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Futures market of CTA strategy
Since 2022, the world situation has become more and more complicated. On the one hand, the money was tight, the epidemic continued to develop, on the other hand, the relationship between Russia and Ukraine continued to deteriorate, and finally war broke out. At home, the strategic orientation of "steady growth" has also collided with the downward pressure on the economy. In this complicated environmental situation, the stock market has undergone great adjustment, and the A-share market has also experienced the biggest monthly decline in recent years. CTA strategy has once again verified the low correlation with other strategies with good positive returns, showing the advantage of "crisis alpha", which has attracted investors' attention and favor. Starting from the futures market, this paper expounds the development course, strategy classification, income source and allocation value of CTA strategy, in order to provide readers with a relatively clear cognitive framework of CTA strategy.

What is CTA strategy?

What assets do you mainly invest in?

CTA (Commodity Trading Consultant Strategy), also called Commodity Trading Consultant Strategy, is also called managed futures strategy, which is an investment strategy applied to alternative assets such as commodities. Because of its low correlation with stock assets and strong defense, it is called "crisis protector" in extreme cases. Mainly investing in the futures market, futures, as a kind of financial derivatives, is a standardized contract made by the futures exchange and agreed to deliver a certain amount of subject matter at a specific time and place. The relevant object can be a commodity, financial assets or index, and the margin trading system is adopted. At present, there are four legally established futures exchanges in China: Shanghai Futures Exchange, Dalian Commodity Exchange, Zhengzhou Commodity Exchange and China Financial Futures Exchange. There are 70 tradable products (excluding options) in the whole market, including non-ferrous metals, black finance, precious metals, agricultural products, energy, chemicals and finance.

What is the trading system in the futures market?

Compared with the familiar stock trading, futures trading mainly has five systems:

Margin system, debt-free settlement system, price limit system, compulsory liquidation system, position limit and large household declaration system.

One of the most distinctive features is the deposit system, which can greatly improve the efficiency of the use of funds.

Margin system refers to the margin paid by futures traders according to a certain proportion of the value of their futures contracts for settlement and performance guarantee.

A simple example:

In stock trading, the stock is 100 yuan/share, and investors must spend 100 yuan/share to buy it; In terms of futures, if a futures contract is also 100 yuan/ton, then investors can buy a contract only by paying 5 yuan/ton according to the margin ratio (usually 5%- 15%);

This is why futures trading can be done from small to large.

Mainly has the following characteristics:

After the listing of 1. contract, the margin ratio is not fixed, and usually increases with the approach of delivery date;

2. The bigger the contract position, the higher the margin ratio.

3. When the futures contract has a continuous long daily limit or abnormal situation, the futures exchange may adjust the margin ratio according to the prescribed procedures;

4. When the contract price of a certain variety is calculated according to the settlement within one month, and the cumulative fluctuation of several consecutive trading days reaches a certain level (one-sided market temperament), the exchange can take measures to control risks according to market conditions.

Who are the main participants in the futures market?

The ecological environment of futures market consists of two kinds of participants.

The first category: enterprises participating in spot trading of commodities or investors holding spot long positions.

In order to prevent the risks brought by the uncertainty of future spot price changes, it is necessary to hedge through futures trading opposite to spot positions. Such participants are called hedgers.

The second category: investors who want to gain benefits from the activities of price changes in the futures market.

Such participants are also called "speculators" and can be subdivided into arbitrageurs and trend speculators. The former gains by looking for the pricing error between contracts in the market and taking advantage of the characteristics of two-way trading of futures varieties, while the latter mainly trades the unilateral trend of futures varieties.

Hedgers reflect the positioning of risk management in futures market;

The existence of speculators has injected more liquidity into the futures market;

It improves the efficiency of the whole market transaction, gives play to the price discovery function relative to the spot, and strengthens the effectiveness of hedging transactions.