Futures curve based alpha strategy In an Merrill Lynch commodity report

Discussion in 'Strategy Development' started by mizhael, Feb 15, 2011.

  1. Futures curve based alpha strategy

    In an Merrill Lynch commodity report, they mentioned about a futures curve-based alpha strategy.

    It's a systematic trading strategy.

    It looks attractive...however, being a proprietary strategy, they didn't give any further details...

    Anybody could kindly please point me to how this strategy possibly works?

    I am interested in doing a backtest on this type of curve-based strategies, and I will post some results...
  2. Call your coverage at ML (assuming you have coverage, i.e. you're not a 17 y.o. in mom's basement) and ask for the relevant research reports, which explain their 'strategy' in detail.

    BTW You double-posted this question. Please don't do that.
  3. Sounds like they are trying to anticipate the roll. You could look at OI to see when participants are most likely to roll their contracts and position yourself accordingly.

    -my 2c
  4. If they're doing it in CL outright or against Brent they will blow-out.
  5. Unfortunately we don't have coverage at ML... anybody please help me? We have coverage at MS though...
  6. They are essentially buying or selling or spreading all the futures markets and at the same time hedging there positions by buying or selling swaps and other derivatives. but this trade does well when you have chop but is not so successful when trending up. UBS has an etf or mutual fund that does the strategy they are good to own 10% or less in your portfolio when the market is in an up trend, but when the markets get flat or choppy up it to 20-25% and when in a downtrend up it to 30-40%. It is hard to trade this strategy by yourself to many parts to follow plus the swaps they use are hard for the small trader or investor to trade or get quotes on.
  7. Could you please elaborate a bit more? Thanks a lot!
  8. No I think by curve trade they mean calendar type of spreads on the same futures...
  9. If a contract needs to be rolled 3 days before the 15th calendar day of a month that doesn't necessarily mean that's when most participants will roll it, nor does it tell you what position they need to roll (if they even will) - that's where looking at OI can help you determine what position to take and when. I'm sure each market has its nuance too.

    I've seen these types of strategies/products from other banks, but it's not to say that's what ML is doing, nor is that to say they would have the same parameters. Just what I think they could be doing based on what you've said.
  10. Either way. I mentioned both.
    #10     Feb 17, 2011