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 document raises a derivatives-pricing question about VXTY futures, whose contract specification references options on ten-year Treasury futures. The author distinguishes option selling, which involves receiving an option premium, from entering a futures…
The document explains how exercise of a call option on a futures contract creates a futures position whose mark-to-market depends on its entry price. Because futures settle daily, the delivered position is treated as entered at the most recent settlement…
The document explains how to convert a Treasury bond futures quote written in points and thirty-seconds into a percentage of par, then into a dollar contract value. In its example, the quote 91-12 means 91 plus twelve thirty-seconds, or 91.375 percent of…
The document explains why spoofing orders may avoid execution and what financial exposure remains for the trader. In the example, a large limit order is placed away from the current bid and ask to create pressure on prices, while the trader takes a position…
The note derives a forward price when an asset pays a deterministic proportional dividend before contract expiry. Its main method compares the forward payoff with a cash-and-carry position: borrow funds to buy the stock, account for the dividend cash flow,…
Treasury futures allow the short to choose which eligible bond to deliver, creating a quality option for the short and affecting the futures price. If the cheapest-to-deliver bond is already known, pricing can be based on that bond’s forward price adjusted…
The discussion explains why out-of-the-money VIX puts expiring on a given date can lose value even when the spot VIX falls sharply. The key distinction is that VIX options are tied to the VIX futures contract for their expiration, not directly to the spot…
The document explains the notation for a EUR trade combining three forward-starting interest rates with different start dates and tenors. It identifies the position as a curve fly, where the intermediate point is the belly and the shorter- and longer-term…
The document concerns how to compress a portfolio of long and short commodity forward or futures positions across delivery months into a single front-month-equivalent exposure. The goal is to approximate portfolio profit and loss using that exposure and the…
The answer describes how to derive a forward rate from a simulated Hull–White short-rate path. At each simulated future time, use the current short rate in the model’s zero-coupon bond pricing expression, with the model’s time-dependent A and B terms, to…
The exchange clarifies that CME’s term SOFR figures are not simply another observation of the overnight rate. They are forward-looking term rates implied by trading in SOFR futures. This explains why the benchmark page can show rates for horizons such as six…
The document clarifies how gross basis relates a bond’s cash price to a bond futures contract. It gives the relationship as bond price minus futures price multiplied by the bond’s conversion factor. This frames gross basis as the difference between the bond…
The document asks what drives the price of a bond futures calendar spread when both contracts share the same deliverable basket and cheapest-to-deliver bond. The accepted answer identifies the forward repo rate implied by term repo rates extending to each…
The document asks where to obtain inexpensive historical tick data for a futures contract, using NYMEX WTI crude as an example. Its answer explains that data price often reflects whether the feed preserves all reported activity or filters some events. A…
The document considers whether large traders can manipulate e-mini futures and whether that possibility makes systematic trading impractical. Its answers distinguish ordinary market impact from deliberate manipulation: large buy orders can push prices up,…
The document explains why futures are commonly quoted by their settlement or delivery price rather than by the contract’s present value. It places this convention alongside other market practices, such as quoting bonds by yield and options by implied…
An airline expects to buy jet fuel later and uses heating oil futures to reduce the risk that fuel prices rise before the purchase. Because the airline is exposed to higher costs if jet fuel rises, it takes a long position in the positively correlated…
The document addresses short-end SOFR curve construction when daily forward-rate jumps are desired at FOMC dates but available three-month futures do not provide enough independent instruments to identify every node. This creates an underspecified…
The discussion cautions against assuming that VIX futures will reliably offset losses in a long-only equity portfolio. VIX measures expected volatility, and it does not invariably rise when stocks fall; consequently, an inverse relationship with stock…
This discussion examines how to compare a cash basket of S&P 500 constituents with an E-mini futures contract when assessing index arbitrage. It asks whether to aggregate constituent bid and ask quotes separately and discount those totals, or use mid prices…
The document asks how to construct term structures for ESTER and SOFR, daily reference rates that do not necessarily have established swap markets. It contrasts the usual curve-building approach with the limited instruments available for these newer…
The document clarifies how open interest changes when futures positions are opened or closed, including a question framed around crypto exchanges. Open interest counts outstanding contracts, with each contract having both a buyer and a seller. It does not…
This exchange explains why SVXY, a daily inverse VIX futures exposure, did not lose all its value during the sharp volatility episode of February 2018. The key distinction is between the VIX index, which is calculated from options and is not directly…
The document distinguishes the value of an un-margined forward from the daily cash flows of a marked-to-market futures contract. For a forward, the change in the comparable forward price represents a payoff at maturity; the value before maturity is that…