Futures curve based alpha strategy

[mizhael]

Quote from bone:

Intermarket commodity spreads generate pure portable alpha.

That is exactly what they are talking about. You are generating returns completely independent from flat price directional risk. If a strategy can generate returns independent from equity market and fixed income market flat price directional risk, it is especially coveted by portfolio managers. Everybody is chasing alpha.

ML's cumulative pnl curve looks very nice - could you please elaborate on how intermarket spreads can lead to that type of curve for past 10 yrs?

 

[mizhael]

Quote from Rodney King:

OK, everyone agrees now, I think -- ML is talking about <i>intra</i>market, not <i>inter</i>market (sic) spreading.

Yeah I guess so ... it's a systematic strategy and 10yr cumulative pnl curve looks nice... maybe too good to be true?

 

[mizhael]

Quote from atticus:

I would guess it's VIX, due to the massive increase in OI in the back months.

How does a "massive increase in OI in the back months" lead to a very nice looking cumulative pnl curve for the past many years?

Is there anything that's fundamental and structural?

 

[mizhael]

Quote from Rodney King:

?

The ML products OP is discussing are based on physical commodities. I've read the ML reports and updates. (Obviously, ML offers all kinds of equity volatility related products also).

Are you sure that's based on physical commodities? Not just a basket of futures, etc.?

I cannot imagine you can incorporate physicals in your backtest and going back many years...

We can talk about equity vol strategies later... I am interested in those too... but right now lets focus on this "curve alpha" trading strategy...