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Back Adjusted Contracts
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| · | Open Interest - Click here to exclude the nearest contract when heaviest open interest shifts to the subsequent delivery month.
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| · | Volume - Click here to exclude the nearest contract when heaviest volume shifts to the subsequent delivery month.
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| · | Open Interest and Volume - Click here to exclude the nearest contract when BOTH heaviest open interest AND heaviest volume simultaneously shift to the subsequent delivery month.
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| · | Open Interest or Volume - Click here to exclude the nearest contract when EITHER heaviest open interest OR heaviest volume shifts to the subsequent delivery month.
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| · | Date - This option lets your computed contract roll from one contract to the next on a specific day of the month. Click here and type the day of the month you wish rollforward to occur. Enter the roll-forward date (1 to 31) within the rollover month. Use 31 to roll on the last trading day. This prompt coordinates with another prompt (at right).
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| Start/End of Month - The default rolling criterion is for the day of the month (above) to be calibrated to the beginning of the month. An alternate rolling option is to select End of Month here, and enter the number of days prior to the end of the month to change contracts in the box at left. When "End of Month" is selected, enter the number of calendar days before the month is over that you want to roll out of a contract (1 to 28). Think of this as an inverted calendar. Enter 1 for the last day of the month, 2 for the next-to-last day, etc. This option is useful for traders who want to avoid risking delivery of a commodity by rolling out of a contract on the first notice day, which is often calibrated relative to the end of the month.
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| Months Prior - In the box to the left of this prompt, enter the number of months prior to the contract's expiration month when rolling should occur. Enter 0 for rolling within the expiration month, 1 for one month prior, etc.
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| · | Strictly by Days Before Expiration Date - Click here to keep the lead contract in your continuous series until a specific date before expiration of the appropriate contract. To calibrate an early roll date relative to the expiration date, enter the number of days before expiration for the rollover to occur. Enter 0 to roll on the expiration date. The "expiration date" used here is based on the typical expiration date for the specific commodity, and may not be accurate at all times.
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| · | Anticipate - With this choice, the last close of the expiring contract is included on the day before your specified rollforward date. The first opening price of the new lead contract appears in the series on the specified rollforward date.
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| · | Aligned with Price Data - With this choice, the last close of the expiring contract is posted on the day of the specified rollforward. The first open of the new contract is posted the day after the specified rollforward date.
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| · | When Known - With this choice, the final close of the expiring contract appears the day after the specified rollforward date and the first open of the new contract appears two days after the specified rollforward.
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| · | Close New contract, Close Old contract Same Day - Here the close of the new lead contract is compared with the same-day close of the former lead contract and the price difference is applied to all historical data such that the new prices are seamlessly appended to earlier data without a gap. A "close-to-close" back adjuster simulates a buy and sell at market on close order, or a spread order executed at close. The delta in this case is the settlement price in the new contract minus the settlement price in the old contract.
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| · | Open New Contract, Open Old Contract Same Day - Same as close-to-close (above), except that the same-day open prices are used. An "open-to-open" back adjuster simulates a buy and sell at market on open order, or a spread order executed on the open. The order is assumed to be executed one day later than the close-to-close order since open-high-low-close data isn't available until the next close. The delta in this case is the opening price in new contract minus the opening price in the old contract.
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| · | Open New Contract Next Day Close Old Contract Same Day
or apply similar rules to Close New Contract Next Day Close Old Contract Same Day
- This formula compares the open price of the new lead contract with the previous day's close price of the former lead contract and applies the difference to all historical data, such that new data can be added without a gap. The "close-to-open" back adjuster simulates exiting the current position at the close of one day and entering the new position at the open of the next. The delta is the difference between one day's close in the old contract and the next day's open in the new contract. The overnight close-to-open price differential is generally small, so the close-to-open choice should be highly representative of the contract to contract differential. This method doesn't reflect the typical trading style, however, so it may not be the best choice for your simulation. A more refined close-to-open adjustment is available through the last two options.
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| · | Close Old Contract Open Old Contract Same Day - With this option, past (from-contract) history is adjusted so that the old contract close equates to the old contract open, such that the close-to-open gap of successive days of the old contract are preserved. The result accurately reflects the old contract when bridging the two-day period from contract to contract.
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| · | Close New Contract Open New Same Day - With this option, past (from-contract) history is adjusted so that the new contract close equates to the new contract open, such that the close-to-open gap of successive days of the new contract are preserved. The result accurately reflects the new contract when bridging the two-day period from contract to contract. This is a good choice because it represents the best future contract to emulate.
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| · | Close New Contract Close Old Contract Same Day, Roll Day Adjusted (Preferred when rolling on V/OI) - Here the close of the new lead contract is compared with the same-day close of the former lead contract and the price difference is applied to all historical data, along with the Open, High, Low of the Roll Day pricing, such that the new prices, starting with the new close, are seamlessly appended to earlier data without a gap. This method preserves the pricing relationships of all prices prior to the Close on the day of the roll and executes the roll during the trading session on the day scheduled as the roll day. |
| · | Back Adjusted - Back-adjusting involves concatenating historical contracts of a given commodity and making price adjustments to smooth the transitions. This adjustment requires applying the raw change in price of the earlier contract with respect to the price of the current (or later) contract. For example, say your series is rolling backward through the quarterly contracts of December, September, June and March of a given calendar year for your commodity. If the price of the December contract were 100 and the price of September were 95 on roll-backward day, this traditional back-adjuster would elevate all prices for the September contract by five. This would be maintained as a delta of five to be added to all past data, beginning with the September contract, on the day before rolling from the December contract.
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| · | Forward Adjusted - A forward-adjusted data series, like a back-adjusted series, involves concatenating historical contracts of a given commodity and making price adjustments to smooth the transitions. In a forward-adjusted contract, however, the prices of the current contract are changed to eliminate the gap between the current and recently expired contract. An important aspect to remember about forward-adjusted contracts is that current prices do not represent actual values for today's markets.
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| · | Ratio (Proportional) Adjusted - This is an enhancement of the original back and forward adjust options. With it, UA will, at your option, proportionately adjust the history of a commodity by percentage or ratio terms, in addition to splicing contracts by adding or subtracting their relative differences into the past. Ratio adjusted series prepared through ratio multiplications are unlikely to go negative, so there is seldom a need to elevate a series out of negative territory. Contracts are joined by increasing or decreasing successively further distant contracts by a percentage to raise or lower the entire history by the same proportion. Rounding problems, caused by attempts to preserve tick differentials of reported prices, could occasionally push a given series into negative territory.
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| Because the ratio adjustment yields a much milder descending slope of long-term prices into the past, there is much less long-side trading bias that can be captured from the data. An unbiased result that offers realism should be much preferred over a highly profitable and unbelievable result that holds more contributions from inflation than from any perceived trading style or expertise.
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| The idea of ratio adjusted contracts requires applying the percentage change in price of the earlier contract with respect to the price of the current (or later) contract. Consider the above example where a five-cent difference in price between successive December and September contracts resulted in a five-cent adjustment to all past data with the traditional back adjuster. In a ratio adjusted series, the fixed delta of five would represent a factor of 5/100 or 105% of the September price for all data in the September contract. This process would repeat at the same percentage for every contract boundary until the series ended.
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| The Ratio (Proportional) back-adjustment principles offered here were inspired by Thomas Stridman, who discussed the idea in his article "Data Pros and Cons" in the June, 1998 issue of Futures Magazine.
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