Each month in this Journal, our technical support staff addresses issues of interest to many CSI subscribers in a question and answer format. 

Notice:
  The views and information expressed in this document reflect the opinions and experience of the author Robert C. Pelletier.  Neither CSI nor the author undertake or intend to provide tax advice or trading advice in any market or endorse any outside individual or firm.  All recommendations are provided for their informational value only.  Readers should consult competent financial advisors or outside counsel before making any software purchase or investment decision.  CSI does not stand behind or endorse the products of any outside firms.

Copyright (c) 2002 Commodity Systems Inc. (CSI).  All rights are reserved.

Q.
    It looks like the seasonal study tool generates an "index rating" for every trading day of the year based on prior years' information. Can you please explain how the rating number is computed, what it represents, and what it is intended to indicate? How does the + or - 3 sigma confidence rating come into play? 

A. 
    Unlike most studies, the seasonal index derives its values not from prices in the recent past, but from market statistics for the same relative day in all previous years leading up to the present. We use a 251-trading-day year for our calculations because this is the average number of daily market reports accrued annually. Each seasonal index data point reflects a cumulative value of that day's pricing over time, presented in standard deviations from the norm.

In the case of CBT Corn, for example, for which the CSI database covers about 52 years of data, the computation would involve averaging and discovering a normalized reading for each of 251 trading days over the then-current history. In this way, the seasonal study creates an independent calculation based on all years of data that precede each seasonal reading. As time goes by, more and more years are added to each calculation, resulting in a final reading for each of the 251 trading days of the final year on file, which in the case of corn, reflects the entire 52-year history.

Interpretation of the index is based upon a tendency for the given market to move within an expected or targeted level, as determined by a moving period of some 251 trading days. The measured results (how the market reacts in relation to the then-current projection) are reduced to standard deviations of the cumulative average deviation over time. The readings supplied typically range from + 3 sigma to - 3 sigma. 

Upon running the study for a market that is, in fact, a good seasonal candidate, you should typically see a repeating seasonal pattern that is successively more and more refined and defined as more data is supplied. Markets that do not have seasonal characteristics are likely to exhibit a more or less flat seasonal picture. We have found the seasonal study to be a popular indicator among CSI users.

Q.
    An associate of mine wants to do some analysis of options data and has been having a hard time finding any. Can CSI supply options data, or recommend someone who does?

A. 
    As your friend has discovered, historical data on options is, indeed, hard to come by. We know of no source other than our own database for full options coverage. The many delivery months and strike prices involved in option trading do not lend themselves to the typical forms of technical analysis that make up most of Unfair Advantage's studies, with the notable exceptions of the Put/Call Ratio study and the At-The-Money study. Most advanced analysis of options is carried out through custom studies relying on UA's API. This allows the user to develop appropriate algorithms without the constraints of individual data files. The UA database is so broad and extensive that virtually any sort of modeling can be thoroughly exploited.

Q.
    The selection screen for creating back-adjusted contracts with UA has a new feature that isn't explained in the manual. Where can I get information about the "generate forward" option?

A. 
    "Generate forward" refers to the perspective Unfair Advantage takes in creating continuous files that roll on volume, open interest, or volume and open interest. This type of file is compiled using the earliest data first and then moving forward to later data. Forward-generated data sets do not use information in their creation that was not available on the date in question, and therefore, may do a better job of avoiding bias. This new feature is not documented in the UA printed manual, but it is included in the latest online version.

Q.
    When I use the UA API, the CopytoClipboard function returns a smaller count for the number of bars than the Retrieve function does. Any idea why this is?

A. 
    When the Retrieve functions count the number of bars, they include non-trading holidays. The API was designed to exclude holidays when copying data to the clipboard. Therefore, the count of the number of days of data put on the clipboard by CopytoClipboard may be less than the total number of days reported by the Retrieve function.