Continuous Futures Contract

[kbarnesie]

Backtesting futures data.
Need to use the Continuous Contract option 1! to smooth out rollovers.

Can anyone tell me how this is calculated.

I can get a contant back adjusting value but cannot figure out how this number is derived...

Please help ?? Under time pressure from above.

[ACM]

Re: Continuous Futures Contract

kbarnesie
The adjustment of the 1! continuous contracts is based on the spread between the specific contracts at the user defined rollover date. That spread is then compounded at each rollover going backwards.
So if for example the spread at the most recent rollover is 4 points then the previous contract will be adjusted by that value. Assuming that at the preceeding rollover the spread was 2 points then all contracts prior to that will be adjusted by 6 points (ie 4+2) and so on and so forth
Alex

Originally posted by kbarnesie
Backtesting futures data.
Need to use the Continuous Contract option 1! to smooth out rollovers.

Can anyone tell me how this is calculated.

I can get a contant back adjusting value but cannot figure out how this number is derived...

Please help ?? Under time pressure from above.

[kbarnesie]

Continuous Contracts

Alex,

Thank you for your reply.

How is that compounded value derived for adjusting the 1! contract...

Is it: (Close of contract A - Close of Contract B) or (Close of contract A - Open of Contract B).

Please see my examples of the last roll in the e-Minis, Nat GAS, Dow and I hope you can make things clearer for me..

I get a constant value between (Closing price of back date contract - 1! Close) but why ???

Thank you for your help much appreciated...

kbarnesie

[ACM]

Re: Continuous Contracts

kbarnesie
To my knowledge the spread is calculated between the Close values of the two contracts on the day prior to the user defined roll date. The spread is then applied from that date going backwards.
That said it seems that in 10.5 [currently in beta] the back adjustment is not being applied to the Close when using the Settlement option for the daily bar. I have passed this information on to eSignal's developers
Alex

Originally posted by kbarnesie
Alex,

Thank you for your reply.

How is that compounded value derived for adjusting the 1! contract...

Is it: (Close of contract A - Close of Contract B) or (Close of contract A - Open of Contract B).

Please see my examples of the last roll in the e-Minis, Nat GAS, Dow and I hope you can make things clearer for me..

I get a constant value between (Closing price of back date contract - 1! Close) but why ???

Thank you for your help much appreciated...

kbarnesie

[kbarnesie]

Continuous Contracts

Hi Alex,
I get the same adjustment for Open, High Low and Close.
i.e 0.297 for the NG contract rolling from M9 to n9.

Still cannot figure out how this 0.297 adjustment is calculated.

It is not the difference between the closes.

Regards
kbarnesie

[ACM]

kbarnesie
As I indicated in my previous reply I believe that the spread is calculated based on the Close of the two symbols at the day prior to the user defined rollover.
Following is an example captured using 10.4 that should illustrate the logic used for the back adjustment of the user configured continuous contracts
If I use the default settings for NG a rollover occurred on 6/26 between NG N9 and NG Q9
The previous day's [ie 6/25] Close for NG N9 was 3.844 while that of NG Q9 was 3.989 for a spread of .145 (see following image)



In the next image you can see the values of the back adjusted NG 1! contract compared to those of NG N9 on 6/25



If you subtract .145 from the O, H, L , C of NG 1! you will see that the values will match those of NG N9
O = 3.924 - 0.145 = 3.779
H = 4.095 - 0.145 = 3.950
L = 3.888 - 0.145 = 3.743
C = 3.989 - 0.145 = 3.844

The prior rollover between NG M9 and NG N9 was on 5/27. The Close of NG M9 on 5/26 was 3.537 while the Close of NG N9 was 3.643 for a spread of .106 (see following image)



In the next image you can see the values of the back adjusted NG 1! compared to those of NG M9 on 5/26



If you subtract .251 [ ie .145 + .106] from the O, H, L, C of NG 1! you will see that the values will match those of NG M9
O = 3.731 - 0.251 = 3.480
H = 3.840 - 0.251 = 3.589
L = 3.639 - 0.251 = 3.388
C = 3.788 - 0.251 = 3.537

FWIW I also checked many of the bars in between the rollover dates and they all appeared to be correct
As to the difference of .297 that you are seeing at your end a guess could be that due to your roll template there may be a rollover subsequent to the one between M9 and N9 that you may not be accounting for
Alex

Originally posted by kbarnesie
Hi Alex,
I get the same adjustment for Open, High Low and Close.
i.e 0.297 for the NG contract rolling from M9 to n9.

Still cannot figure out how this 0.297 adjustment is calculated.

It is not the difference between the closes.

Regards
kbarnesie