Strategies · Library · Futures
§10.2Pairs and relative value
Calendar spread
Buy the near contract and sell the deferred (or opposite) based on expected supply and demand tightness.
- Asset class
- Futures
- Held for
- Weeks
- Data
- Needs data ARCANE lacks
- Symphony
- Cannot be built as a symphony
The rule
- Signal
- Near-minus-deferred price spread.
- Entry and exit
- Open on a view, close at expiry.
- Sizing
- Equal contracts.
How it fails
- Spread can widen
- Margin
- Liquidity
Data it needs
- two futures maturities
No second contract.
How ARCANE uses it
Not usable.
Needs two maturities.
Filed under the pairs and statistical arbitrage card
Find two securities whose prices moved together for a year. When the gap between them opens past two standard deviations, buy the laggard and sell the leader.
A paper plan from this card holds 5 to 126 days, stops at 1.5× the expected move and uses at most 50% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §10.2, p. 95 of the SSRN version. Described in our words. Pairs and relative value is ARCANE’s filing, not the book’s.