When markets are highly correlated, it can be tough to stay diversified. If various markets are moving up or down in unison, your risk and volatility can quickly get out of hand. That’s why we’ve started keeping an eye on two statistics that illustrate how easy or difficult it has been to stay diversified in the futures markets: the risk on/risk off trade, and market correlations.
Category: Markets
04
Dec
2012
Long-only Commodity ETFs vs. Futures- November 2012
It’s time for our monthly look at how the long-only commodity ETFs are performing versus simply holding the December futures contract and rolling annually. Futures trading is complicated, presents a risk of loss, and isn’t for everyone, but we’ve yet to receive a good answer to the question: why invest in an ETF when you can just roll December futures contracts annually?
03
Dec
2012
Playing Corn by Ear
Trend followers have been struggling lately, but there is one bright spot in the managed futures world: Ag traders. The CME has released some nice infographics on the Ag space and what drives prices in these markets, highlighting one of the unique aspects of ag markets: the role of market fundamentals.
28
Nov
2012
The Oil/Nat Gas Slide Continues
We’ve been wondering lately whether natural gas futures were set to reclaim the title of “Widowmaker,” but in the meantime, we’ve seen a different widowmaker move taking place: the collapsing oil/natural gas spread.
28
Nov
2012
Gambling, Investing, or “Prediction Marketeering?”
This week, the CFTC took action against the online prediction market Intrade. It’s not the first time they’ve run into regulatory trouble, and frankly it’s not very surprising. Will the folks at Intrade figure out a legal way to operate their market in the US? If only there was somewhere we could go to bet on whether or not they will…
20
Nov
2012
If a Credit Rating Falls in the Forest…
The latest “big” development in Euro-area debt crises came yesterday as Moody downgraded France’s credit rating from Aaa to Aa1. But rather than being a massive event for the Euro, and for global markets, it was a pretty boring day, leading us to wonder what use these ratings agencies are in the first place.
19
Nov
2012
Look out Below; Watch out Above?
We were just getting ready to comment on the increasingly down mood in many markets lately, but wouldn’t you know it – as soon as we began, the market started to rally… and then we come in this morning to another neon-green rally. So are we looking out below, or watching out above?
12
Nov
2012
The Bitter Taste of the SoyAAPL Trade
No… SoyAAPL isn’t the newest Snapple flavor, it’s the combination of two of the worst-performing investments over the past few months. While most of the stock world has been obsessing over the drop in AAPL lately, those of us in the futures world have been watching grain markets, and particularly Soybeans, plunge at about the same pace.
07
Nov
2012
Obama On, Risk Off
Yesterday the board was green – leading many (including us) to speculate that the markets were in the midst of a “certainty rally,” driven by relief that the election would be decisive. This morning, however, we’re greeted by a pullback across the board. Is today’s “risk off” move stemming from genuine surprise that Obama was re-elected? Has the reality of the fiscal cliff fight finally started to sink in? Or is it something else?
06
Nov
2012
Election Day Risk On Rally
Americans are lining up to cast their vote, but the market isn’t taking the day off. Today’s neon green rally is giving the pundits one last chance to speculate about the connection between the markets and the election – but does today’s trading say anything about what we can expect from today’s vote?
