04.23.2014
By Terry Flanagan

Factors Affecting VWAP in Futures: Volume Profile Predictability (Part 1 of 3)

In today’s complex and low-latency electronic futures trading marketplace, achieving optimal execution performance with a Volume-Weighted-Averaged-Price (VWAP) trading strategy has never been more challenging. To reduce explicit and implicit costs for buy-side clients, brokers’ trading algorithms must be sophisticated enough to take into account multiple factors in their trading models. Among all those factors, a few carry the most weight: volume profile predictability, spread, liquidity (market impact) and volatility (pricing risk). Over the next three weeks we will explore how these four factors affect the performance of a VWAP strategy in the futures markets.

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