Question about futures portfolio?

Discussion in 'Strategy Development' started by losemind, Mar 17, 2011.

  1. losemind


    Suppose you are given $10million to invest in futures and you are forming a futures portfolio.

    I've checked that the one with the highest margin rate is probably Wheat, it's about 1:9

    The one with the lowest margin rate is probably Live Cattle, it's about 1:33.

    Therefore, on average, for a diversified portfolio with a basket of futures, the margin rate is about 1:20.

    The size of your portfolio can be measured by the total absolute margin sizes in USD you've put up (LONG + ABS(SHORT)).

    So with $10million cash, how much would you invest in the futures portfolio, lets say you aim at a 30% annual return?
  2. There is no reason to think the commodities will continue to rise. One needs a system or systems with some trading frequency, some drawdown characteristics, some correlation, ... Without this piece, there is no general answer. Intraday crude oil trading is totally different than buy-and-hold gold.
  3. losemind


    The stats are:

    For a portfolio/basket that's backtested and in paper-trading (all things combined together):

    [Average Annualized PNL] / [Standard Deviation of Daily PNL Annualized]=2

    [Average Annualized PNL] / [Max Drawdown Each Year Historically] = 2.5

    What could be a good margin (i.e. size) to use?