Low Volatility Futures?

Quote from Grant:

JangoFolly,

What's ATR? Average True Range?

If so, and using your figures, are you saying the bund's (average) moves are equal to the e-mini S&P? Or am I way off?

Grant.
More...

Hi, Grant.

Yes, ATR=Average True Range. The 20-day ATR I'm showing for the Dec. Bund is 0.45; at 10 Euro per tick with a $1.26 exchange rate, the US dollar value works out to roughly $567. The 20-day ATR on the Dec. S&P is 10.69 (unit=full points); at $50 per point that's $535 (ATR is a little higher than when I checked earlier).
 
Quote from Grant:

JangoFolly,

What's ATR? Average True Range?

If so, and using your figures, are you saying the bund's (average) moves are equal to the e-mini S&P? Or am I way off?

Grant.
More...
Quote from JangoFolly:

Hi, Grant.

Yes, ATR=Average True Range. The 20-day ATR I'm showing for the Dec. Bund is 0.45; at 10 Euro per tick with a $1.26 exchange rate, the US dollar value works out to roughly $567. The 20-day ATR on the Dec. S&P is 10.69 (unit=full points); at $50 per point that's $535 (ATR is a little higher than when I checked earlier).
More...

To compare the volatilities of any two futures contracts, it isn't meaningful to simply compare their ATR dollar values. Size matters... we need to look at relative vol., e.g., expressed as a percent of each contract's current value. Otherwise, you're playing with different leverage.

The Bund's contract value is about $148,310 vs. $67,960 for the S&P e-mini. Using JangoFolly's daily ATR numbers, FGBL's daily vol. is 0.38% vs. 0.79% for ES. So, S&P is more than twice as volatile as Bund, as you'd expect.
 
Quote from late apex:

To compare the volatilities of any two futures contracts, it isn't meaningful to simply compare their ATR dollar values. Size matters... we need to look at relative vol., e.g., expressed as a percent of each contract's current value. Otherwise, you're playing with different leverage.

The Bund's contract value is about $148,310 vs. $67,960 for the S&P e-mini. Using JangoFolly's daily ATR numbers, FGBL's daily vol. is 0.38% vs. 0.79% for ES. So, S&P is more than twice as volatile as Bund, as you'd expect.
More...

If she's trading intraday, the contract size and associated percentages are irrelevant. Relative to the stated interest of the OP, what matters is the dollar value of the movement.
 
JangoFolly, late apex (where do you guys get these names from?),

Thank you for the info.

Without examining the figures (I’ve printed both replies) there are a couple of questions I’d like to raise.

Whichever approach is correct, and assuming one can draw at least a crude correlation, would the relative values and presumably, implied relative risk, be reflected in differences of the implied volatilities of the respective options? I doubt it . Sorry, I can’t give a rational explanation at the moment (getting late) but from my past knowledge, bund implied is low compared to any index. Whether this is reflected directly, or is coincidental, in late’s figures, I’m not sure but I reckon the bund is indeed half as volatile as the S&P.

Using late’s approach, if EUR/USD goes to parity or worse (halves), then theoretically the mini S&P will be equal (or exceed) the bund’s value in dollar terms. But , using either Jango’s or late’s ATR would be inappropriate or invalid because the equation(s) would show equal volatility. While this is possible theoretically, I can’t see it in actuality – bund yields would go through the roof, surely?

I’ve been looking (superficially) at the relative changes in value of the DAX and Euro Stoxx in, eg dollar terms.

Generally, DAX and Stoxx follow the US. But gains on DAX/Stoxx can be severely undermined if Eur/USD goes the opposite way. I don’t know what the possible ramifications are but it must be significant, assuming there are US institutions holding large European portfolios.

Jango,

“Eurodollars; not to be confused with EUR/USD” . As confusing as short long gilt, long short sterling.

Grant.
 
Quote from JangoFolly:

If she's trading intraday, the contract size and associated percentages are irrelevant. Relative to the stated interest of the OP, what matters is the dollar value of the movement.
More...

So, by your logic, the big S&P is 5 times as volatile as the e-mini, correct? And Euro FX would have to be twice as volatile as e-mini Euro FX, wouldn't it? And so on.

In fact, you'll agree that their volatility is exactly the same, by any conceivable measure. Including "relative to the stated interest of the OP."
 
Quote from late apex:

So, by your logic, the big S&P is 5 times as volatile as the e-mini, correct? And Euro FX would have to be twice as volatile as e-mini Euro FX, wouldn't it? And so on.

In fact, you'll agree that their volatility is exactly the same, by any conceivable measure. Including "relative to the stated interest of the OP."
More...

I never mentioned anything about volatility, and I'm not trying to make any larger point about it; I'm simply trying to help the OP to find relevant information. She's interested in a contract that has limited intraday movement when compared to the ES and other minis. If she were pricing options, hedging risk in a portfolio, or anything else more complicated, then I would agree wholeheartedly with your thinking.

The simple fact is that in trading one bund contract she would have approximately the same dollar amount of risk exposure as she would trading one ES contract. Regardless of their respective contract values, when compared side-by-side these two contracts have roughly the same tick value (US$12.50) and lately each moves through a range of approximately 45 ticks in a given day, making them essentially the same for the purpose of calculating potential risk/return while trading intraday.
 
Quote from Grant:

JangoFolly, late apex (where do you guys get these names from?),

Thank you for the info.

Without examining the figures (I’ve printed both replies) there are a couple of questions I’d like to raise.

Whichever approach is correct, and assuming one can draw at least a crude correlation, would the relative values and presumably, implied relative risk, be reflected in differences of the implied volatilities of the respective options? I doubt it . Sorry, I can’t give a rational explanation at the moment (getting late) but from my past knowledge, bund implied is low compared to any index. Whether this is reflected directly, or is coincidental, in late’s figures, I’m not sure but I reckon the bund is indeed half as volatile as the S&P.

Using late’s approach, if EUR/USD goes to parity or worse (halves), then theoretically the mini S&P will be equal (or exceed) the bund’s value in dollar terms. But , using either Jango’s or late’s ATR would be inappropriate or invalid because the equation(s) would show equal volatility. While this is possible theoretically, I can’t see it in actuality – bund yields would go through the roof, surely?

I’ve been looking (superficially) at the relative changes in value of the DAX and Euro Stoxx in, eg dollar terms.

Generally, DAX and Stoxx follow the US. But gains on DAX/Stoxx can be severely undermined if Eur/USD goes the opposite way. I don’t know what the possible ramifications are but it must be significant, assuming there are US institutions holding large European portfolios.

Jango,

“Eurodollars; not to be confused with EUR/USD” . As confusing as short long gilt, long short sterling.

Grant.
More...


Hi, Grant.

I'm disagreeing with apex only in the context of intraday trading (the OP's stated interest). If one had a longer-term perspective (which I generally don't), then his points and yours are most likely correct and mine are not.

Eurodollars futures (CME describes them as "futures contracts [that] reflect the London Interbank Offered Rate (LIBOR) for a three-month, $1 million offshore deposit") are sometimes confused with Euro FX, or EUR/USD, futures, which is why I made note of the difference.


Regards,

William
 
William,

I wasn’t making a judgement as to which was correct – both exhibit knowledge of that with which I’m not familiar (that’s tortured prose, resulting from trying to be diplomatic, isn’t it?).

However, the point you raised has certainly provoked thought, and I intend to investigate this further.

Re futures confusion. I was making a joke. Next time, maybe.

Grant.
 
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