer realizes that on July 17 the company will have to issue \$5 million of commercial paper with a ...
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0answers
160 views

CME Rate Hike Probability Calculation

First thing first, CME has a tool to calculate fed rate hike probability from here. As of 11/20/2017, their probability distribution was like this: I have checked a couple Q&A sections on this ...
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1answer
99 views

If spot prices tends to be higher than futures prices, then long hedges are particularly attractive - Why?

Explain why If spot prices tends to be higher than futures prices, then long hedges are likely to be particularly attractive Supposed logic behind this is that if spot prices are likely to be ...
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56 views

Creating a synthetic future

Let's say we have a time series for an illiquid future and we would like to replicate this time series using two time series for liquid futures using daily rebalancing. What would be a good approach ...
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0answers
88 views

Net Exposure of FX Future

I'm a software developer currently working for an asset manager in their Risk department. I'm looking at Currency Futures and have a question I was hoping someone could put me right on. If I have a ...
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1answer
158 views

eurodollar future

I just found out about eurdollar futures and I am confused. A eurodollar future contract is defined as a cash settled future based on a Eurodollar Time Deposit having a principal value of USD $1,000,...
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1answer
122 views

XIV Positive Roll Yield

I understand that VIX futures are usually in contango and so a portfolio that holds futures with a weighted average expiration of 30 days will "roll" down to equal the VIX index at maturity. This is ...
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1answer
68 views

Role of next month's dividends in forward pricing

I'm using the equations given on this page to price forwards on an equity. It's a basic equation that discounts dividends. But my question is: What do we do about dividends that occur after the ...
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1answer
83 views

The settlement and payment date of Eurodollar

This is John Hull's book Options, Futures and Other Derivatives 9th Page 142 Suppose the maturity of a ...
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1answer
60 views

Making an IB contract: Directory for IBpY exchanges and commodity codes?

All the tutorials for making a contract seem to use either Apple or Google as examples: goog_contract = create_contract('GOOG', 'STK', 'SMART', 'SMART', 'USD') If I want to trade CME Feeder Cattle ...
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1answer
92 views

Libor futures rolling adjustment & curve building

Can futures rolling affect curve constructing? Let's say that i'm using future 1 and 2 to construct the short end of my curve. As i understand it, rolling will create volatility (as volumes spike), ...
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1answer
109 views

What's the future price when you exercise the future option

Here is the example of future option in John Holl's book Options, Futures and Other Derivatives 9th page 384. I don't understand that when you exercise the future ...
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1answer
109 views

Taking advantage of mispricing in forwards [duplicate]

Suppose gold futures are selling at 360 in February, and 370 in April. Interest is 9% annually. Note that 360*(1+0.09*2/12)=365.4, so the April futures is overpriced. Then we can sell April and buy ...
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1answer
174 views

Traders view on hedging of FX Futures with FX Forward

I would like to get a trades view on hedging a FX Forward with a FX Future by just moving the (1) FX_Spot rate and ignore the other risk factors (2) ccy1 DV01 risk, (3) ccy2 DV01 risk, (4) basis swap ...
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1answer
88 views

Zero value of cash flow for future in Shreve's book

Here is the statements of future price in Shreve's book Stochastic Calculus for Finance II page 244 to proof the ...
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1answer
101 views

How to understand closing position of futures

When we want to close out the position of futures prior to the delivery period, you will entering into the opposite trade to the original one. Equivalently, except ...
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0answers
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Could you explain the modified version cost of carry model application in practice for index future

The complex equation is: where t: today T: the expiration day of the futures S(t)=today’s spot price of the underlying asset S(t-1)=yesterday’s spot price of the underlying asset r(t)=risk free ...
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1answer
801 views

What exactly is a deposit futures contract?

I have been working with Deposit Futures and the Brazilian One-Day Interbank Deposit Future but I can't get my head around them. What exactly is delivered and when? What is the contract a right to?
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269 views

Is there really a negative roll yield for futures in contango?

I am trying to wrap my head around how ETFs that track futures work (whether its USO tracking WTI futures or VXX tracking VIX futures). I have read online about how for normal contango environments, ...
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1answer
50 views

Payoff of an odd indicator of one stock being greater than another

Suppose $S_t^1$ and $S_t^2$ are two stocks following GBMs and have current value $s_1$ and $s_2$ respectively. How can I explicitly compute the payoff $$ V(t,s_1,s_2)\triangleq \mathbb{E}\left[ 1_{\{...
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0answers
313 views

Extracting continuous futures prices on different dates with the ratio adjustment

I extract continuous prices for a set of futures contracts using Bloomberg. I select the Ratio as adjustment with the Bloomberg default settings. For instance, to extract the first/forward generic ...
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1answer
512 views

Why does a futures price converge to a spot price?

I've sort of get the arbitrage logic of it, i.e if the futures price is more expensive than spot price, then investors would short the contract and buy the asset for delivery. Correct me if i'm wrong. ...
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3answers
1k views

Calculating PnL on Eurodollar futures trading

I'm trying to understand how the published prices for futures relate to how much is actually spent when you execute. For example: looking at GEH8 on 4/19/2017. The quotes look like 98.50, 98.515, but ...
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381 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 ...
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1answer
421 views

Margin modelling to backtest futures investment strategy

Let say that I have access to continuous daily time series for 20+ years of data for E-mini S&P 500 Index Futures. I have a long/short strategy to backtest that places orders either on open or ...
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1answer
154 views

time series for futures roll

I'm trying to build a multi year time series for a 3 month futures contract. How do I handle rolls? On the day of roll, volatility is high and I want to roll over to next contract series in a way that ...
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1answer
67 views

Integrating Interest and Dividend Functions

How are interest rate and dividend functions integrated over time in practice? For example, what does it mean in practice to discount a current price by $e^{\int_{t_m}^{T}r_s ds }$ where $r_s$ is the ...
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2answers
503 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 ...
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2answers
537 views

pairs trading, normalization

I am interested in implementing a simple pairs trading strategy using two correlated futures contracts. I am unsure what the best way to normalize the prices of the two instruments is. Essentially ...
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2answers
831 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 ...