Following the Trend, 2nd Edition

CHAPTER 2Futures Data

Futures as an Asset Class

Futures Exchanges

There are quite a few futures exchanges around the world, although a few large exchanges in the US are the most important for the typical diversified futures manager. Most exchanges have excellent web pages with tons of useful information about the products they offer and they are worth having a read through. You can always look up the exact specifications for a contract or any other detail you might be interested in.

Futures and Currency Exposure

If you are an international investor or trader and mostly used to cash instruments such as stocks, the concept of currency exposure when it comes to futures will be quite different from what you are used to. With cash instruments the currency exposure is always very clear and straightforward but that is not necessarily the case with futures. If you are a Swiss‐based investor buying US$100,000 worth of IBM in New York, you also need to buy the dollars to pay for it, at least if for a moment we disregard Lombard financing and such. That means that after the transaction you have US$100,000 exposure to the stock price of IBM and at the same time US$100,000 worth of exposure to the US dollar (USD) against the Swissie (CHF). This exposure can have a major impact on the return of your investment and is a major factor in any quantitative analysis of the trade. Consider the ...