bonds, commodities, currencies, equities · Global · CFDs, futures · Daily · Global Free

Turn of the Month Effect in Futures Momentum Strategy

Academic paper

The MOM-TOM Effect: Detecting the Market Impact of CTA Trading

AuthorsOtto Van Hemert

Institute

NLAsser Institute
?Man AHL

Paper linkhttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=2515900

Strategy in a nutshell

This strategy uses 52 liquid futures across asset classes with a 100-day SMA momentum signal, scaled by volatility. Positions are held only during the 3-day turn-of-the-month window, where over half of total momentum returns occur, delivering higher risk-adjusted performance.

Economic rationale

Turn-of-the-month inflows create buying pressure as managers rebalance, with CTA momentum funds amplifying effects, especially in commodities. This leads to temporary price pressure and partial reversals later, explaining the strong momentum profits in ToM periods.

Backtest performance

Annualised return4.8%

Volatility1.5%

Beta-0.01

Sharpe ratio3.2

Sortino ratio-0.476

Win rate51%

Full Python code

1import numpy as np
2from AlgorithmImports import *
3from collections import deque
4from pandas.tseries.offsets import BDay
5from pandas.tseries.offsets import BMonthEnd
6class TOMEffectFuturesMomentumStrategy(QCAlgorithm):
7def Initialize(self):
8 self.SetStartDate(1991, 1, 1)
9 self.SetCash(100000)
10 self.symbols = [
11     "CME_S1",       # Soybean Futures, Continuous Contract 
12     "CME_W1",       # Wheat Futures, Continuous Contract 
13     "CME_BO1",      # Soybean Oil Futures, Continuous Contract
14     "CME_C1",       # Corn Futures, Continuous Contract
15     "CME_O1",       # Oats Futures, Continuous Contract
16     "CME_LC1",      # Live Cattle Futures, Continuous Contract
17     "CME_FC1",      # Feeder Cattle Futures, Continuous Contract
18     "CME_GC1",      # Gold Futures, Continuous Contract
19     "CME_SI1",      # Silver Futures, Continuous Contract
20     "CME_PL1",      # Platinum Futures, Continuous Contract
21     "CME_CL1",      # Crude Oil Futures, Continuous Contract
22     "CME_HG1",      # Copper Futures, Continuous Contract
23     "CME_PA1",      # Palladium Futures, Continuous Contract 
24     "CME_RR1",      # Rough Rice Futures, Continuous Contract
25     "ICE_CC1",      # Cocoa Futures, Continuous Contract 
26     "ICE_KC1",      # Coffee C Futures, Continuous Contract
27     "ICE_OJ1",      # Orange Juice Futures, Continuous Contract
28     "ICE_SB1",      # Sugar No. 11 Futures, Continuous Contract
29     "ICE_RS1",      # Canola Futures, Continuous Contract
30     "ICE_GO1",      # Gas Oil Futures, Continuous Contract
31     "CME_RB2",      # Gasoline Futures, Continuous Contract
32     "CME_KW2",      # Wheat Kansas, Continuous Contract
33     "ICE_WT1",      # WTI Crude Futures, Continuous Contract
34     "CME_AD1",      # Australian Dollar Futures, Continuous Contract #1
35     "CME_BP1",      # British Pound Futures, Continuous Contract #1
36     "CME_CD1",      # Canadian Dollar Futures, Continuous Contract #1
37     "CME_EC1",      # Euro FX Futures, Continuous Contract #1
38     "CME_JY1",      # Japanese Yen Futures, Continuous Contract #1
39     "CME_SF1",      # Swiss Franc Futures, Continuous Contract #1
40                 
41     "CME_NQ1",      # E-mini NASDAQ 100 Futures, Continuous Contract #1
42     "CME_ES1",      # E-mini S&P 500 Futures, Continuous Contract #1
43     "EUREX_FSMI1",  # SMI Futures, Continuous Contract #1
44     "EUREX_FSTX1",  # STOXX Europe 50 Index Futures, Continuous Contract #1
45     "LIFFE_FCE1",   # CAC40 Index Futures, Continuous Contract #1
46     "LIFFE_Z1",     # FTSE 100 Index Futures, Continuous Contract #1
47             
48     "CME_TY1",      # 10 Yr Note Futures, Continuous Contract #1 -5000
49     "CME_FV1",      # 5 Yr Note Futures, Continuous Contract #1-8000
50     "CME_TU1",      # 2 Yr Note Futures, Continuous Contract #1 -10000
51     "ASX_XT1",      # 10 Year Commonwealth Treasury Bond Futures, Continuous Contract #1   # 'Settlement price' instead of 'settle' on quandl. 
52     "ASX_YT1",      # 3 Year Commonwealth Treasury Bond Futures, Continuous Contract #1    # 'Settlement price' instead of 'settle' on quandl.
53     "EUREX_FGBL1",  # Euro-Bund (10Y) Futures, Continuous Contract #1
54     "EUREX_FGBM1",  # Euro-Bobl Futures, Continuous Contract #1
55     "EUREX_FGBS1",  # Euro-Schatz Futures, Continuous Contract #1 
56     "SGX_JB1",      # SGX 10-Year Mini Japanese Government Bond Futures
57     "LIFFE_R1"      # Long Gilt Futures, Continuous Contract #1
58     "MX_CGB1",      # Ten-Year Government of Canada Bond Futures, Continuous Contract #1    # 'Settlement price' instead of 'settle' on quandl.
59 ]
60 
61 ma_period = 100
62 vol_period = 60
63 
64 self.SetWarmUp(vol_period)
65 self.data = {}
66 self.sma = {}
67 
68 self.days = 0
69 
70 for symbol in self.symbols:
71     data = self.AddData(QuantpediaFutures, symbol, Resolution.Daily)
72     data.SetLeverage(5)
73     data.SetFeeModel(CustomFeeModel())
74     
75     self.data[symbol] = deque(maxlen=vol_period)
76     self.sma[symbol] = self.SMA(symbol, ma_period, Resolution.Daily)
77     
78def OnData(self, data):
79 for symbol in self.symbols:
80     # data is still coming
81     if self.securities[symbol].get_last_data() and self.time.date() > QuantpediaFutures.get_last_update_date()[symbol]:
82         self.liquidate(symbol)
83         self.data[symbol].clear()
84         continue
85     if symbol in data and data[symbol]:
86         price = data[symbol].Value
87         self.data[symbol].append(price)        
88 
89 if self.IsWarmingUp: return
90 
91 if self.Portfolio.Invested:
92     self.days += 1
93     if self.days == 3:
94         self.Liquidate()
95         self.days = 0
96 offset = BMonthEnd()
97 last_day = offset.rollforward(self.Time)
98 # day before EOM
99 if self.Time.date() == last_day.date():
100     # Volatility calculation
101     volatility = {}
102     for symbol in self.symbols:
103         if len(self.data[symbol]) == self.data[symbol].maxlen:
104             volatility[symbol] = self.Volatility(self.data[symbol])
105     
106     if len(volatility) == 0: return
107
108     # MA sorting
109     long = [x[0] for x in volatility.items() if self.data[x[0]][-1] > self.sma[x[0]].Current.Value]
110     short = [x[0] for x in volatility.items() if self.data[x[0]][-1] < self.sma[x[0]].Current.Value]
111
112     # Volatility weighting
113     weight = {}
114     
115     total_vol_long = sum([1/volatility[x] for x in long])
116     if total_vol_long != 0:
117         for symbol in long:
118             vol = volatility[symbol]
119             if vol != 0:
120                 weight[symbol] = (1.0 / vol) / total_vol_long
121             else: 
122                 weight[symbol] = 0
123     total_vol_short = sum([1/volatility[x] for x in short])
124     if total_vol_short != 0:
125         for symbol in short:
126             vol = volatility[symbol]
127             if vol != 0:
128                 weight[symbol] = (1.0 / vol) / total_vol_short
129             else: 
130                 weight[symbol] = 0
131     
132     # Trade execution
133     for symbol in long:
134         if data.contains_key(symbol) and data[symbol]:
135             self.SetHoldings(symbol, weight[symbol])
136         
137     for symbol in short:
138         if data.contains_key(symbol) and data[symbol]:
139             self.SetHoldings(symbol, -weight[symbol])
140     
141def Volatility(self, history):
142 prices = np.array(history)
143 returns = (prices[1:]-prices[:-1])/prices[:-1]
144 vol = np.std(returns) * np.sqrt(252)
145 return vol
146# Quantpedia data
147class QuantpediaFutures(PythonData):
148_last_update_date:Dict[Symbol, datetime.date] = {}
149@staticmethod
150def get_last_update_date() -> Dict[Symbol, datetime.date]:
151return QuantpediaFutures._last_update_date
152def GetSource(self, config, date, isLiveMode):
153 return SubscriptionDataSource("http://data.quantpedia.com/backtesting_data/futures/{0}.csv".format(config.Symbol.Value), SubscriptionTransportMedium.RemoteFile, FileFormat.Csv)
154def Reader(self, config, line, date, isLiveMode):
155 data = QuantpediaFutures()
156 data.Symbol = config.Symbol
157 
158 try:
159     if not line[0].isdigit(): return None
160     split = line.split(';')
161     
162     data.Time = datetime.strptime(split[0], "%d.%m.%Y") + timedelta(days=1)
163     data['settle'] = float(split[1])
164     data.Value = float(split[1])
165     if config.Symbol.Value not in QuantpediaFutures._last_update_date:
166         QuantpediaFutures._last_update_date[config.Symbol.Value] = datetime(1,1,1).date()
167     if data.Time.date() > QuantpediaFutures._last_update_date[config.Symbol.Value]:
168         QuantpediaFutures._last_update_date[config.Symbol.Value] = data.Time.date()
169 except:
170     return None
171     
172 return data
173# Custom fee model
174class CustomFeeModel(FeeModel):
175def GetOrderFee(self, parameters):
176 fee = parameters.Security.Price * parameters.Order.AbsoluteQuantity * 0.00005
177 return OrderFee(CashAmount(fee, "USD"))