I just purchased data from Pinnacle who provides software to form both point-adjusted (i.e. backward-adjusted) as well as percentage-adjusted continuous contracts. I want to confirm that
- *point-adjustment does not retain accurate day-to-day percentage changes (nor volatility in terms of percentage) but does retain volatility in terms of points; and
*percentage-adjusted does not retain volatility in terms of points but does retain day-to-day percentage changes (as well as volatility in terms of percentage)
So if one uses in his/her system measures of volatility based on point changes, such as ATR, then s/he would want to use point-adjusted continuous contracts. Otherwise, to measure volatility using ATR on a percentage-adjusted contract would yield incorrect historical ATR values.
I want to make sure I am not overlooking something as this is the first time I have looked into the issue.
Gratzi!
