Weekly Futures Reversal Using Volume, Open Interest, and Returns

Summary

The document describes a cross-market futures reversal strategy. It groups contracts by recent changes in trading volume and open interest, then selects contracts in the high-volume, low-open-interest group. Within that subset, the stated method goes long the weakest prior-week performers and short the strongest. Positions are weighted using each contract's return relative to the selected group average. The universe is described as US futures spanning currencies, financials, agriculture, and commodities, with contract rolls handled around delivery.

The provided algorithm is an implementation example, not reported evidence: it gives no backtest results, benchmark, or risk analysis. Its mechanics also warrant scrutiny before use. The prose specifies weekly Wednesday-to-Wednesday observations, while the code triggers rebalancing on a month change; additionally, the code's return sort appears to use symbols rather than return values. These differences may prevent the implementation from matching the described strategy. Costs, leverage, roll handling, and data quality also affect practical results.

Key ideas

• The stated strategy filters futures by high recent volume change and low open-interest change.
• It takes long positions in the weakest prior-week returns and short positions in the strongest within the filtered group.
• Weights are based on returns relative to the selected contracts' average return.
• The description spans several US futures sectors and discusses rolling contracts near delivery.
• The sample code's monthly rebalance and apparent symbol-based return sort differ from the stated weekly return-ranking method.
• No backtest results or risk analysis are included.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.