5
votes
Questions on options cost of carry, and relationship to futures cost of carry
Both answers already address the gist of the question. I decided to add (quite) some details because I think there is some confusion from the OP. It is not the future that has carry costs or benefits ...
- 8,143
5
votes
Questions on options cost of carry, and relationship to futures cost of carry
I think it's best if we go through the various terms that appear in your question and explain them one-by-one.
Derivative price: intuitively, a derivative price is what it costs to "create it&...
- 5,998
4
votes
Accepted
Carry/slide on Treasury CTD basis position
“understand whether a long CTD basis position needs to incorporate slide/roll when computing basis net of carry”. I’d say (a) yes in order to compute net basis, you have to subtract all economic ...
- 16.6k
4
votes
Algorithm / source to calculate historical expiry dates of futures
I think the simplest way to do this in Python is with Databento's API.
...
- 5,231
4
votes
How do you define the NAV of a leveraged ETF?
Are you familiar with how a futures trading account works? You deposit a certain amount of cash. When you "buy" a future this does not use up any cash, nor is the future shown on your ...
- 10.9k
4
votes
Accepted
Trade price and settlement price
The Settlement Price
When you buy a futures contract, you're not actually paying the price of the underlying asset upfront. Instead, you're entering into an agreement to buy or sell the asset at a ...
- 1,736
3
votes
DI futures contract value on bloomberg
You're talking about the future Bloomberg calls 'ODA Comdty' (e.g. 'ODF21 Comdty'), and the BMF exchange calls DI1. It uses a non-linear contract multiplier. To convert from the quoted price to the ...
- 31
3
votes
How to calculate returns for interest rate futures
The standard approach is to create a synthetic aka adjusted price series. Usually this is done by backwards adjusting prices of older contracts to align with newer ones. This price series then mimics ...
- 641
3
votes
How do you define the NAV of a leveraged ETF?
I am not 100% sure, but I think taking a close look at one leverage ETF, it's NAV and holdings may help.
Let's take an example: TQQQ - UltraPro QQQ (which is a 3x leveraged NASDAQ ETF)
If I download ...
- 8,062
3
votes
How does the underlying get delivered for electricity market derivatives?
Electricity markets are term markets, ie to specify delivery, one needs to define the reference period (year, quarter, month, week) and the capacity (MW in wholesale markets). To give an example, the ...
- 1,651
3
votes
How can a future exhibit both normal backwardation and be in contango?
I think these are just words. Contango means forwards are higher than spot. Backwardation means forwards are lower than spot. The only way they can both be true is if the forward curve has a ...
- 16.6k
2
votes
Why historical data of futures contract price include data after settlement date of the contracts?
The Hang Seng futures June 2023 contract started trading on 13 June 2022. When no trading occurs, the exchange provides a daily settlement value. The first real trade occurred on 12 Aug 2022 (daily ...
- 1,335
2
votes
Accepted
Value at Risk for Portfolio of Futures
Futures and options are financial derivatives, and one key feature is their inherent leverage, which means you don't need to have the full cash equivalent to finance the market risk they represent. ...
- 480
2
votes
How does unwinding of long BTC futures positions prevent further downside risk/decrease in prices of BTC/Crypto?
I think you misread the article. It says the unwind of BTC long positions is nearing its end. Meaning, less selling. Therefore market will stop going down. Nothing more than that.
Edit based on ...
- 16.6k
2
votes
2
votes
Why do exchanges apply a fixed interest rate as part of the funding rate for perpetual futures?
I have not seen much work on theoretical fundamental values of perpetual futures and how often the price deviates from them but there are some works on minimizing arbitrage gaps. While there might be ...
- 444
2
votes
Black 76 and Asian Style Options on Shaped Power Futures
I think to answer your question, it needs to be understood accurately how the option contract that you are pricing is defined. If you are looking at a pay-as-produced type option, you also need to ...
- 1,651
2
votes
what is the rationale behind CTD (Cheapest to Deliver) mechanism in bond futures
Sometimes there is not much liquidity in a particular bond issue and it could become scarce and shoot up in price vis a vis others. Then there would be accusations that someone is manipulating the ...
- 10.9k
2
votes
Why does Natenberg say that when future options with future-type settlement are traded, no money changes hands?
This isn’t too tricky. First what is the meaning of futures-type settlement. It means that when you transact , no cash changes hands. This is what happens when you enter a futures contract. So if ...
- 16.6k
2
votes
Open Interest Change in Futures Trading
@dm63 answer is correct, I just wanted to add some details that helped me when I first started learning about Open Interest (OI). I think it was also helpful to also look at Volume at the same time.
...
- 8,143
2
votes
Why is the VIX futures market usually in a state of contango?
I think there are two ways of looking at it, and that they are ultimately equivalent.
As others have said, it's an insurance premium, as simple as that.
There is only one thing which affects the price ...
- 119
2
votes
Questions on options cost of carry, and relationship to futures cost of carry
Interest rates have an effect on options in two ways:
the forward: the higher the interest rates, the higher the forward. Thus with a higher forward, calls become more expensive and put the opposite.
...
- 190
1
vote
Accepted
How to calculate expected value for an underlying contract and expected value for an option?
In options trading, an option position refers to the ownership of an option contract or a combination of option contracts, whereas an underlying position refers to the ownership of the asset or ...
- 1,736
1
vote
Continuous futures data roll adjustment
User 42108 summed it best by saying at the time that TradingView did not offer any back adjustment option on their continuous charts. So in other words, they were just stringing together contracts and ...
- 11
1
vote
Question regarding the accuracy of CME FedWatch Tool
My analysis shows in the last 2 years and roughly 9 rate hikes, the the "CME FedWatch Tool" was completely wrong 4 times! That is HUGE (approaching 50% wrong)!
The following dates reflecting ...
- 11
1
vote
How does the underlying get delivered for electricity market derivatives?
ZRH is right https://quant.stackexchange.com/a/76435/69690 but I wonder if the answer for the OP isn't simpler: wires, usually up on big pylons or towers. The ones you see along the interstate.
In ...
1
vote
Understanding end-of-month options embedded in Treasury Futures
Prior to expiry the futures price is a variable. It changes mostly following the converted price of the ctd but also based on the relative prices of the instruments in the basket which are deliverable....
- 361
Only top scored, non community-wiki answers of a minimum length are eligible