Contract Rollover/Expiration Questions

S

speculari

I am trying to learn the intricacies with regards to expiration dates and when to rollover from one contract to the next. I have been observing several different markets and it appears that volume flows out of the contracts before the actual exp. date.

I was wondering is there a way to find out what the consensus day for rolling over contracts in the different markets.

Here are a few examples of markets I am looking at. The indexes (ES,YM) form the bulk of my experience with futures as for other commodities I am relatively a newbie so please feel free to correct any inaccuracies I post here.

IqFeed is my data provider and is the source for any info I post below

Dollar (DX) - Last Trading Day - The 2nd business day prior to the 3rd Wed. of the expiring month. On the LTD, trading ceases at 10:16 a.m. (the DX June 06 contract will expire on Mon June 19th)

Monday and tuesday there were 12,678 and 3,823 contracts traded respectively on the june contract (M6). The numbers for sept contract (U6) were 14,019 and 7,232. So it appears that more vol is taking place on septs contract already.
 
Crude Oil (CL) - Last Trading Day - According to NYMEX.com – “Trading terminates at the close of business on the 3rd business day prior to the 25th calendar day of the month preceding the delivery month. If the 25th is a non-business day, trading shall cease on the third business day prior to the business day preceding the 25th calendar day.”

I interpret this to mean that june’s contract expired on May 22nd, and currently the active contract to trade is july (CLN6)

This contract rolls over every month of the year and on N6 vol was 113K and 147k for mon and tue respectively. Q6 vol was 73k and 90k
 
Natural Gas (NG) - Last Trading Day - According to NYMEX.com – “Trading terminates three business days prior to the first calendar day of the delivery month.” Should trade jul contract which is valid until 6-27

mon/tue vol - 27k and 32k on N6; 16k and 22k on Q6
 
Quote from speculari:

Natural Gas (NG) - Last Trading Day - According to NYMEX.com – “Trading terminates three business days prior to the first calendar day of the delivery month.” Should trade jul contract which is valid until 6-27

mon/tue vol - 27k and 32k on N6; 16k and 22k on Q6
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Not really sure of your question - there is no one definitive way to roll. For purposes of backtesting, if you are using something like CSI data, you have to determine your own method for rolling amongst a number of choices. Many choose to use the crossover in Open Interest as the determinate. In practice, it is one of those things that makes you a "trader" versus someone who trades a mechanical trading system (nothing wrong with that). I prefer to manage my rolls. I usually will have rolled well before expiry dates, last trading days, notice days, whatever. As you observed, there are a few days where the volume in shoulder months start crossing over - this is the time to manage your rolls. An ideal roll, for me, will be to not have a gap in price from exit to entry, one contract to the next, since these are real dollars - ideally, you want positive roll, not negative. This is a big deal for system backtesting and actual results.

So you've focused on the right area - one that does not get the attention it deserves IMHO in most of the books, mags, articles on trading.

Good luck.
 
One cute thing you can do is temporarily tell your data software to rollover on contract expiration (see image), and also tell it to build an ASCII output file of the result. Be sure to put the contract month into the ASCII output file.

Now you can look at the output file and see exactly when contract expiration really occurred. (In some futures markets, particularly the oddballs, this is hard to determine from the exchange's information. Lots of them are not mentioned in your broker's (or Futures magazine's) Futures Calendar either).

Scan backward through at least 20 expirations. Note the dates on which expiration occurred. If you're a conservative person and want to make absolutely sure you always roll over well before expiration, note the earliest date-of-the-month that the contract ever expired. In the case of British Pound futures, the earliest expiration occurred on the 13th of the month. Conservative people would make sure they rolled BP futures several days before the 13th.

Ultra conservative people would postulate that, due to very bad luck, this day might eventually fall on the Friday of a 4-day holiday weekend. They want to roll on Friday the 13th but the exchanges are closed for the holiday. The market doesn't reopen until Tuesday the 17th! Oh no! These ultra conservative people would subtract 4 days from the 13th, just to be ready in case this Perfect Storm of worst case holiday placement ever occurs, and they would be sure to roll over well ahead of the 9th. I am one of them, I roll over BP on the 8th. So does Pinnacle Data, see the tables in their web page about contract rollovers.

(the attached image file is big and doesn't display well in a browser window, so you may want to right-click and Save File As onto your desktop. then view it with Windows Picture and FAX Viewer, which can zoom and pan.)
 

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Hi Horribilicus,

Would you mind sharing the name of the software you use for creating continuous contracts? I've been looking for such a tool with no success... the tool you show on the snapshot looks really neat.

Thanks!


Laputa

Quote from horribilicus:

One cute thing you can do is temporarily tell your data software to rollover on contract expiration (see image), and also tell it to build an ASCII output file of the result. Be sure to put the contract month into the ASCII output file.

Now you can look at the output file and see exactly when contract expiration really occurred. (In some futures markets, particularly the oddballs, this is hard to determine from the exchange's information. Lots of them are not mentioned in your broker's (or Futures magazine's) Futures Calendar either).

Scan backward through at least 20 expirations. Note the dates on which expiration occurred. If you're a conservative person and want to make absolutely sure you always roll over well before expiration, note the earliest date-of-the-month that the contract ever expired. In the case of British Pound futures, the earliest expiration occurred on the 13th of the month. Conservative people would make sure they rolled BP futures several days before the 13th.

Ultra conservative people would postulate that, due to very bad luck, this day might eventually fall on the Friday of a 4-day holiday weekend. They want to roll on Friday the 13th but the exchanges are closed for the holiday. The market doesn't reopen until Tuesday the 17th! Oh no! These ultra conservative people would subtract 4 days from the 13th, just to be ready in case this Perfect Storm of worst case holiday placement ever occurs, and they would be sure to roll over well ahead of the 9th. I am one of them, I roll over BP on the 8th. So does Pinnacle Data, see the tables in their web page about contract rollovers.

(the attached image file is big and doesn't display well in a browser window, so you may want to right-click and Save File As onto your desktop. then view it with Windows Picture and FAX Viewer, which can zoom and pan.)
More...
 
Quote from laputa:Would you mind sharing the name of the software you use for creating continuous contracts? I've been looking for such a tool with no success... the tool you show on the snapshot looks really neat.
More...
That is just the standard CSI interface. Not standalone sadly.
 
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