Interest Rate contracts liquidity

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AceofAce
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Interest Rate contracts liquidity

Post by AceofAce » Sat Apr 14, 2012 2:44 pm

Interest Rate contracts have a lot of liquidity and open interest in many forward contract months. For a LTTF system such as the turtles, i wonder which is the optimum contract month to have a position on and what rule to use to roll. On all other futures (commodities, FX, Indices etc) I roll to the highest open interest contract month which seems ok but for Rate futures this doesn't seem a very applicable method.

Any ideas would be apreciated...

sluggo
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Post by sluggo » Sun Apr 15, 2012 11:58 am

If you know somebody who runs CSI Unfair Advantage you can ask them to do you a favor. You can ask them to make continuous futures contracts, always rolling N months before expiration, for any N you like between 0 and 12. I think UA won't go out beyond 12, though.

Then you could try out some trading systems on these continuous futures contracts and see whether there's a big impact on performance. You could also print out the "Volume" and "OpenInterest" on every rollover day, to check whether you are comfortable with the liquidity.

If you don't know anybody with CSI Unfair Advantage who will do you this favor for free, you could check whether any of the Blox System Development Partners will do this for a consulting fee.

strix
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Post by strix » Mon Apr 16, 2012 5:11 pm

Interest rate products aren't seasonal like ag stuff, so one month is going to behave pretty much like any other. Your only real concern is minimizing transactions costs, and trading the front month with quarterly rolls is already pretty reasonable on that score. If it ain't broke...

As for roll triggers, open interest and volume both work (with the caveat that both can leave you holding a long position past First Notice Day). Beyond that, it's an issue of picking a date-based roll that's optimal with respect to liquidity/expiration/whatever. Given the depth of these markets, any date that respects First Notice/Last Trading days should work just fine. But messing with rolls more than a month or two before expiration doesn't accomplish anything other than gutting your volume, even with something like 10-yr Note futures.

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