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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Should I train (and apply) a commodity forecasting model using nominal or real historical (futures) prices?
I am forecasting hourly power prices by applying Gradient Boosting to, among other variables, average monthly gas prices. The algorithm is currently trained on historical nominal monthly average gas ...
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Yield curve steepening/flattening using different duration treasury futures (TUT Spread) and volatility
Yield curve steepening: long 2 contracts 2 year (2 contracts due to contract size), short 1 contract 10 year
Vice versa for flattening.
If the 2 year note has a expected volatility of 2% per contract (...
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sizing fx futures trades by targeting volatility
If I lever up a JPY/USD futures with a 6% volatility/contract 2x to meet my 12% volatility target, how many contracts should I buy per $100,000 I have in liquidity? How do I size my position based on ...
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If every buyer in a futures contract has a corresponding seller, how can open interest ever be an odd number? [closed]
I'm new to trading so pardon the entry-level question:
Here's a screenshot of today's settlement for the September 2021 S&P futures contract on the Chicago Mercantile Exchange:
The prior day's ...
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Euro-Bund Futures fair value
I am trying to calculate the fair value via discounting the cashflows of the (synthetic underlying) for the euro bund futures (https://www.eurex.com/ex-en/markets/int/fix/government-bonds/Euro-Bund-...
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Cash settled contracts price convergence at expiry
I am aware why the price of the underlying security/commodity and its futures contract price would converge at expiration, i.e. if the underlying price was lower than the futures price, an arbitrageur ...
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LIBOR rate and eurodollar futures
If the libor rate stays the same -which implies that also the eurodollar future quoted price remains the same- (ie: jun '22 prices is trading at 99.8, and it expires at 99.8), does the investor that ...
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Hedging Curve Risk with Futures
Please help confirm/correct my understanding of hedging curve risk using futures.
For example, if I purchased a 9y bond and hedged the duration risk (parallel shift) by shorting 10y treasury futures ...
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Mini Nikkei Futures Contract - Tick and Point Value
for the Mini Nikkei Futures Contract traded at the Osaka Japanese Exchange, it states that the Tick Value is 500 Yen per Tick. But the actual contract is quoted in 5 Point Increments. Is the correct ...
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Forward/futures contracts that satisfy $F=S\exp(rT)$
I am interested in estimating riskless rates from forward/futures data. The standard forward pricing formula is given by
$$F=S\exp(rT).$$
From this we can solve the interest rate used in pricing as a ...
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Query on Volume and Turnover of Equity Index and Index Future
I downloaded daily price, volume, turnover time series data of S&P500 Index (SPX) and S&P500 Futures (SP1). I observed that SPX Turnover is less than SPX Volume. Here's a single day's example ...
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IV on FOP (futures options) being higher than IV on equivalent ETF
I've been observing that options on /es has a higher IV than the options on SPY even though they're both tracking the S&P 500. What causes this? Doesn't this mean that the options on /es is more ...
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Market making with transaction fee literature
In the past 2 months, I have read number of literature on market making; however, all of it has not considered transaction fee. Therefore, when implemented, those strategies are all loss-making after ...
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Timeseries of cheapest-to-deliver bonds from Bloomberg
I am running a regression analysis on a bondxday panel to explain the variation in repo rates. The dependent variable is the ...
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Short Eurodollar futures front v back month
What is the difference between shorting the front month, rolling it into a back month vs just shorting the back month?
For example: shorting the front month and rolling the short every 3 months until ...
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Why do Futures Contracts use variation in the US, but options don’t?
Sorry if this is obvious, but I was reading up on Futures and the concept of variation margin intrigued me. Options settle like Stocks and have unrealized gain/loss without affect on cash flow during ...
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Synthetic bonds with FX futures
FX futures price in the interest rate of different currencies, so can you use US treasury bonds (for example /zn) and FX futures (for example SGX USD/CNH FX Future) to create a synthetic bond of a ...
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NDF Point a good factor for the discount/premium of future prices
I am a bachelor student and I have to do a research paper for my finance class.
I saw that some currency have NDF such as TWD, KRW, BRL. Therefore I imagine that the rate implied in this NDF is what I ...
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Eurodollar futures trading and mechanics
I need help with calculating the profit I'd make if I was short the Jun '23 Eurodollar futures contract @99.275. I believe that it'll move to 98.75, which should net me a profit of 0.525*2500=1312.5. ...
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How do we analyse the future and option market on the base of the Fama-French model?
How do we analyse the future and option market on the base of the Fama-French model?
Basically i want to know can we analyse derivative market on base of FAMA French or CAPM model ?
e.g for stock we ...
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Setting the record straight on contango and backwardation in futures markets
Contango is commonly defined as "The situation where the price of a commodity for future delivery is higher than the expected spot price". But how is this "expected" spot price ...
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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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Trading futures, how does it work in practice?
If my understanding is correct, then owning a future essentially means owning a contract which obliges to buy/sell something at a certain time for a certain price.
But what I don't understand is how, ...
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Bond Future and Bond Yield relation
I recently read, that yield changes during a short time window can be approximated by dividing the returns of futures on the bond by its Duration. Has anybody heard this before and can shed some light ...
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What is the point of hedging in this scenario?
I'm new to this stuff, and have the following question:
In John C. Hulls book the following scenario is presented: on May 15 we enter into a contract to sell 1 mill barrels of oil for the market price ...
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pricing crypto quanto swap and perpetual
https://www.bitmex.com/app/contract/ETHUSD
https://www.bitmex.com/app/contract/ETHUSDM21
How do you apply stochastic quanto pricing formulas to quanto crypto futures and perpetuals? I can see couple ...
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Question about calendar spread mean-reversion strategy
I'm excited to ask my first question here! I'll try to describe the mean-reversion strategy with some background, then explain what I couldn't understand.
The strategy is described in Earnest Chan's ...
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Futures Market Open
I've been reading a book recently about trading ORB (Opening Range Breakout) in the futures market. I haven't been able to figure out when exactly the open is for futures. I know the futures market ...
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Implementing a hedging strategy for oil future options
I am currently writing a paper examining two models for pricing options on WTI Crude oil futures, and I want to backtest hedging strategies from both model and compare them against each other.
However,...
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Intraday volatility pattern of Emini
I have the series of 1-min logarithmic returns of Emini future from 2007 to 2020
I calculated the standard deviation of each return at a fixed time of day and then I plotted the results (see image).
I ...
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Buying an Option on Futures or entering a Futures contract
Let's say I want to hedge my current position using a futures or future options. What is the use of buying a future option if I can enter into the futures contract at zero cost(at any time before the ...
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Algorithm / source to calculate historical expiry dates of futures
I can find several source on this site where to find expiry dates of coming futures contracts.
I am looking for a (e.g. Python) algorithm or a data source where I can find historical dates when a ...
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Hull on Futures: I am not able to understand this sentence
The usual rule chosen by the exchange is to pass the notice of intention to deliver on to the party with the oldest outstanding long position.
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price alignment interest on future contract
why this is no PAI (price alignment interest) on a future contact like cleared swaps have?
Am I right that you may get interest from your margin account, but you do not need to pay the interest back ...
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Futures positioning reported by CFTC
How is the net futures position calculated by the CFTC? For instance, GBPUSD net contract is positive in the CFTC report, what does it mean given that for each buyer there is a seller?
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Book that considers stochastic interest rate models in discrete time?
Are there any books that covers interest rate swaps, futures, forwards etc. but have a discrete time model? I would like to go deeper into this without having to worry about the stochastic calculus.
...
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Market neutral strategy with quarterly futures and perpetual swaps?
What is a "perpetual swap"?
In cryptocurrency exchanges, there is a financial product called "perpetual swap". (It is also called as "perpetual futures" or "...
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Black 76 and Asian Style Options on Shaped Power Futures
I am attempting to price a monthly lookback option on the gen-weighted average price of power at a particular solar plant over a given month. If the option settles at hub H, am I right to shape the ...
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SX5E option hedge
There are only quarterly contracts (3,6,9,12) for SX5E futures. In practice, how do we hedge SX5E option at expiry for non-quarterly contracts (say April)?
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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 ...
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Alternatives to Zipline backtester / Alternatives to futures data from Quandl
I intend to set up a fully automated system for trading equities and futures. As preparation for this project, I worked through a couple of books on the topic, e.g., "Trading Evolved" by ...
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long position on futures
Now I am opening a long position of 1000000 USD on euro futures at a spot FX rate of $1.2568/€. Technically, this means that I am taking a credit of €795,671.55 (2dp) from my broker and immediately am ...
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How do I hedge yield spread?
We'd like to offer a product in which a notional amount $(N)$ is given, and the underlying is spread $(s)$ defined as, say, 30Y yield minus 10Y yield (both from treasury YTM yield curve). At the end ...
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MSCI World and MSCI World future: low correlation, how come?
Noticed today that hedging the MSCI World (NTR, div reinvested) by shorting it's very own future (same underlying index, also NTR) leaves a lot of active risk. This is explained by low correlation ...
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Future price in continous time
I am in the following continuous time market:
$S_t^0 = rS_t^0dt$
$S_t^1 = (\mu - \delta) S_t^1dt + \sigma S_t^1 dB_t$
where $r, \mu, \delta$ and $\sigma$ are constant values in $\mathbb{R}$. $\delta$...
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Price Prediction Intervals from Forecasted Returns (ARIMA)
I have successfully fit an ARIMA model to a time series of the daily returns of power futures prices. The question I have is: How can I create a prediction interval for the prices? Or, alternatively, ...
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TNote Futures contract YTM vs yield on bought notes? [duplicate]
I understand how to calculate the yield on a 10 yr TNote based on face, price & coupon.
I don’t understand why the yield (and price) on a futures contract about to expire is so different than the ...
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Liquidity measures for Commodities Futures
I would like to find a way to measure Liquidity for Commodities Futures. I found the following 4 papers/definitions:
Volume (Share / Dollar) (Dollar Volume Liquidity)
Amivest Liquidity Ratio (...
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Electricity Futures Risk Premiums With ARIMA
I am attempting to model long-term electricity prices using today's futures prices. Unlike most futures, electricity is delivered over a period of time (usually a month), rather than at a point in ...
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FX futures valuation under negative rates
Market participants use negative interbank rates (LIBOR JPY/CHF) for the valuation of FX futures. Does this make any economic sense?
Positive rates in valuation formula indicate opportunity cost of ...
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