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Good old CSI certainly believes their Perpetual
Contracts are lots "better" than continuous contracts.
I think I saved the issue of their newsletter that
discussed why -- I'll look for it tonight. Something
about "stationary" as I recall.
Prices in a perpetual contract are a weighted average
of two actual prices from two actual contracts.
For example, the two actual contracts might be June 1998
Crude and Dec 1998 Crude. The "weights" are arranged
so that the nearer contract is given more weight.
Examples:
For 02Jan98, perpetual = ((105/106) * CL98M) + ((1/106) * CL98Z)
For 15Mar98, perpetual = ((53/106) * CL98M) + ((53/106) * CL98Z)
For 01Jun98, perpetual = ((1/106) * CL98M) + ((105/106) * CL98Z)
This has the "advantage" that perpetual prices don't
get "distorted" by rollovers. Look at a continuous contract
for S&P500, they will tell you. In 1982 the continuous
contract prices are around 120 .... but the futures themselves
traded around 300. What a "lie" the continuous contract
is telling. And plenty of commodities have continuous
contracts that INCLUDE NEGATIVE NUMBERS! Horrors!
Algorithms based on the absolute level of prices, might do
better with perpetual contracts.
Me? I use continuous contracts. Exclusively.
Mark Johnson
--
Mark Johnson Silicon Valley, California mark@xxxxxxxxxxxx
"... The world will little note, nor long remember, what we
say here..." -- Abraham Lincoln, "The Gettysburg Address"
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