Steal them from other people If you know other people are making money trading an idea, it is often a good idea to pursue it too. This isn’t school. The market gods give no prizes for originality or showing your work. An edge is an edge however you got to it. But be smart about …
Disclaimer: the links in this post are affiliate links. If you use them to purchase a TradingView subscription, you’ll receive $15 in addition to the massive Black Friday discounts TradingView is currently running. We’ll receive a few dollars, too – so thanks in advance if you purchase using our link. I’m sure you’ve heard of TradingView. …
The Equal Risk Contribution (ERC) portfolio seeks to maximally diversify portfolio risk by equalising the risk contribution of each component. The intuition is as follows: Imagine we have a 3-asset portfolio Assets 1 and 2 are perfectly correlated (correlation of 1.0) Asset 3 is uncorrelated with the other two (correlation of 0.0) Let’s say we …
Exponential weighting schemes can help navigate the trade-off between responsiveness and stability of the inherently noisy estimates we make from market data. We previously saw examples of calculating the exponentially weighted moving average of a vector, and estimating the correlation between SPY and TLT using an exponential weighting scheme [link]. In this article, we’ll implement …
Using Exponentially Weighted Moving Averages to navigate trade-offs in systematic trading A big part of the job of the indie trader is data analysis. We’re always looking in the past data to validate (or more often, invalidate) a hypothesis about what might predict future returns. And one could argue that recent data is more useful …
The first fundamental problem traders run up against is that there’s no beginners’ market. You have to compete for good prices with the best in the market. This is a problem. There are a lot of people better at markets than you. If you approach trading in a gung-ho manner, it’s basically like playing in …
Your job, as a trader, is to take all the information we have available now and make a judgment on whether something is trading at the right price or not, given things you can know here: Is it the wrong price? Can we buy it too cheap, or sell it too rich? Let’s say we …
I’ve previously discussed the Volatility Risk Premium (VRP) and how it differs from the Equity Risk Premium (ERP). Probably the most interesting difference, from the perspective of the trader, is that the VRP may be somewhat amenable to timing – more than the ERP at any rate. In this article, I’ll use some of the …
Lately, I’ve been thinking a lot about the Volatility Risk Premium (VRP). The VRP makes much more sense (to me, at least) when I have the Equity Risk Premium (ERP) for context and comparison. So, in this article, I want to discuss the ERP and the VRP, their similarities and differences, and how I seek …
I felt like doing something a little more lighthearted than usual. I’ve been deep in data engineering land these last couple of weeks, building data pipelines for processing a ton of options data for a trade we’re researching (the straddle-over-earnings trade). So I took some time out to mess around with something fun – building a …
