The mechanics of trading calendar spreads
To backtest an intraday calendar spread strategy for crude oil futures (symbol CL), I first collect 1-minute bid/ask bars for all CL futures contracts from Interactive Brokers.
After loading the prices into a
pandas DataFrame, I use the function
get_contract_nums_reindexed_like to obtain a DataFrame showing each contract’s numerical sequence in the contract chain as of any given date:
>>> from quantrocket.master import get_contract_nums_reindexed_like >>> contract_nums = get_contract_nums_reindexed_like(bids, limit=3) >>> contract_nums.head() ConId CLM9 CLZ9 CLK9 CLJ9 CLN9 Date 2019-03-04 3.0 NaN 2.0 1.0 NaN 2019-03-05 3.0 NaN 2.0 1.0 NaN 2019-03-06 3.0 NaN 2.0 1.0 NaN 2019-03-07 2.0 NaN 1.0 NaN 3.0 2019-03-08 2.0 NaN 1.0 NaN 3.0 2019-03-11 2.0 NaN 1.0 NaN 3.0
I isolate the bids and asks for contract months 1 and 2 by masking the prices with the respective contract nums and taking the mean of each row. In taking the mean, I rely on the fact that the mask leaves only one non-null observation per row, thus the mean simply gives us that observation.
are_month_1_contracts = contacts_nums == 1 month_1_bids = bids.where(are_month_1_contracts).mean(axis=1) month_1_asks = asks.where(are_month_1_contracts).mean(axis=1) are_month_2_contracts = contacts_nums == 2 month_2_bids = bids.where(are_month_2_contracts).mean(axis=1) month_2_asks = asks.where(are_month_2_contracts).mean(axis=1)
I then use the bids and asks to compute the calendar spread. To reflect the fact that I must buy at the ask and sell at the bid, I compute the spread differently for the purpose of identifying long vs short opportunities:
# Buying the spread means buying the month 1 contract at the ask and # selling the month 2 contract at the bid spreads_for_buys = month_1_asks - month_2_bids ... # Selling the spread means selling the month 1 contract at the bid # and buying the month 2 contract at the ask spreads_for_sells = month_1_bids - month_2_asks
I use the spreads to construct Bollinger Bands set two standard deviations away from the spread’s 60-minute moving average, and I buy (sell) the spread when it moves below (above) its lower (upper) band.
Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.
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