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The negative price that was all over the news was the front contract for WTI (West Texas Intermediate) futures that went to -40 and had a last trade date of 21.04.2020, so today. This movement was connected to derivatives and among other explanations was the fact that traders were exiting positions in order to avoid the risk of taking delivery of physical ...

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Treasury futures are actually really complicated... There are complete books dedicated to this topic (e.g., The Treasury Bond Basis) and really good sell-side research papers ("Understanding Treasury Bond Futures" by Salomon Brothers) that I highly recommend. You're actually very much on the right track, but I'll try to paint a somewhat complete picture. ...

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Not saying this trade won't work, but there's certainly no guarantee that it will... Given that QE will stop in October is well teleported at this point and has been expected since last year, you'd think this should be fully priced in. Last year, when the "tapering" talk started, Treasuries did sell off quite a bit, but has since rallied all the way back. ...

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This is a basic fact about futures trading and the storage of commodities. The phrase that was used by futures traders in the old days (and probably still today) was "the contango is limited by the carrying cost, there is no limit to the backwardation". This means that for example if spot gold is at 1200, gold dated one year from now cannot possibly sell ...

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We assume that, under the probability measure $Q$, \begin{align*} dS_t &= S_t\big(r_t dt + \sigma dW_s(t)\big),\\ dr_t &= -k\, r_t dt + \alpha dW_r(t),\tag{1} \end{align*} where $d\langle W_s(t), W_r(t)\rangle_t = \rho dt$. From $(1)$, for $s\ge t$, \begin{align*} r_s = e^{-k(s-t)}r_t + \alpha\int_t^s e^{-k(s-u)} dW_r(u). \end{align*} Then, for $T\ge ... 11 There is actually a lot of art involved. The most simplistic framework is as follows: The first step is to obtain a list of FOMC meeting dates. These are available currently for 2015 and 2016 here. If you're interested for rate expectations beyond 2016, you'd need to "guess" the meeting dates in the future based on past patterns. The next step is to ... 11 This is a surprisingly complicated question that encompasses many moving parts. Without knowing exactly what your objectives are, it's a bit difficult to offer concrete advice, so I'll provide some general comments below. Mechanically, you earn the total return when you buy and hold a real bond or a bond ETF. By contrast, bond futures are financed ... 11 Systematically finding most liquid futures instruments Can we put together a better list than the academic articles? Yes! The lists in existing publications [1, 2] are great, but fall slightly short of your goal: I'm asking for a systematic, repeatable procedure for determining a list of what I expect to be around 100-300 markets instruments. [3] What'... 10 Forward delta is 1 (defined as change in the value of the forward with respect to an instantaneous change in the price of the underlying, holding everything else constant). However for a meaningful discussion of the differences in forward and futures pricing, the forward price delta of forwards should be considered and it is exp(r(T-t)).Though the delta ... 10 I will talk about equity futures. Commodity futures can be slightly different, as I briefly point out. Equity futures are standardised exchange-traded instruments. Futures on stock indices are especially liquid. The reason for that, is that one cannot simply buy/sell an index as he would buy/sell a single stock because an index is merely a reference value, ... 10 Leverage: futures usually require much lower margin than their ETF counterparts. For example /ES (E-mini S&P 500 futures) requires about \$4K overnight maintenance margin per contract (may vary by brokerage) to control 50 times the S&P 500 index (currently valued at about \$108K). This is over 20:1 leverage. Furthermore you do NOT pay interest on ... 9 Think of it like a forward trade on the settlement price. If you are buying with a TAS you are agreeing to go long the futures contract at the settlement price (+/- the offset), and whoever you trade with is agreeing to go short at the same price. It is guaranteed because the exchange becomes the counterparty for both traders and there is a margin deposit. ... 9 Just take something like $$\frac{\log{\frac{F_j}{F_i}}}{t_j - t_i} \times 365$$ where$t_i$denotes the expiry (or alternatively delivery) date of future$i$. The annualization is so you can compare different futures. 9 Using the following data from 12/18/16: Jan 2017 Fed funds futures =9936, Jan 2018 Fed Funds futures =9877 implies that 99.36-98.77 = 59bp of hikes are built in for 2017. IF you assume the only two possibilities are 2 hikes or 3 hikes (meaning, 50bp or 75bp of hikes, assuming each hike would be 25bp), then by simple linear interpolation the probability of 3 ... 9 Treasury bond futures are surprisingly complicated - this is an attempt at a short explanation, it will obviously gloss over some details, but hopefully gives you a flavour of how they are priced. The most important fact is that the underlying is not a single bond, but a basket of bonds. For example, the US Treasury Bond Futures contract spec says that you ... 9 If your strategy truly has no directional bias, then the benchmark should be cash (ie whatever you would earn using the capital in your trading account and taking no risk). 9 Futures are in "zero net supply", or "for every long there is a short", which means that at any time there are investors who are long a certain number of contracts and other investors who are short an (exactly matching!) number of contracts. This number is called the Open Interest. It starts at zero when the exchange introduces a new contract (like Sep 2019 ... 8 Yes. Although sometimes people mean the Euro/Dollar currency pair which can cause confusion. Besides the daily mark-to-market, the counter-party risk is also removed through the clearing house for the futures. No. Eurodollar and FRA are not the same as swaps. A Eurodollar fixes an interest rate for a three month period in the future whereas a swap represents ... 8 Your question is an important one, but I am not aware of any particularly satisfying answer. There are several papers on this issue -- see Luo and Zhang 2009 and Zhang et al 2010, just for example. One thing to note is that VIX futures are not always in contango -- after large jumps in the VIX, they can even be in rather steep backwardation. I have heard ... 8 Your questions about contango in VIX futures have close analogies in options too. The Black & Scholes model suggests that all time frames and all strikes should have the same implied volatility, but they don't. I think one of the reasons is that the B&S model assumes that stock returns are distributed in a normal (gaussian) distribution, but ... 8 VIX is a measure of volatility -- something that changes explicitly with uncertainty. The chances of uncertainty arising tomorrow, is lower than the chances of uncertainty increasing in the longer term. A long-dated option should therefore have more "potential uncertainty" baked into the price. When pricing normal futures, the price is a martingale, the ... 8 Based on the your comments, I believe the issue lies with what you consider to be "carry." The reality is that there's no consensus. So let's take mini steps. We'll start with what rates guys consider as "pure carry." In this most classical and fairly strict definition, carry is the deterministic component of expected returns – you know exactly what it is ... 8 Put simply, VIX is a spot index (fair value to a variance swap on SPX of constant maturity) that you cannot own as a security. Market participants create futures for you to trade. Futures trade higher than the VIX -- if you long VIX futures, you lose when the futures contract converges to VIX. You therefore have a negative roll-down. VIX ETF doesn't avoid ... 8 This has been posted a few times now, so I will invest the time on a full response. FRA / Futures convexity has nothing to do with profits/losses being immediately recognised on the future through margin settlement, and potential reinvestment, whilst deferred on the FRA. Although the opposite seems to be a very common belief amongst many practitioners (... 7 This part of your post In addition, on expiry day the holder (...) is wrong. [Short Story] Due to the daily variation margins calculated by the clearing house on each market close, you have already received/coughed up what you should upon expiry. If the contract is cash-settled, the story thus ends here. In case of physical delivery however, although ... 7 Personally I hate the term "roll cost" and prefer "roll yield" or "effect of rolling". It is not really an out of pocket cost (it involves no outlay or receipt of cash). It has to do with contango and backwardation. When you close the contract that expires soon, it is priced close to Spot, but the new contract that you enter into may be priced above or ... 7 Trading bond futures calendar spread is actually a very involved exercise, with many moving parts. But first things first, recall that bond futures price is approximately: $$F = \text{spot price} - \text{carry} - \text{delivery option value (DOV)} \pm \text{rich/cheap}.$$ So calendar spreads represent the differences in spot prices, in carries, in delivery ... 7 These contracts follow standard ICE procedures for calculating settlement prices, which can be found in section 2.4.6 of this document. A high-level overview of the procedure is -- An 'anchor' expiry is determined. For the futures you described, this is the expiry with the highest volume in the settlement period (14:28 to 14:30 for power futures). The ... 6 I think there is confusion around the forward price and the value of a forward contract. A forward contract obligates an exchange of an asset at some future time$T$. By convention, this forward contract has initial value zero (at time$0$). The forward contract, being an exchange of an asset for a set dollar amount in the future, has at some$t \in [0, T]...

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You could compute index dividend yield from ATM options using linearized put-call parity (assuming index options are European.) The present value of the dividend payment is: $PV(div) = P - C + (S - K) + K(e^{rT} - 1)$ where $r$ is interest rate to the option expiration and $T$ is time to maturity in years. Then the implied dividend is: \$d = \frac{PV(div)}{...

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