It does actually (assuming you haven't messed with the parameters to equalise pre-cost returns) and I even wrote at length about how it does it here GAT
What are folks doing with US 5-year note (situation is similar with 2- and 10- year) right now, I rolled to hold June (March contract is past first notice) but there's no liquidity for September, how do you compute carry?
GAT - question on market data subscriptions for you. Pysystemtrade contains IB market data access libraries, you trade futures Globally, which means many exchanges. When I look at the IB market data subscription page and add up the costs for all of the exchanges I think you would need to obtain market data - I arrive at somewhere around $480 per month. The US bundle seems like good value at $10, but the ICE exchanges charge hundreds. Knowing how "careful" you are with trading cost overheads, this is surprising. Is this really what you pay out, or are able to collect your market data without requiring these subscriptions?
I don't use the carry rule, because of this very reason. Others use the carry rule only for those instruments for which future contracts are available. So they set a parameter for each instrument to indicate whether the carry rule should be used or not.
I just checked I already have 17 EOD prices for each of the June ZF and ZT in my database (downloaded automatically daily), maybe there's no liquidity, but there's still somehow an EOD price coming from IB (every contract should have an official closing price I guess?), also, I'm smoothing carry signal, so in any case I need longer time series to do it than usually available form the current pair, so the system stitches together older pairs of price-carry contracts from the previous periods when there's not enough data in the current pair and then computes the signal on that longer historical time-series which only ends with the latest pair..
Interesting. I was thinking about that, but quickly discarded it as I think Rob said in Leveraged Trading (perhaps in Systematic trading as well if I recall correctly) that that's not a good idea. I think it's worth a backtest at least Thanks! Did you mean June or September? I see that June has a bunch of prices, September is my problem If you query reqHistoricalData, you'll get a closing price even for September as you mentioned, but I also don't know where is that coming from if there hasn't been a single trade yet. Cursory looks shows that it's the same as the Jun price, so it might be that they just copy it? :shrug:
Carry is different for different futures, right? For bond futures, you can get the "spot futures price" by using the CTD bond and it's conversion factor. The difference between the futures price and this "implied spot" scaled by time to expiration is your carry (a.k.a. implied repo).
The September contract for US5 (ZF) does have historical data. There have been trades in the past. However, from Feb 18th (or earlier) until today there have been no trades in this September contract. So any price data on this contract is stale. You would not be able to use that for a carry trading rule.
In my experience, the carry factor has a higher beta to the stock markets than momentum, so it is less effective as a diversifier if you are including the strategy as part of a balanced portfolio of long-only equity indicies and systematic strategy. When markets go into risk-off mode (e.g. during a market crash), carry factor also suffers. On the other hand, during a crisis, the momentum factor tends to do well so it could be better at offsetting stocks. For this reason, personally I only use the momentum factor without the carry in the systematic portion of my portfolio.
Well I don't trade ICE markets I get by on a very small number of subscriptions which cover all the markets I trade. I could trade without IB data (for example using a source like barchart for daily prices) but then I'd have to trade 'blind' on market orders since I need the live data for my execution algo. I would need to do the calculation to see if the expected diversification benefit would be worth that. I think they are something like: CFE enhanced, Eurox core L1, Euronext basic, KSE L2, and the US bundle. Total cost is about $25 a month, although looking at my statement I am getting a 100% refund on the US bundle because I'm doing enough trading so it's actually about $15 a month. GAT