Thanks for raising this! I'll have a look and report back
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For dated futures you can only guarantee positive P&L if you hold to expiry, so your compounding opportunities are limited to once/month or once/quarter. So either simple annualization, or (1+x)^12 (monthly) or (1+x)^4 (qtrly) depending on whether you compound or not.
To err on the side of caution I would just use simple annualization everywhere since it applies to every type of contract, requires the least action on the part of the trader, and is more easily understood.
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The system I set up to track premiums uses simple annualization everywhere for this reason. Compounding 8 hour interest to annual is useful primarily for generating eye-popping numbers when you need to impress someone.
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It's truly delightful when there's such depth behind a simple question – I hadn't bothered to consider the denomination of the cash flows, but makes a tonne of sense when you lay it out like that! - Show replies
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