Monday, June 23, 2014

How Does Roll Affect Hedge Fund Short

I was asked for thoughts on how the ‘roll’ (the quarterly expiry of nearest future) might affect the data from my earlier analysis of ‘large spec’ net short positions (‘Are Hedge Funds Throwing in Towel on Eurodollar Shorts’).  The last 7 quarterly ‘rolls’ capture the protracted accumulation of the recent record net-short Eurodollar position held by CFTC described ‘non-commercial accounts.  While this is not a particularly robust set of data, we can see that over this period the average decrease in open interest from quarterly expiry to next day is 640,000.  Additionally, there appears to be no dramatic change in the trend toward greater accumulation of net-short positions at the ‘rolls’.  The downdraft in open interest following the most recent expiry of June ’14 was 538,000 or slightly below the average.  Although the timing of the short position adjustment is near the June ’14 quarterly expiry, I believe this to be rather coincidental and not an influential event.  There appears to be little connection between the ‘roll’ and the net-short positioning in Eurodollars by ‘large spec’.    

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