[R-SIG-Finance] Generating a front month only Time Series for Futures Prices

[G See]

On Thu, May 3, 2012 at 3:28 PM, G See <gsee000 at gmail.com> wrote:
> If you just want to combine 2 series together, no problem:  use rbind.
>  But, then you'll have a gap in your data on the roll date, and you'll
> be back asking how to adjust for it. ;-)  That's where the minefields
> come into play.
>
> I look at roll cost like a dividend (which is often negative).  You
> can adjust for it a couple different way.  You could add the roll
> costs back to the series, which may mean negative prices in the past.
> Or, you could multiply by an adjustment ratio (treat it like a split).
>
> If you don't adjust for the roll, you'll have big gaps in your data.
> Imagine buying the front month VIX future and rolling it each month.
> 10 years later, the VIX may still be at the same price, but you'll
> likely have lost way more than you started with.
>
> If you do adjust for the roll, either the oldest prices or the newest
> prices may not be reasonable.
>
> To get this back to R, let's get some code involved.
> This is laying in the FinancialInstrument sandbox; I haven't
> personally looked at it, so I don't know how it works.  Ditto for
> FinancialInstrument:::slice and FinancialInstrument:::splooth
> https://r-forge.r-project.org/scm/viewvc.php/pkg/FinancialInstrument/sandbox/continuousSeries.R?view=markup&root=blotter
>
> If you just want daily data that has already been adjusted for you,
> look here for code to download data from trading blox (it has Heating
> Oil.. not gasoil though):
> https://r-forge.r-project.org/scm/viewvc.php/pkg/FinancialInstrument/inst/parser/download.tblox.R?view=markup&root=blotter
>
> I believe Trading Blox simply adds back the roll cost.  And, I think
> they roll when Open Interest rolls.
>
> source("http://r-forge.r-project.org/scm/viewvc.php/*checkout*/pkg/FinancialInstrument/inst/parser/download.tblox.R?root=blotter")
>

# oops. forgot this line
getSymbols("HO", src='tblox')

> chartSeries(HO[, 8])  #unadjusted
> addTA(HO[, 4], col='red', on=1) #adjusted
>
> Or, are you looking for code to calculate the expiration dates of instruments?
>
> What have you tried? ;-)
>
> Garrett
>
> On Thu, May 3, 2012 at 3:07 PM, gussinsky <sduve at hotmail.com> wrote:
>> Hey Garrett,
>>
>> thank you for this, I had a read through this page in the book you
>> referenced. And looking at Agricultural Commodities this makes a lot of
>> sense. And if you look at Wheat and Corn on the CBOT, I think you only have
>> 5 deliveries per year, hence the massive gaps when each contract rolls off.
>> So here the interpolation makes sense, and I think one could approach this
>> trade as a box.
>>
>> But lets consider for example heating oil again, here you have monthly
>> deliveries, and the seasonality is far less nowadays, in Europe even less
>> due to the increased Diesel consumption on the roads.
>>
>> But lets consider this:
>>
>> "Trading in a current month shall cease on the last business day of the
>> month preceding the delivery month."
>>
>> This is the expiry rule for Heating Oil on the Nymex. I think this is
>> codeable without minefields isn't it. It would be terrific if anyone could
>> point me in the right direction on how to approach this.
>>
>> I think it wont be possible to download this with one simple function. I
>> suspect one would have to store individual files for the respective expiry
>> contracts, and perhaps index the file names. And then perhaps through a loop
>> function could read out the corresponding 1:n values for each month, store
>> them in an array, and then run the next month with the same rule, and store
>> them again, etc....In the end one needs to connect all those arrays into one
>> big time series.
>>
>> And here is my problem, I dont know how to code this, I know what I want....
>>
>> Many thanks for the advice so far....
>>
>>
>> Best
>>
>>
>> Gussinsky
>>
>>
>> PS: Garrett, it is your Pair Trading code that brought this up my mind again
>> :-)
>>
>> --
>> View this message in context: http://r.789695.n4.nabble.com/Generating-a-front-month-only-Time-Series-for-Futures-Prices-tp4606794p4606979.html
>> Sent from the Rmetrics mailing list archive at Nabble.com.
>>
>> _______________________________________________
>> R-SIG-Finance at r-project.org mailing list
>> https://stat.ethz.ch/mailman/listinfo/r-sig-finance
>> -- Subscriber-posting only. If you want to post, subscribe first.
>> -- Also note that this is not the r-help list where general R questions should go.