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Yes Tim I agree, there are always two sides … however I’m not sure what else I can add to my experience … feel free to ask further questions if you feel there are facts missing. Alternatively if you feel my version is biased then please simply refer to my E Mini S&P example … this is generic and...

This post concerns Interactive Broker’s Exposure Fee as it applies to clients holding positions in equity index futures … eg. E Mini S&P, EURO STOXX 50, DAX etc. When I first read about their Exposure Fee last year sometime, IB said that … Interactive Brokers imposes a daily "Exposure Fee" on...

Ahhhh of course. Now re-reading your original question … …you are absolutely correct, my research proves nothing of the kind … my bad.

That wouldn’t be difficult to test and is certainly worth considering. In fact I currently do something similar with a volatility measure that I employ for some shorter term strategies. The only thing that concerns me is that I’d now be introducing another potentially optimizable parameter into...

So you mean, using the above testing portfolio and just simply go long all markets with a negative skew and vv? Sure, I guess you could do that because as you say there is little correlation amongst these markets but I think it’s unlikely to improve returns. In the past I’ve found that if you...

Yes I also like the diversification plus of this strategy but losing money for more than 30 years … that’s a bit of an ask for me Interesting, I hadn’t really thought of this as an RV trade … the key issue here is for me to think more about which markets within which sectors Yep this is on...

Actually sorry to say it’s simply the former … not so careful :sneaky: Based on the disparity in results between the two strategies it seemed largely academic to investigate any further.

Bang on … longer-term trend following does indeed suffer from some big down days despite a positive skew when viewing monthly returns and as GAT says ... it's all about the holding period. Well spotted tradrjoe. Recently I carried out some work on this very topic and I’d say no … “profitable”...

Thanks I appreciate that. As to why I arrived at such a different outcome from the referenced research paper, I’ve already hinted at a few reasons in my earlier posts, however in summary I’d suggest the following key issues … · If you wish to examine the relationship between characteristics...

Results time … Below is a chart from the authors’ research showing the performance of their Skewness portfolio vs a few other commodity strategies that the authors have previously researched. At first glance it looks pretty smart, right? Nice sloping upward curve with no big drawdowns. And...

The final issue I have prior to carrying out the back-test is one that applies to any rotational strategy … how frequently should we rebalance? How important this issue is should really depend on two factors. Firstly how many candidate markets are included in the overall portfolio and secondly...

A number of the commodities included in the testing portfolio don’t have an active underlying options market so I’ll be using historical volatility over a period similar to that used to measure the skew. Thanks, I was beginning to think that I may well be the only one reading this :D With that...

Another important point that I think needs to be addressed correctly is the allocation of capital made to each commodity. The paper says … “The constituents in the long-short portfolios are equally-weighted” But equally-weighted according to what? Keeping in mind that we are trading futures...

The next potential issue I have concerns the construction of the return series used in calculating the skewness of each market. The authors appear to have a lot of experience working with futures data so I am surprised to see no mention of the methodology used to construct a continuous price...

So following on, here is what I feel is a far more diverse and therefore appropriate portfolio to analyze the effect of past skewness on future returns …. Grains: Soybeans, Wheat, Rice, European Rapeseed, Milling Wheat and White Maize Energies: Crude Oil, NY Natural Gas, UK Natural Gas and...

So prior to carrying out any testing I wanted to take a look at a few issues (some important, some not so important) that concern me regarding the authors’ methodology. Firstly their selection of commodities to include within the testing portfolio. Here’s what they say … “We use 12...

Same … but different. Same, in the sense that we may be buying into a market that has had lots of big down days vs few big up days … so maybe in that case you are looking for a type of mean reversion. However consider a market that has a negative skew over the last 200 days … it is entirely...

Indeed Sergio, you may well be correct … in fact the sample period used is limited to 26 years and covers a fairly concentrated portfolio of some quite similar markets. I intend to conduct testing over a longer time frame and use a much more diverse range of commodities. That said I do like the...

I came across the above named paper (a quick google will get you a pdf copy) a few months ago now and have been meaning to take a closer look at the topic of skewness and it’s applicability in predicting returns on commodity futures. I don’t normally get a lot of value from “academic” papers, as...

Well, back in 2009 I was trading institutional money so was fortunate in that I could access most of these markets via Newedge. But I think that for a retail trader your comments are probably right, that back then, high commissions and poor platforms were probably the norm for retail clients...