I am working on a fully collateralized commodity program. Working within the constraints of equity is a different frame of mind. In backtesting this, I realize a continuous contract focuses on maintaining a specific position size, but in a fully collaterlized program, it needs to focus on maintaining a weighted value for each market. There is a huge difference. Has anyone run into this. It seems one could use a continuous contract for signal generation, and use an actual unadjusted series for position sizing and rolls.
I would love to hear how others handle this issue.
Continuous Contracts valid for full collateralization?
Perhaps this post might offer an idea viewtopic.php?p=3651&highlight=stridsman+ratio#3651
Myself, I have no suggestions; my experience is with less-than-fully collateralized trading, or as I like to call it, trading with margin.
Myself, I have no suggestions; my experience is with less-than-fully collateralized trading, or as I like to call it, trading with margin.
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(thanks sluggo - that thread made my head spin)
To me that thread is more about understanding overall total exposure if everything went to zero in a worst case scenario.... not just risk of a position.
This has always been an interesting subject as I came from equity option trading and you really have to be on top of the definitions concepts and understandings of the differences between such issues as...
risk, notional risk, theoretical (current price to stop risk), total portfolio risk.
also leverage, margining, exposure, gross and net exposure
fully collaterised exposure v theoretical exposure.
with options you can have no risk at present but risk dependent on future possible price moves.... you sometimes need to think outside what you can see at the present moment and think in terms of what "may" happen.
Point being when looking at these things first make sure you define exactly what you are talking about and then map out how and why you are doing it right at the start.... it will save you confusion and circle work later on.
eg; a continuous contract is not a back adjusted continuous contract
So if you are using a continuous contract for signal generation, what happens when there is a gap due to a roll.... how will that affect the variables that look back over the past data. which variables will use which?
(I am jetlagged so i hope this helps)
To me that thread is more about understanding overall total exposure if everything went to zero in a worst case scenario.... not just risk of a position.
This has always been an interesting subject as I came from equity option trading and you really have to be on top of the definitions concepts and understandings of the differences between such issues as...
risk, notional risk, theoretical (current price to stop risk), total portfolio risk.
also leverage, margining, exposure, gross and net exposure
fully collaterised exposure v theoretical exposure.
with options you can have no risk at present but risk dependent on future possible price moves.... you sometimes need to think outside what you can see at the present moment and think in terms of what "may" happen.
Point being when looking at these things first make sure you define exactly what you are talking about and then map out how and why you are doing it right at the start.... it will save you confusion and circle work later on.
eg; a continuous contract is not a back adjusted continuous contract
So if you are using a continuous contract for signal generation, what happens when there is a gap due to a roll.... how will that affect the variables that look back over the past data. which variables will use which?
(I am jetlagged so i hope this helps)
Yes, I am talking about back adjusted continuous contracts. With an equity constrained system, the position size varies at each roll with the degree of contango or backwardation present, and this cannot be captured in a back adjusted series.
Now I am trying to figure out how to do rolls inside a blox. If anyone has done this before, I am very interested in hearing your approach, it would save me a great deal of time.
Now I am trying to figure out how to do rolls inside a blox. If anyone has done this before, I am very interested in hearing your approach, it would save me a great deal of time.