I've been checking out your reports here and there, mostly out of curiosity to see the positions. For the last couple of weeks, I haven't seen any short bond positions (I haven't checked every day, I might have missed some if the system went in and out), how come? I've had at least 2 bond shorts most of the time, and performing technical analysis on the chart (read: I looked at the chart ) seems like downtrend has been quite decent.
I also currently have 2 bond shorts (-1 contract each), although the natural positions are quite small, so DO did the rest: GBM:-0.01; ZB:-0.18
I think it's related to the vol attenuation and the carry. Rates volatility has increased a lot lately so vol atenuattion can be practically cancelling trend following forecasts. For some rates futures the carry is signaling to buy the bonds also.
Congrats on the performance! Huge fan! Any guesses concerning AHL’s result? A thought crossed my mind; that they got caught on the wrong side of the LME nickel surge. But I guess there has been a large number og price spikes that could have spoiled their year. A whole host of reasons so to speak
Sorry for the late response, been on holiday and writing a very long blog post. What you would do is estimate the cash VAR of Crude oil. Let's use some up to date figures from here. I will also use a slightly different formula for risk scaling, which makes things easier to translate into VaR terms. Big Wti crude has risk of around 34% a year or 2.1% a day with price of say $100. That equates to daily risk of $1000 (futures multiplier) * 2.1% * $100 = $2,100. If I had $100k of daily cash vol target that would translate to 100 / 2.1 ~ 48 contracts. If returns were Gaussian then something with $100k standard deviation would have a 2.5% VaR of $200k (assuming mean of zero, which for daily returns makes sense). So we could have a $200K 'VaR' budget instead of a standard deviation risk budget. Let's say we estimate the daily 2.5% VAR for Crude oil at a 7% loss (so it's non Gaussian, since if it was then the VaR would be 2.1% * 2 = 4.2%). In cash terms, that translates to $7 in price points multiplied by the contract multiplier of 1000 which is $7000. We could buy $200k / $7k = 28 contracts. Of course that's less than before, because the scaling of the risk budget assumes returns are Gaussian, whereas they are not in practice. Hope that makes sense Rob
This was a good idea / suggestion. My reporting system is now set up on GitHub. Makes it a lot easier to monitor the system from one update to the next, usually on a daily basis. KH
I'm on https://www.toptradersunplugged.com/podcasts/systematic-investor/ this Saturday. Any questions? Rob