Krystal Ramirez, CFTe’s Post

Let's look at how returns are calculated for a commodity derivative futures contract from the perspective of a long futures position. It's simpler than it sounds! There are 3 parts to it: 1. Price Return=(current price - previous price) / previous price. Simplified: This represents the increase in the value of the futures position. 2. Collateral Return: When taking a futures position, investors post collateral that earns a yield, known as collateral yield. Simplified: This is the return earned on the collateral. 3. Roll Return=(price of expiring futures contract - price of new futures contract) / price of expiring futures contract. This return can be positive or negative, depending on market conditions. When the spot price exceeds the futures price, it's termed as backwardation (positive roll return). Conversely, if the futures price is higher than the spot price, it's called contango (negative roll return). Simplified: This reflects the return when the investor closes out the expiring position to re-establish a new position. Hence, Total return= Price return+ Collateral return+ Roll return. Do you find this breakdown helpful? Share your thoughts below! 💬💰 #CommodityFutures #InvestingInsights #Finance #Investing #Trading #Lesson: 8

📊Understanding Futures and Options: A Quick Guide for Beginners📊🌟 In the world of finance, Futures and Options are powerful tools used for hedging, speculation, and managing risk. But what exactly are they? Futures: A futures contract is an agreement to buy or sell an asset at a predetermined price at a specified time in the future. These contracts are standardized and traded on exchanges. Futures are used by investors to speculate on price movements or hedge against risks in the market. 🔹 Example: A farmer may enter into a futures contract to sell their crop at a fixed price to avoid the risk of fluctuating market prices. Options: An option contract gives the buyer the right, but not the obligation, to buy (call option) or sell (put option) an asset at a specific price before a certain date. Unlike futures, the buyer isn't required to execute the contract. 🔹 Example: An investor might buy a call option on a stock they believe will rise in price, giving them the potential to profit while limiting their risk to the cost of the option. #FinanceBasics #investment #Businessfinance #LinkedIn #RiskManagement #FinancialMarkets #StockMarket

Total Return Swaps (TRS) on US equity underlying positions again foreshadowed the market volatility that occurred last week. We see the pattern repeatedly and the data shows how well TRS traders can predict, time or move the market. More on #finadium: https://lnkd.in/ed2MrjyW

Buy & Sell Signals Long Term Trading Analysis for (FXB): Stock Traders Daily has produced this trading report using a proprietary method.  This methodology [...] Look at the Charts

In futures markets, what is contango and backwardation? link https://lnkd.in/eNgJHB_M #quant #finance #trading #futures #markets #contango #backwardation #cme

We took an updated look at the costs of mechanically trading to match index rebalance events and found that index funds, on average, are buying too high and selling too low in their effort to trade the same securities, on the same day, at the same time as the index. This approach can leave returns on the table, even compared to waiting just a few hours after a rebalance event to trade. Yet another reason to go beyond indexing. https://lnkd.in/gjeEB9mz

Total Return Swaps (TRS) on US equity underlying positions again foreshadowed the market volatility that occurred last week. We see the pattern repeatedly and the data shows how well TRS traders can predict, time or move the market. More on #finadium: https://lnkd.in/ercN5aNj

Market-Neutral Trading Strategies (Rules, Backtest, Returns) A market-neutral strategy is a type of investment approach that enables an investor to benefit from both rising and falling stock prices. This is achieved by taking long positions in one stock and short positions in another stock. The strategy is designed to reduce exposure to specific market risks and can be applied in one or more markets. We backtest the following trading rules. First, make the following calculations: * Make a pair ratio of XLU divided by TLT; and * Calculate the 5-day RSI of the pair ratio; and * Calculate the High - Low for TLT every day - (Volatility). We take a long position in XLU (60% of equity) and go short TLT (40% of equity) when the following are true: * The 5-day RSI of the pair ratio must be below 20; and * The five-day average of TLT volatility is higher than the 25-day average (#3 above). Close out the positions when the 5-day RSI of the pair reaches 50. The trading rules are flipped to take the opposite position. When we apply the trading rules we get the following equity curve shown below Want to learn more about the strategy? Check comment 👇 #TradingStrategy #MarketNeutral #StockMarket #Investing #TechnicalAnalysis #Backtesting #FinancialAnalysis

VIX Futures Trading Strategy Backtest And Example A VIX futures strategy refers to the methods and techniques you can use to trade VIX futures, which are financial derivative products that represent a contract to trade a specified unit of the index at a pre-agreed price on a future date. Let’s make a backtest using the VIX spot index and the following trading rules: VIX must set a new 20-day high, The five-day RSI must be higher than 70 (for the VIX, If both rules above are correct, we buy S&P 500 (SPY), We sell at the close when the close is higher than yesterday's high. The equity curve of the strategy looks like the image shown below. Can the strategy be improved or made different? If you have any suggestions, please comment 👇 You can find more info about this trading strategy here: https://lnkd.in/gn-iFJzf #tradingstrategies #vix #VolatilityTrading #futurestrading #backtesting #tradingstrategy #RSIIndicator #sp500 #marketanalysis #financialmarkets #investingtips

📝 Looking to master 0-DTE SPX index options? Check out our latest post: "The 3 Ways to Trade 0-DTE SPX Index Options." Discover key strategies to maximize your profits with same-day expiry options. Whether you're a seasoned trader or just starting, these insights will help you navigate the volatility and seize trading opportunities. 🔗 https://lnkd.in/gkHa3XcG #OptionsTrading #SPXOptions #TradingStrategies #0DTE #MarketVolatility #FinancialMarkets