Continuous time series in futures

Discussion in 'Trading' started by ganesha, Jun 15, 2013.

  1. ganesha


    Hi I did go through the previous posts on this topic but still confused. I am basically researching on some ideas and need continuous time futures data. At any point in time I basically have three futures, F1, F2 F3. They basically have monthly, 2 month and 3 month expiries. I have daily OHLC data for all of the, but need to create continuous time series.

    I am basically researching on convergence-divergence ideas in price space. What is wrong with just the following procedure

    1) Just grab the F1 price and at the roll data switch to F2 or the new front month?

    When I went through the papers and discussion on creating continuous contract, please correct me if I am wrong but it seemed that the procedure is the follows, to get the front month contract.

    Say today is expiry and we have the data for today

    F1 - x F2 - y F3 - z

    Here x is the settlement price of the expired contract F1. I go back in the past until the previous expiries and multiply all prices by y/x. At the day of expiry I get for the price of F1 as x*y/x = y. Is that true?

    If yes the problem with this approach is that how am I supposed to get continuous prices for F2 and F3, since it is not the case that I have an F4 or F5, I strictly have only 3 contracts at any given point in time. Please help. I think I am lost.
  2. I know a bit about this.

    I think there may be a shortcut in just analysing the difference between the price of each contract.

    Maybe post a bit more about what you're trying to isolate.
  3. ganesha


    Sure, I guess my problem is the fact that at any given point in time I just have 3 contracts. Maybe I am reading the posts out there wrong. But for instance I read this

    This is a pretty simple description. Then you can imagine that I will run into a problem because I will be able to back out adjusted prices for F1, and F2 but not F3. For that I will need the F4 closing price at the expiry day. But F4 doesn't exist. Am I making sense, not sure, if I am understanding this correctly :)
  4. Ok. I'm going to take a shortcut here, at the risk of sounding like a dick...

    If you want a continuous price, use an the index, or spot. Continuous futures pricing is untradable pricing. If you want to trade futures inter-month model difference, not a back propagated adjusted untradable price.
  5. ganesha


    Not sure how you mean, I am trading futures, there is no liquid spot. For instance imagine commodity markets?
  6. Look for an ETF
  7. tobbe


  8. ganesha


    I read this, but not sure if you see what I am trying to ask. I guess the question is how do I back adjust the contract F3? I think I need a F4 to do that but I don't have one. Doe that make sense or am I off?
  9. tobbe


    That does not make sense.

    What back adjusting method of the four different ones in the posted PDF are you going to use, and why?
  10. You are off.

    Get a PC.

    Get a platform.

    Type in the symbol for "continuous" anything.

    Apply your software (Rework it first it is screwed up a little).

    Get trading results.

    Iteratively refine.
    #10     Jun 15, 2013