Following the Trend: Diversified Managed Futures Trading

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Futures Data and Tools

FUTURES AS AN ASSET CLASS

Futures is really a type of instrument and not a type of asset. I still call it an asset class for the simple reason that you can treat it like one. The most interesting feature of these instruments is that they are standardised and exchange listed, so you can trade practically all asset classes in a single coherent manner without caring about what the actual underlying asset is, and therefore you can view futures itself as a single asset class. Futures can offer many advantages for the systematic trader and of course some unique challenges as well. With futures strategies you can cover everything from equities to bonds, metals, grains and even meats, with standardised instruments following the same basic characteristics. If you are looking to build portfolio strategies that make full use of diversification effects, this is a dream. You need not worry about whether the underlying is the S&P 500 Index, gold, corn or livestock; they can all be treated the same way. They are of course likely to have very different volatility profiles and that is something you need to address in your core strategy.

From a technical point of view, a futures contract is an obligation to conduct a transaction at a specific future date. The buyer of the contract is obligated to buy the underlying asset at the end of the contract life and the seller is obligated to sell the same underlying asset at the same time and the same price. The original idea behind ...