Fully automated futures trading

It's getting pretty nasty out there at present. Most CTAs are long bonds and long equities and both are getting hit hard. It would be good to see another portfolio update when you've a moment GAT to get a sense of how things are going relative to the CTA numbers I'm seeing at present. Thanks!
 
sh203 said:
Hi GAT.

I think I've read that the amount of institutional money trading trend following strategies have hit a record high, and on a similar note smart beta strategies are also very popular these days.

How would you identify if this space is crowded or not?
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Sorry for the delay in replying been on holiday.

I find these kinds of questions a bit meaningless if I'm being honest. I think "crowded trades" are a problem when you are trading quickly, are trading mispricings, are trading relative value, have high leverage and so on. This creates an enviroment in which crowded trades are obvious (eg the value premium being squeezed out in equities, interest rate premia vanishing in fx carry) and also dangerous.

None of these things characterise institutional trend following, so it's hard to identify if the space is crowded, and also hard to know what you should do differently. If anything trend following could be self reinforcing the more people are doing it. Because it's relatively slow 90% of traded volume in most asset classes will still be done by people doing other strategies.

I gave a longer and more thoughtful answer to this question in one of the top traders unplugged podcasts I did.

GAT
 
tur said:
Hi globalarbtrader!

Really enjoyed your book.

Question regarding carry rule: how would you deal with assets with strong positive carry? E.g. EM currencies, like RUB or TRY? Carry rule will always be long on such asset, is it a bit strange for trading rule? And such strategy (always long EMFX currency vs USD) didn't do a good job in recent years.
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Nothing except that the forecast is capped at +20 (2 standard deviations)

The whole point behind such strategies is you run them consistently because they make sense over long historical periods and there is no evidence they work differently for different currencies.

If you're also running trend following on them you'll get taken out of the worst bear markets.

GAT

PS I don't trade FX like these at all, but if i did I would use a mixture of momentum and carry exactly like I do for G7
 
Rationalize said:
Hey - I'm unsure the "carry rule" makes sense with equity index futures. The difference between expries is the present value of the dividends paid over the period, and both the front and back months trade pretty tightly to this. (I used to push them back inline in another job, and I know some of the guys who keep them in line currently. All via institutional market making algorithms.). The return (carry) you will get is exactly the funding rate that the institutions are paying, which is not much over risk free.

Where's the edge?
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Edge? I didn't say I had an edge, did I? All I'm doing is picking up risk premia...

If I compare futures to spot then I'd get the the excess return eg expected dividends less the funding rate. I use back versus front as an approximation for this, as I'm too lazy to collect spot prices. I guess to be precise I'm measuring the forward excess return when I compare front to back.

My backtests show that this carry signal is profitable on a wide variety of asset classes, and there is no evidence to reject the hypothesis that it also works on equities.

GAT
 
AvantGarde said:
It's getting pretty nasty out there at present. Most CTAs are long bonds and long equities and both are getting hit hard. It would be good to see another portfolio update when you've a moment GAT to get a sense of how things are going relative to the CTA numbers I'm seeing at present. Thanks!
More...

I will do an update in a week as usual. But if you're curious I'm down 5.2% since my last update on September 5th in a 11% drawdown (on twice the vol of a typical CTA). Still up for the calendar year

GAT
 
globalarbtrader said:
Edge? I didn't say I had an edge, did I? All I'm doing is picking up risk premia...

If I compare futures to spot then I'd get the the excess return eg expected dividends less the funding rate. I use back versus front as an approximation for this, as I'm too lazy to collect spot prices. I guess to be precise I'm measuring the forward excess return when I compare front to back.

My backtests show that this carry signal is profitable on a wide variety of asset classes, and there is no evidence to reject the hypothesis that it also works on equities.

GAT
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But dividends are lumpy per time.
As, the distribution of ex-div dates and amounts is different per contract expiry.
Im a bit confused lol.
 
globalarbtrader said:
I will do an update in a week as usual. But if you're curious I'm down 5.2% since my last update on September 5th in a 11% drawdown (on twice the vol of a typical CTA). Still up for the calendar year

GAT
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What is your leverage? How much are up this year? Thanks.
 
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