Rob, where are your Oil & Gas positions? That's the sector with the highest risk for me right now. Hard to believe your system doesn't have a single position on.
Maybe, makes sense. I'm not sure about using VXM, I was actually thinking to switching to the large one! Sometimes I have more than 40 contracts to roll. If you want to use the second contract to reduce skew this is relatively big volume for VMX. For instance, in 10 days I will roll to December contract, and now its daily volume is around 50 contracts. I think it is a little tricky to use mini/micro contracts in this case since volatility is an asset class with very few assets. Luis
Guess I can answer my own question: looks like DO is getting that exposure via the EU-OIL sector instead. Makes sense.
Slightly misleading labelling, but I'm long EU-OIL which is an equity sector future but is really a proxy for energy markets where the contract sizes are probably a bit too chunky for a position now given the forecast strength. Having said that my risk there is only 2.7% which isn't very much; Bonds is my biggest risk. Looks like my reply crossed yours. Rob
Yes although my liquidity report says that at $2m of risk a day it's liquid enough (floor is $1.5m); that only reports on the most active contract which as you say is problematic when it comes to rolling. Rob
I have computed my ratio and seems too low at a first glance (0.25). I'm targeting 30% risk instead of 25%, but it doesn't explain this big leverage. I will look into it. Thanks for the pointer Rob! Thanks, Luis
Yes I think its an artifact of your optimisation process, anything too much like normal markowitz is going to push into big 'hedged' positions. Rob
Oddly enough, the issue seems to be unrelated with the tracking portfolio optimization. I have computed the sum of absolute standard deviation per instrument of the unrounded positions and it's very similar to the one obtained for the tracking portfolio. I thought it could be related to the Instrument Diversification Multiplier but it doesn't seem to be that neither. I will keep looking before my luck changes!
I'm on TTU this friday with Alan Dunne. You can send me questions by replying to this thread or DM Rob
Hi Rob, Really enjoyed your latest book, particularly your mean reversion strategy. At one point I remember you stating that the sharpe ratio of your system was not changed by running your system only every other day as opposed to every single day. Do you still stand by that? Is there any drawback to me running your system every other day? Thanks.