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ES contract rollover strategy
Started:September 9th, 2015 (09:00 PM) by nathanologist Views / Replies:760 / 4
Last Reply:October 7th, 2015 (12:45 PM) Attachments:0

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ES contract rollover strategy

Old September 9th, 2015, 09:00 PM   #1 (permalink)
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ES contract rollover strategy

Right now ES 9/15 is at 1937
Right now ES 12/15 is at 1927

I've been through 2 rollovers live, and am wondering if there's a decent strategy for trading it. When to switch, is there an edge to switching earlier or later?

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Old September 9th, 2015, 09:00 PM   #2 (permalink)
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Old September 10th, 2015, 09:47 AM   #3 (permalink)
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grausch View Post
Most ETFs use futures to some degree to maintain their exposure. In the past there was an exploitable edge, i.e. when these ETFs rolled their contracts, you could try and front-run them and by shorting the closer month and buying the next month. This trader made decent money using that strategy Emil van Essen - IASG but I don't think he trades it anymore. I believe it was his spread-trading strategy and the performance was good for a year or two and thereafter it decreases quite a lot.

I believe most of the ETFs and LTTF funds now start rolling over earlier and try and minimize their impact in order to keep their roll-over cost as low as possible. Another example of how the market constantly changes...

Quoting myself from another thread. There used to be an edge, and the CTA I linked to make very decent money exploiting that. I don't have access to IASG, but based on what I could see the strategy is no longer being traded - I have read elsewhere that ETFs discovered they were being exploited. If you hold longer term positions, I would advise rolling earlier. If you daytrade, then there may still be some effect, but I suspect most ETFs and LTTF funds now roll their contracts earlier and spread the process out a lot which will reduce the dislocation between the current month and the next month contract.

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Old September 12th, 2015, 03:24 AM   #4 (permalink)
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the spread as it is listed on the exchange is extremely liquid, like 100k up. so it wont move much. of course if you want to get fancy you can try and leg it to save a tick but you leave yourself open the getting legged up and getting a worse fill.

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Old October 7th, 2015, 12:45 PM   #5 (permalink)
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I've played with this a few times, not worth it in my opinion. Remember, the spread between the ES contracts moves, but the ultimate convergence is between that last front month contract and the cash index. So, something built out of the futures and the cash is what I was messing with and it just didn't seem worth it to me. But, like I said, my opinion only.

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