Trading Euro Bunds (FGBL) Futures Expiration Week Trading
The Euro Bund futures contract shows weak seasonal performance during the futures expiration week.
The contract has ticker code FGBL, is issued by Germany, has a maturity between 8.5 and 10.5 years, and one contract has a value of 100 000 EUR. It’s a heavily traded futures contract that expires four times per year: on the third Friday of March, June. September, and December.
The expiration weeks in the US
We have previously covered the options expiration weeks in both the US and EU:
Trading the futures expiration week in Euro Bund
Let’s go straight to our backtest of the Euro Bund:
We test the futures contracts – not the cash index – and we use a 100% margin. 100 000 is invested in March 2000 and reinvested into the next quarterly futures expiration week. Thus, there are four trades a year.
We invest at the close of the Friday one week before the futures contracts expire, and we hold for one week and sell at the close the next Friday at settlement/expiration day. No commissions or slippage.
This is the equity chart of the Euro Bund during the futures expiration week:
The average gain is a negative 0.06% and the win ratio is 57%. The average gain of any random week is 0.1%.
If we look at the performance for each separate month, we get these results:
The first column shows the respective months. All months are negative except for an outlier (?) in December when most markets have a Santa Claus Rally.
How does the Bund perform after the expiration week? Let’s backtest and find out:
Trading The Week After Euro Bund Futures Expiration
The Euro Bund (FGBL) shows significant positive performance following the expiration of the previous future contract.
The Euro Bund (FGBL) is a bond contract with a maturity of 8.5 to 10.5 years. It’s issued by Germany, and one contract has a value of 100 000 EUR.
EuroBund is a popular trading vehicle and is heavily traded. The contracts expire on the third Friday of the last month of each quarter: March and June, September, and December.
Let’s test the Euro Bund and its performance the week after expiry. We test the futures contracts – not the cash index. We use a 100% margin.
One hundred thousand is invested in March 2000 and reinvested into the next quarterly futures expiration week. Thus, there are four trades a year. We invest at the close of the Friday when the futures contracts expire, and we hold for one week and sell at the close of the next Friday. No commissions or slippage.
This is the equity chart of the Euro Bund:
If we look at the performance for each separate month, we get these results:
The only negative month is December. September is the best month. These happen to be the worst months in the indices. Why is that? we don’t know, but stocks and interest rates normally go opposite ways.
FAQ:
When is the investment made during the Euro Bund futures expiration week, and when is it sold?
The reinvestment is made at the close of the week before expiration and sold at the close of the expiration day.
How does the Euro Bund futures perform in each separate month during expiration week?
December is the only one of the four months that shows a positive return during the expiration week.
What are the implications of the backtested results for Euro Bund futures traders?
The implications are that Bund investors can expect lower returns during expiration week, except for December.
What is the trading strategy for Euro Bund after expiration?
The trading strategy involves investing 100,000 EUR in March 2000 and reinvesting it during the next quarterly futures expiration week. Trades are executed at the close of the expiring futures contract’s Friday, held for one week, and then sold at the close the following Friday.
What is the Euro Bund strategy’s average gain and win ratio after expiration week?
The Euro Bund strategy exhibits an average gain of 0.31% with a win ratio of 73%.