Fully automated futures trading

Hi GAT,

I've a few questions regarding the Carry calculation.xlsx on your LT website. Appreciate if you can clarify for Spot FX.

1. If my broker charges -2.65 swap points for a long position, -2.16 swap points for a short position, is the expected annualised return = -2.65-(-2.16) = -0.49?

2. Why is the scaling factor 30?

3. How do I calculate the position to take using the forecast? Can I still use the below position sizing formula for Carry?
Notional exposure target = ((forecast / 10 ) x target risk % x capital) / instrument risk %
 
John Nash said:
Hi GAT,

I've a few questions regarding the Carry calculation.xlsx on your LT website. Appreciate if you can clarify for Spot FX.

1. If my broker charges -2.65 swap points for a long position, -2.16 swap points for a short position, is the expected annualised return = -2.65-(-2.16) = -0.49?

2. Why is the scaling factor 30?

3. How do I calculate the position to take using the forecast? Can I still use the below position sizing formula for Carry?
Notional exposure target = ((forecast / 10 ) x target risk % x capital) / instrument risk %
More...

1. I don't know what a 'swap point' is. Can you give me an example of what a 'swap point' will do to your position if held for a year? I assume this includes both the interest rate and spreads?

2. it's an average calculated across a large number of instruments to get the forecast to be of average absolute value +10

3. yes that's the standard formula from the book

GAT
 
Last edited:
globalarbtrader said:
2. it's an average calculated across a large number of instruments to get the forecast to be of average absolute value +10
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Maybe it is advisable to emphasize that this average relates to futures instruments. The question seems related to spot FX. The calculated average might not be applicable to spot FX instruments?
 
HobbyTrading said:
Maybe it is advisable to emphasize that this average relates to futures instruments. The question seems related to spot FX. The calculated average might not be applicable to spot FX instruments?
More...

Well the great thing about carry is the signal is an expected Sharpe Ratio. So the multiplier of 30 implies that with an expected SR of 0.333 you'd have an average sized forecast of 10. The question is whether an expected SR of 0.33 is 'average'. That estimation was done over futures, but those futures include IMM FX forwards which should be roughly the same as holding spot FX until the next IMM date (note the massive funding spread doesn't affect the calculation of carry since it gets cancelled out).

I'm not personally a fan of using asset class specific multipliers - that will mean smaller carry positions in asset classes with traditionally high carry such as bonds and vol - fine if you want that, but not for me. If you want to go down that route looking at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2298565 it might be that FX carry is higher than the average, perhaps 0.6 rather than 0.3

GAT
 
djames said:
Would it be possible to view the configuration of your system used in the blog post?
Is the Config yaml commited anywhere?
More...

Sorry I will add a link

Actually my blog post for next month will be a complete review of what I'm now trading, more informative than a config.

GAT
 
Rob, how do you decide which futures contract months to trade or rollover to, so that it's optimal from liquidity and costs point of view? Do you look at volume, open interest and select best months or do just roll to next available period? And on which day exactly to rollover? Let's say MBT, MES, MGC, ZC. One important factor is also IB's close-out period for contracts with physical delivery.
 
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