Wheat Roll (Carry contract expired on Roll Offset Day?) #1413
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I’ve been updating prices for 10 instruments manually and using interactive controls and manual updates to keep price and roll data fresh until I can fully automate the process. While experimenting with the Interactive_update_roll_status tool, I noticed something confusing about the carry expiry for WHEAT, which shows as -37 days. WHEAT has an annual contract roll in December, with a roll offset of -60 and an expiry offset of 13, targeting a roll date around 2024-10-15. The carry contracts are HKNUZ, and the carry offset is -1, so we’re looking at the September 2024 contract. It seems like the carry contract expires before the target rollconfig roll date. Historically, Mr. Carver rolled WHEAT in September rather than October, which makes me wonder if I’m misunderstanding something fundamental about rollconfig offsets and roll timing. Could anyone clarify how to interpret this or confirm whether I’m misapplying the rollconfig parameters in this case? |
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It seems like you understand the roll config correctly, but maybe you're looking at them too much as a prescription - think of them more as a suggestion, or like a reminder of when you should be thinking about rolling. If Rob has typically rolled in September rather than October should give you a clue - he wants to roll before the carry contract expires. Before you can roll, you also need the forward contract to be sufficiently liquid. This should not be a problem with December WHEAT, but could be for other contracts. Sometimes it's a balancing act to decide if you should wait for more liquidity, or roll sooner so you'll have a more accurate carry forecast. Rob has an entire chapter in AFTS on "accurate" carry, where the takeaway is that it doesn't really matter. I can't remember if he discusses this situation of having stale carry data for a short period (like you would if you followed the roll config strictly). My guess would be that it just doesn't make much difference. |
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When prompted in the interactive_update_roll_status_tool "How many days ahead should I look for expiries?" I'm no longer going to choose the default of 10 days. Thank you for your help |
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It seems like you understand the roll config correctly, but maybe you're looking at them too much as a prescription - think of them more as a suggestion, or like a reminder of when you should be thinking about rolling.
If Rob has typically rolled in September rather than October should give you a clue - he wants to roll before the carry contract expires.
Before you can roll, you also need the forward contract to be sufficiently liquid. This should not be a problem with December WHEAT, but could be for other contracts. Sometimes it's a balancing act to decide if you should wait for more liquidity, or roll sooner so you'll have a more accurate carry forecast.
Rob has an entire chapter in AF…