Fully automated futures trading

Discussion in 'Journals' started by globalarbtrader, Feb 11, 2015.

  1. tradrjoe

    tradrjoe

    What are some classic/standard approaches to equities systematic trading that don't require high frequency technology or intraday trading? Anything as robust as long term futures trend following?
     
    #681     Mar 12, 2017
  2. #682     Mar 13, 2017
  3. Hi GAT,
    I note you have your base currency as GBP. If you have GBP in your account and buy a non-GBP asset (e.g., ESM7), IB charge you commission on BOTH i) the futures trade and ii) the FX trade to finance the futures trade. I double checked this with them on the phone. The commissions are here.
    Most futures are denominated in USD. If your average margin to equity is say 30%, would it not make sense to hold 40% USD in the account, with the rest in GBP?
     
    #683     Mar 16, 2017
  4. Yes to buy a USD future I need some initial USD margin. Actually there are two possibilities:

    a) I could convert GBP into USD myself, paying commission on the trade (and a small spread)

    b) but if I don't do that I would automatically borrow USD from IB. There is no commission but I'm charged interest margin on the borrowing.

    The question then is which of these is best. In general the cost of borrowing is going to very quickly dwarf commissions except for a very small account ($2 on say $100,000 is 0.002% but IB charge me 2.16% / 1.66% a year on USD borrowing depending on the amount borrowed).

    The other factor to consider is the risk of owning USD. This doesn't bother me that much, I like the idea of having a diversified portfolio of currencies. However I wouldn't want to build up an excessively large balance in say KRW.

    So my policy in general is to
    • ideally avoid having to borrow anything in any currency (which implies having enough cash for all my initial margin)
    • If I'm net short cash to have evenly spread borrowing, but as little as possible where interest rates are very high (eg KRW).
    • If I'm net long cash to have evenly spread deposits, with maybe not so much in emerging markets (I don't need any more exposure to the carry trade thank you).
    In practice this means I might trade currencies a few times a year to even things out.

    GAT
     
    #684     Mar 16, 2017
  5. Do you have to calculate manually how large your cash position needs to be to cover initial margin (and/or maintenance margin)? Or are you able to somehow get that information via the API from IB? The reason for asking is that I do know how to get cash position information via the API. But don't know whether margin requirement information per currency is available through the API.
     
    #685     Mar 16, 2017
  6. Since my account is more than 100% funded, and I never use more than about 30% of the account for margin, I've never even thought about this.

    But you can get aggregate margin requirements in theory hopefully one of these fields will do the job:

    http://interactivebrokers.github.io...l#ae15a34084d9f26f279abd0bdeab1b9b5&gsc.tab=0

    GAT
     
    #686     Mar 16, 2017
  7. Thank you for your reply. It is indeed possible to get the aggregate margin requirement via API. However, that is the combined value, translated into the base currency. I will also ask IB, but I fear that it is not possible to get a margin requirement per currency via the API. If so, then I guess I have to write some simple software to calculate an approximate value. Currently am I using almost all available cash to invest in ETFs, but that does result in debit interest being charged for the futures positions.
     
    #687     Mar 17, 2017
  8. Hi GAT,
    I just read this article from the FT 'Rise in new form of ‘portfolio insurance’ sparks fears'. Do you have any thoughts on the massive flows into trend following and how this may affect performance? It could help if everyone is buying rallies and shorting sell-offs, but not if everyone is rushing for the exit at the same time...
     
    #688     Mar 21, 2017
  9. I discussed this in my 'top traders unplugged' podcast about halfway through the transcript here http://www.toptradersunplugged.com/why-diversification-is-key-robert-carver/

    284 billion sounds like a lot of money, but its probably only about 10% of the entire hedge fund industry and less than 0.5% of all global assets under management. To be fair there are probably futures markets where 20% of the open interest is in medium to long speed trend following, but its a much small proportion of the volume (certainly less than 1%).

    The FT did a similar scare story about risk parity funds, since these will sell an asset when its risk rises which puts them half in common with (although they will also buy if the price falls without risk rising, so net/net....). But again, what size are these funds across the total market?

    I'm more worried about funds that do relative value trading, and need leverage to do it. That results in all kinds of weird correlations in crisis.


    GAT
     
    #689     Mar 21, 2017
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  10. traider

    traider

    #690     Mar 28, 2017