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what are you trying to isolate and trade by doing this?

USO has such a non linear relationship with crude. Intractable..it has the same problems as vxx to vix futures.... You are speculating on price and a changing roll cost/yield that is another factor of speculation as well... I'd love to see this factor quantified into a measurable risk to get a...

Well basically your pricing it against it's driver/component instead of just it's price.. this way you can bring things back to a different unit of measure and look at an individual contracts relative price to the "driver" rather then just what it visual looks like against the rest of the...

And here we are at just under 49 dollars for the a CLJ contract.. boy that accounting seems to have huge notional risks for just a 3mm rip..

I'm not sure that is always correct... That is a rather absolute statement.. shorting straddles takes alot of margin.. which creates a position size/liquidity risk for the trader.. Defining risk has a certain value in itself.. You might disagree.. but that's cool to.. To assume in every case...

I don't need to get down to the nitty gritty of it.. but i think i have already.. I realize its another way to reduce complexity and to score the data in relation to loadings/components.. So how would you take into account the backwardation, and contango with crude oil into this.. obviously...

My cousin has taking stat theory 1 and 2, methods 1-3 and hasn't learned about PCA yet...

Thanks but that doesn't mean I will know what you are indirectly inferring right away... Sorry... I'm slow :)

for those who are following..This should help as a precursor to what we are talking about

Third factor???? belly is the point on the curve that responds to this third factor.. what are you referring to as the third factor?? I should be able to figure this out as it is implied.. seems like in this case ED8

Ok so inflection here means a change in the direction of convexity... Or not to get mixed up with that word because of its special meaning with bonds... When a curve goes from being concave to convex PR vice versa

What is BELLY OF THE CURVE? The intermediate maturities of the YIELD CURVE, generally considered to include the three to sevenyear sector. See also LONG END, SHORT END. Got this part... But your saying they exhibit a belly... This describes it as if they all have it Law Dictionary: What is...

Could you define belly and inflection. Pretty please. Thx

I just wanted you to clarify... I appreciate everyone's input

I don't know that gamma translates from options to futures in the way your describing... That or I don't understand what your saying... Typically a correlation is build in relation to the front contract... As opposed to options to their underlying

So what could pca extract out of a yeild curve...

I don't understand you....

are you still talking about futures or are you talking about options?

your right.. A bull call debit spread has the same pay off as a short risk reversal along with 100 shares

Like for example how to derive where on the strip, and of what value the fed will be raising rates?