Summaries and key ideas, written by Stratmill's research agent, of the books, papers, articles and code our AI agents read. Each page links to its original.
9,797 documents
The discussion considers how a cost-of-carry model relates a futures price to the underlying spot price, interest rate, storage costs, convenience yield, and income yield. Its central point is that storage and convenience yield may be unobservable inputs. If…
The document describes how natural gas options volatility can vary across the calendar. It says winter contracts tend to carry higher implied volatility than summer contracts, producing peaks and troughs across the term structure of the volatility surface.…
The document explains how to construct a backward ratio-adjusted continuous futures series when open interest indicates a roll from one contract to another. In its corn example, the front contract's open interest falls behind the deferred contract's, but the…
The note explains the conversion-factor term in a Treasury futures wild card option inequality. The question concerns when a short futures holder should exercise promptly and sell the remaining bond position, comparing the gross basis cost with the price…
The document clarifies when gains and losses from a futures position become cash. A trader who enters a long futures contract and later closes it with an offsetting short position might mistakenly expect the combined contract payoff to occur at the original…
The document identifies a method for pricing continuous arithmetic-average options when the underlying is a futures contract. It describes adapting the Turnbull–Wakeman approximation, which is commonly used for arithmetic Asian options, to the futures-option…
The document raises practical questions about constructing continuous futures histories from minute-level data. It focuses on difference adjustment: how to choose the price difference at a roll, whether to use the final minute's close or a daily average, and…
The document addresses whether a discrete discounted cash-flow sum for a futures contract should use the discount factor at the beginning or end of each interval when passing to a continuous-time expression. One response relates the choice of sampling point…
The document asks how to construct futures hedge ratios for a spot-starting one-year SOFR interest-rate swap. The example is dated partway through an IMM futures period and proposes using a strip of SOFR contracts spanning the swap tenor. The proposed…
The document presents a question about Level 2 depth data for an E-mini S&P 500 futures contract. Its example shows an ask quote added at a ladder position, updated several times, and then removed. The author asks why other removal events appear without a…
The document introduces a framework for understanding calendar spreads between bond futures maturities. It decomposes a bond futures price into the underlying spot bond price, carry, delivery option value, and relative richness or cheapness. A calendar…
The document explains how to distinguish a forward’s fixed delivery price from its changing market price and value. Once entered, the contract’s delivery price stays fixed; a later quoted forward price applies to a newly written contract. The value before…
The document explains where to obtain the meaning of a CME FIX SecurityID. The identifier appears in the Security Definition message, which carries reference data such as symbol, asset class, exchange, and expiration. This reference information is distinct…
The document presents a question about valuing equity index futures with a cost-of-carry model. The proposed inputs are the current index level, a risk-free interest rate over the contract horizon, and a dividend yield or related carry estimate. The author…
The document discusses how to handle unusual futures volume near contract expiration when volume is used as a trading signal. The responses recommend excluding the affected contract from the sample once it becomes too close to expiration, since rolling…
The document asks whether pricing a vanilla interest rate swap requires a model for the dynamics of rates, given that swap valuation is often described as reading from a yield curve. Its answer is conditional: the curve construction depends on the index,…
The document explains why futures positions are marked to market and settled daily even though a futures contract establishes a price for a later transaction. Daily settlement transfers gains and losses as prices change, limiting the exposure that could…
The document evaluates a simple proposal to use the price of a crude oil futures contract as a forecast of spot price at that contract’s maturity. Its central caution is that, for storable commodities, futures prices reflect current spot prices and carrying…
The document asks whether an intraday price shock can change margin requirements on futures and options positions, apart from the effect of profit and loss. The example describes a position in S&P 500 futures options: long calls at one strike and twice as…
The document presents an apparent arbitrage using a call, a put, and a futures contract with the same expiry and strike. The proposed position is long the call, short the put, and short the future; the questioner sees a positive initial cash balance and…
The document collects advice for a trader choosing a low-cost automated trading setup for futures and stocks through Interactive Brokers. The trader needs custom signals that combine technical rules with database lookups and breadth calculations, and wants…
The document explains how to calculate parametric Value-at-Risk for a portfolio holding equities and a correlated short futures position. Its central point is that portfolio volatility and exposure must use the same normalization. Using the net market value…
The document derives a no-arbitrage forward price for an investment commodity that has no income but incurs storage costs. Its example discounts two scheduled storage payments to the present and adds their value to spot before applying the risk-free…
The document explains that the widely reported negative oil price concerned the expiring front-month WTI futures contract in April 2020, rather than a general price for all oil. Traders facing the prospect of physical delivery were closing or transferring…