To calculate carry you need matching prices in the two contracts. Do these have to be trades? Not neccessarily. In fact it might be worse, if for example you took the last trade in two contracts; but one of those trades occured just before the close, and the other in an illiquid contract. I use quoted prices at the close. What if a contract isn't trading? There will nearly always be a quote at the close. Usuually this will be 'marked to model'. The spread will therefore be accurate even if no trades have actually taken place. Here for example are the prices I have for Sep and June: Code: Sep 2020-02-26 23:00:00 121.703125 27467 2020-02-27 23:00:00 121.796875 27475 2020-02-28 23:00:00 122.750000 27483 June 2020-02-26 18:22:18 121.566406 27456 2020-02-26 23:00:00 121.585938 27457 2020-02-27 14:06:55 121.933594 27460 2020-02-27 15:16:28 122.042969 27461 2020-02-27 16:24:20 121.886719 27462 2020-02-27 17:24:45 121.792969 27463 2020-02-27 18:25:10 121.753906 27464 2020-02-27 23:00:00 121.937500 27465 2020-02-28 14:20:03 122.503906 27468 2020-02-28 15:27:17 122.550781 27469 2020-02-28 16:36:04 122.558594 27470 2020-02-28 17:36:28 122.535156 27471 2020-02-28 18:36:59 122.597656 27472 2020-02-28 23:00:00 122.570312 27473 2020-03-02 14:10:54 123.050781 27476 2020-03-02 15:11:19 123.207031 27477 2020-03-02 16:11:33 123.121094 27478 2020-03-02 17:12:11 123.003906 27479 2020-03-02 18:12:24 122.996094 27480 2020-03-02 23:00:00 122.601562 27481 23:00 is the pseudo timestamp for a closing price. I don't sample the forward contract intraday. There are matched prices for 26,27,28 February. Sometimes the quote is stale and there is a jump in the carry signal. Big deal. Because I'm trading carry with a smooth that doesn't impact the signal so much. Sometimes you don't even get a quote, like for yesterday. Big deal. At the extreme end, as long as I got a pair of matched prices every time I rolled (the minimum required for the backadjustment to work) I could calculate carry. If you want to get very anal about this and say you won't use carry at all then I respect your decision, but there is no evidence that having a 'poorer quality' carry signal leads to poorer Sharpe; quite the opposite since the problem is endemic in bond futures which have very high carry returns (could be Beta... see below), whereas in commodities with long series of traded contracts carry doesn't work so well. We're trying to forecast roughly what a price is doing based on an imperfect indicator. We're not doing cash-futures arbitrage. We're not trading the Jun-Sep spread. We don't have to be anal about this. Correct, but this is a pain that needs quite a bit more data (at AHL we used to use the underlying govvie interest rate curve to calculate carry Others, like me, use the carry rule on every single instrument That's a perfectly valid stance to take. Just bear in mind one point: do you calculate momentum based on a total return series? (like a back adjusted futures price series) Then you will have an implicit allocation to carry and the carry factor. So I would be surprised if removing it had a huge effect. I don't optimise in the presence of my long only portfolio so I haven't checked this myself. My long only has a momentum overlay anyway so I'm more likely to want a bit less momentum. (This also means that if you have carry and total return momentum, your allocation to carry is higher than you think) GAT
IB also offers snapshot quotes that could be used to work around this problem. They charge a few cents per quote depending on the market, and will automatically upgrade you to a subscription in any month that you spend more than the subscription fee would have been. I don't know if a bit more diversification would justify even this cost, but it's certainly cheaper than paying for full market data, especially for anyone who has to pay the exorbitant "professional" rates. https://ibkr.info/article/2830
Yeah, you can make it arbitrarily complex depending on how anal you are. In a lot of smaller index futures, there are various specific captive flows or product details. Sometimes it's possible to find ways to make some money in a low-risk way, if you know where to look. The problem with these strategies (for someone like myself) is capacity.
What is this, a vocabulary night? A lot of institutions are forced to trade things - hedge, cover their positions, show lower risk for the books. All of these trades are done not because they love to sell futures specifically if it rains at 2pm, but because they have no choice. If you know that people like these are coming to trade, you can make a little cash for yourself.