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22 votes
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Negative price of oil

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 ...
David Duarte's user avatar
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13 votes

Theoretical limits for contango and backwardation

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 ...
Alex C's user avatar
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13 votes
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Convexity Adjustment for Futures

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(...
Gordon's user avatar
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11 votes

How does one estimate the probability of the Fed increasing its benchmark rate based on Fed funds futures?

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. ...
Helin's user avatar
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11 votes
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Bond ETF vs Bond Future for longer term holding

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 ...
Helin's user avatar
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11 votes
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Why are FRA/futures convexity adjustments necessary?

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 ...
Attack68's user avatar
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11 votes
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How to make a trading universe of liquid futures contracts

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 ...
databento's user avatar
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10 votes
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Why are futures valueless?

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 ...
Quantuple's user avatar
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10 votes
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Large trend-followers: why use futures rather than ETFs?

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 ...
uminatsu's user avatar
  • 124
10 votes

Price of bond future, given a specific interest rate?

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. ...
Chris Taylor's user avatar
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10 votes
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When would open interest equal trading volume?

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 ...
Alex C's user avatar
  • 9,272
10 votes

Setting the record straight on contango and backwardation in futures markets

Both charts are right in their own way. The second chart shows the shape of the Curve of Futures Prices at a point in time (for ex: today at 10am). In Contango far away futures contracts are priced ...
nbbo2's user avatar
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9 votes
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How is this probability (45%) of Fed raising rates 3 times in 2017 calculated from Fed Funds market?

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 ...
dm63's user avatar
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9 votes
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Determine the carry of a treasury bond futures contract?

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 ...
Helin's user avatar
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9 votes
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What is the appropriate benchmark for a Long/Short VIX futures strategy?

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).
Chris Taylor's user avatar
  • 5,798
8 votes
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Why not just be long VIX and wait for the next volatile period?

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 ...
ExIR's user avatar
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7 votes
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A proof that the final payoff on a futures contract is twice that on a forward contract

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 ...
Quantuple's user avatar
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7 votes
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Cost of rolling futures contracts

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 ...
nbbo2's user avatar
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7 votes
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How to trade interest rate futures calendar spread?

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} - \...
Helin's user avatar
  • 11.3k
7 votes

Delta One Trading business

Delta one trading desks provide synthetic exposure to their clients. OK, so what does that mean? Delta One desks give their clients exposure to a product (stock index, ETF, or even a single stock) ...
JoshK's user avatar
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7 votes
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ICE futures settlement prices change with zero volume and zero OI

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 ...
Chris Taylor's user avatar
  • 5,798
6 votes
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the cash flows behind closing out futures positions

Futures contracts are marked to market every day. This mean that each evening cash is added to or subtracted from your account as a result of the price movement that day. When you close out your ...
Alex C's user avatar
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6 votes

How to get historical data for expired futures contracts in IbPy?

After some research and reading the source, I found there is a field in the Contract class called: m_includeExpired. Set this to True and you can get data for expired contracts.
Peter H's user avatar
  • 211
6 votes

CME gold futures, do expiries follow any rule?

The rules are pretty straightforward. I keep this rulebook on my office computer as a reference but it can be found on the CME website in the NYMEX area I believe. Below is straight from the ...
amdopt's user avatar
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6 votes
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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?

Interest rate futures enable you to build an interest rate projection curve which you can think of as representing the risk neutral expectation of rates in the future, therefore providing you with a "...
Antoine Conze's user avatar
6 votes

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?

I would put it slightly differently. For Stock index futures , the 2019 contract has the same underlying stocks as the spot index. Therefore the futures price can be simply calculated as spot price ...
dm63's user avatar
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6 votes
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What is the formula for calculating fair value of currency futures?

$$F = Spot \times e^{(\text{local interest rate} - \text{foreign interest rate}) \times T}$$ where $Spot$ = AUD per dollars. $T$ is the time to maturity of the contract (in years). So for example ...
Patriots299's user avatar
6 votes
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Group name for currencies, equities and other financial products

The most universal name that any "currency (pair)", "equities" or "futures" falls under is either a product or an instrument. In some ways I prefer product because you can have 2 exchanges allowing ...
madilyn's user avatar
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6 votes

What is the appropriate benchmark for a Long/Short VIX futures strategy?

You could compare it, over the historical period of interest, to 1000 randomly generated VIX strategies which are: Flat on 60 Percent of days (randomly chosen days) Long VIX futures on 20% of days ...
nbbo2's user avatar
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6 votes
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Oil price model calibration with Kalman Filter and MLE in python

Expanding on the answer by @ir7, here is some pykalman code/psuedocode to help get you started. This can be adjusted in many ways but I have left in some ...
amdopt's user avatar
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