Enjoyed Trade Like a Quant / Quant Like a Trader? Ready for the next step?
In Trade Like a Quant and Quant Like a Trader, you learned the foundational skills and concepts for finding, understanding, and exploiting edges in financial markets.
In this course, we take things further. You’ll learn:
Volatility, options, and tail hedging – Options and volatility dynamics and navigating the trade-offs around tail hedging
Volatility targeting – A simple approach to position sizing and risk control
A trade for timing the volatility risk premium – Learn why VIX derivatives tend to trade at a premium or discount to the index and how this leads to a trade
How to structure trades to express your ideas – Guiding principles for answering questions like: “Should I buy the stock or a call option?”, “Should I use a stop loss?”
What’s Inside Advanced Quant Trading Techniques:
Week 0
Enrolment & Initiation
You will get immediate access to the Discord community from the time you sign up. So introduce yourself, say hello, and spark up any discussion with us and the team.
Module 1
Dynamic Sizing in Risk Premia Harvesting
In this Module, we revisit the Risk Premia Harvesting strategy from Trade Like a Quant – a “stonkingly obvious” way to get paid.
We discuss the basis for a risk premium – that is, why do stocks and bonds tend to go up in the long term?
We consider the problem of universe selection and walk through the trade-offs involved with picking a set of instruments for harnessing risk premia, including that forecasting the macro “regime” is hard, and what we can do about it.
We compare three specifications of the strategy – equal weight buy and hold, rebalancing to an equal weight, and rebalancing to an equal risk contribution – and show that there is a basis for noisily forecasting future volatility.
We explore volatility targeting from both theoretical and real-world perspectives, leading to a practical approach to dynamically sizing the Risk Premia Harvesting strategy.
Module 2
Options, Volatility, Tail Hedging, and Market Chaos
In this Module we look at options and how you can use them to protect a portfolio against extreme, unpredictable events.
We also discuss the dynamics of equity volatility and present a systematic strategy for trading VIX derivatives. We finish the module with a discussion of the unique opportunities that present themselves in times of extreme market stress.
One of the challenges of active trading is that:
- The best opportunities tend to occur in the eye of the storm, when normal market relationships are stretched
- But that’s usually after a significant drawdown in most effective strategies.
So, if you’re not careful, you can end up in a situation where you have the least buying power just when you want it the most.
Options have useful properties to help us try to navigate this. We might choose to “pay up” for protection against a market crash, to cushion drawdowns, and ensure that we have the capital we need to take advantage of opportunities in the chaos.
We’ll look at very simple tail-hedging techniques.
Next, we look at a time-varying volatility risk premium harvesting strategy in VIX derivatives.
Previously, you learned about Risk Premia Harvesting. You learned that you tended to make excess returns over the long haul for taking on certain risks.
We didn’t try to “time” our exposure to the “risk premia’ in because:
- These premia appear to be very large
- Every time we are not exposed to them we “miss out” on the premia
- There’s a lot of evidence that timing our allocation to risk assets is hard
- We didn’t want to screw up a “stonkingly obvious high-probability edge” by overcomplicating it.
However, there is some evidence that some risks are not rewarded all the time.
In fact, there’s evidence that taking on some risks can sometimes appear to be quite a bad idea. A good example of this is what we call the Volatility Risk Premium.
On average, equity index options look to be slightly too expensive. It is easy to understand why.
An effective way to “insure” a portfolio of risk assets is to buy options that pay off large in bad times.
“Selling volatility” (using equity index options or VIX products) tends to receive a risk premium because it tends to incur large losses in market crashes.
But there’s evidence that it’s a bad bet to take on that risk all the time.
In fact, due to very lopsided customer positioning, going long volatility tactically can be an excellent trade at times.
We’ll walk through this dynamic and describe a simple trading strategy to exploit these effects using VIX ETPs or VIX futures.
We’ll investigate the time-series properties of VIX. And you’ll note that it’s easy to predict:
- It tends to cluster (stay the same in the short term)
- It tends to revert to its mean over the longer term
- It is positively skewed
- It tends to have a floor under which it won’t go lower
- It tends to increase when the equity index declines
- It tends to show conditional trend effects.
It is not surprising that VIX is predictable, because you can’t trade VIX.
So there is no competitive mechanism to drive out inefficiency.
So we’ll look at VX futures and observe significant basis effects in the futures prices. If VIX is very low, the futures will tend to trade higher than the index. If VIX is very high, the futures will tend to trade lower than the index.
Why?
Because everyone knows volatility is likely to revert from extreme values.
So you won’t find anyone prepared to sell you VIX futures at 9% when VIX is at 9%. The sellers will demand a premium and the buyers will be happy to pay – because everyone knows VIX is more likely to go up.
The futures contracts tend to “price in” the obvious, predictable changes in volatility.
Trading VIX products is not as simple as “predicting VIX!”
You’ll model the “basis” as made up of two elements:
- Predictable future expected changes in volatility.
- The left-over stuff that’s not explained by that – which we call a “time-varying risk premium”.
This leads to a simple systematic strategy to exploit the time-varying volatility risk premium.
This is the most untamed of the strategies we explore in any of the courses. So we’ll have a robust discussion about skew, risk, and sizing.
Finally, we’ll look at strategies for taking advantage of market stress. Some of the very best opportunities present themselves in times of severe market stress, because:
- Leveraged traders are trading when they have to, not when they want to.
- Arbitrage trading is more constrained than usual.
This means that some of the normal “arbitrage relationships” between instruments can become stretched. Sometimes, for example, you can buy $100 worth of assets for $90.
We look at simple trades you can use to take advantage of market stress in Close-End Funds, ETFs, ADRs, equity futures, and crypto futures.
Module 3
Trade Structuring
Let’s say you think that a certain stock is going to go up. How do you best structure a trade around your view?
- Do you just buy the stock?
- If so, do you use a stop loss?
- Would you be better off buying a call option?
In this lesson, we present a simple approach and some guiding principles for structuring trades such as this. After this lesson, you’ll know what questions to ask yourself the next time you need to structure a trade.
This lesson touches on many important lessons related to dealing with edge and uncertainty.
We see that most financial assets are approximately fairly valued, most of the time, and that there are no “free lunches” – only trade-offs.
If we know the future, we can find complex trade structures that would maximise our payoff. But of course, we never know the future. In fact, we know surprisingly little.
One thing we do know for sure is that certain instruments are cheaper to trade, and certain positions are easier to reason about.
So how do you navigate these knowns and unknowns? What do you optimize for?
Here’s what some of our past students have to say about their Robot Wealth Bootcamp experience…
Money-Back Guarantee
If you start the course and decide it’s not quite what you need at this point in your trading journey, we genuinely don’t want your money.
This means you can dive in and experience the course for seven days — to watch the training videos, have a go at implementing the strategies, get support and make some genuine connections in the private Discord server. If the Bootcamp experience still isn’t hitting the mark for you, let us know within seven days and we will refund your full enrollment fee, no questions asked.
Enrollment info
$149 USD
One payment
Your enrollment includes:
Two modules of training including video lessons and written content.
A one-hour lecture on trade structuring
Web application for simulating and managing a portfolio of systematic strategies
Private Discord server for real-time discussion with your instructors and peers
Lifetime access to all training material
Money-Back Guarantee
If you want a refund for any reason, just let us know within seven days and we’ll send your money back, no questions asked.
If you have any pre-purchase questions about Bootcamp, we are happy to help. Email us at [email protected]
More testimonials from past Bootcampers…
