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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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652 views

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 ...
0 votes
1 answer
21 views

How to correctly postion size back adjusted 'continuous' data while back testing?

Added my question as a pic given the detail, basically seeking insight on how can we best normalize my entry sizes to mitigate the above-mentioned issues for back-adjusted futures data?
4 votes
2 answers
236 views

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 ...
-2 votes
0 answers
41 views

Futures Spread Contract - How to Structure Risk to Reward

Futures Spread - Contract There is a Futures Spread, Where the Margin reflects a Leverage of 3 to 1 , The Margin for the contract is just $ 210. I ‘am Buying “ 1 Futures Contract September, Selling 1 ...
3 votes
2 answers
10k views

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 ...
0 votes
1 answer
96 views

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 ...
0 votes
0 answers
66 views

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. ...
0 votes
0 answers
31 views

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 ...
0 votes
1 answer
70 views

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 ...
0 votes
1 answer
85 views

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 ...
28 votes
6 answers
14k 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 ...
0 votes
0 answers
42 views

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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0 answers
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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 ...
0 votes
1 answer
208 views

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 ...
1 vote
1 answer
391 views

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?
3 votes
1 answer
327 views

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 ...
0 votes
0 answers
34 views

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 ...
5 votes
3 answers
344 views

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 ...
0 votes
2 answers
294 views

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/...
1 vote
1 answer
94 views

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 ...
5 votes
1 answer
2k views

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 ...
-1 votes
2 answers
146 views

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 ...
0 votes
1 answer
153 views

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 ...
2 votes
1 answer
100 views

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 ...
0 votes
0 answers
57 views

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 ...
1 vote
1 answer
835 views

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 ...
0 votes
1 answer
89 views

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, ...
2 votes
0 answers
92 views

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 ...
0 votes
0 answers
206 views

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: ...
3 votes
1 answer
302 views

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 ...
0 votes
1 answer
439 views

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%...
0 votes
0 answers
28 views

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 ...
2 votes
1 answer
918 views

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. ...
1 vote
1 answer
150 views

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 ...
5 votes
1 answer
405 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 ...
0 votes
1 answer
141 views

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 ...
1 vote
2 answers
377 views

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 ...
0 votes
1 answer
50 views

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 ...
1 vote
0 answers
24 views

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,...
0 votes
0 answers
203 views

Convexity adjustment future/fra in practice

The topic of Future/FRA adjustment has already been addressed on a theoretical point view, roughly we need a rate model to calculate the covariance between the money market account of the discount ...
0 votes
1 answer
65 views

Convenience yield intuition on consumption assets?

Something I'm having difficulty wrapping my head around is the argument that commodity futures can be in backwardation due to a large convenience yield, for example "to keep a production process ...
0 votes
0 answers
46 views

Relationship Between the Equity Funding Curve and Equity Forward Curve

am trying to understand the core concepts of Equity Forwards Curve, Funding Curve and yield Curves (most sources online seem to focus on Interest rate related examples, so any sources for equity ...
3 votes
0 answers
220 views

How do I calculate implied convexity from futures vs swaps?

From STIR Futures - Trading Euribor and Eurodollar futures by Stephen Aikin, convexity is determined by comparing the zero rate on a swap with an equivalent set of futures. For example, using futures,...
5 votes
2 answers
223 views

VIX future's lower and upper bounds

A Tale of Two Indices, by Carr and Wu (Jrl. of Derivatives, Spring 2006) As per the above paper of Carr and Wu (page 24 and 25), the price of a VIX future has for lower bound the fair strike of a ...
8 votes
4 answers
1k 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 $\sigma_2$ ...
0 votes
0 answers
131 views

Futures Backtest

Trying to get my head around a simple futures backtest, namely trend. What I am struggling with is after back-adjusting (Panama canal) 10 year bond futures, I'm left with negative prices in the series....
9 votes
1 answer
1k views

Bond convexity Treasuries futures

I know that long-duration bonds, on a a single bond basis, exhibit convexity. However, do Treasuries futures prices and the 10 year yield exhibit the same property? Below is a plot of continuous 10 ...
5 votes
3 answers
536 views

How does the underlying get delivered for electricity market derivatives?

I have been reading around energy markets recently and recent schemes such as Voluntary Carbon Markets, similar to the 'cap and trade' style of the Kyoto Agreement in 1997. I have been reading in ...
1 vote
0 answers
59 views

I am trying to compute the the tail of a future roll using the ratio of forward dv01

I am trying to compute the the tail of a future roll using the ratio of forward dv01, per the link CME: Calendar Spreads with Tails : I am trying to compute the the tail of a future roll using the ...
2 votes
0 answers
167 views

SOFR futures options margining

If we consider quarterly (or serial, or mid-curve) SOFR options, traded on CME. Are those options subject to margining? It is clear to me that their underlying (say, 3M SOFR futures) is margined as ...

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