Quant Mashup
RUT Iron Condor - Dynamic Exit - 66 DTE - 20 Delta Continued [DTR Trading]
This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC), with 20 delta short strikes, with different profit and loss exits as a percentage of the initial credit. Recall that these RUT ICs
- 9 years ago, 1 May 2015, 02:42pm -
Implications from the Rise of Passive Investing [EconomPic]
ThinkAdvisor shares Jeff Gundlach's (Doubleline) thoughts from the Milken Institute Global Conference, outlining the potential impact of the shift towards passive investing within Robo Advisors. The financial planner industry has very wide range of delivery. A lot of … asset gathers do
- 9 years ago, 30 Apr 2015, 10:50pm -
"Lies, Damned Lies, and Statistics" ... and Incorrect Statistics [Flirting with Models]
In keeping up with my research reading, I came across a white paper from J.P. Morgan titled Defining Absolute Return Investing in Fixed Income. A graph on one of the last pages caught my eye: JPMorgan - Defining Absolute Return Investing in Fixed Income The stunning non-normality of the
- 9 years ago, 30 Apr 2015, 03:10pm -
Is Being Different Better? Dispersion and Active Management [Investor's Field Guide]
Beating the market very obviously requires performance that is different than the market, which in turn requires portfolio holdings that are themselves different from the market. "Active Share"-or the percent of your portfolio which does not overlap with your relevant market benchmark
- 9 years ago, 30 Apr 2015, 03:00pm -
Market Data Patterns, Order Anticipation, and An Example Trading Strategy [Mechanical Markets]
I recently discussed the inseparability between predicting an instrument’s price and anticipating its order flow. But, sometimes it’s possible to directly predict order flow from the signatures of execution algorithms or even certain exchange order types. In this post, we’ll see examples of
- 9 years ago, 30 Apr 2015, 03:00pm -
Is Passive Perfect? High Active Share Long-Term Investing Works Better [Alpha Architect]
Cremers and Pareek A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract: This paper documents that among high Active Share portfolios - whose holdings differ substantially from the holdings of their benchmark
- 9 years ago, 30 Apr 2015, 02:59pm -
May Has Become The (short-term) “Toppiest” Month [Dana Lyons]
Yesterday, we looked at the “Sell In May & Go Away” phenomenon, with a couple new twists. With many seasonality-type indicators or trends, it is common to see their effectiveness begin to wane over time. Traders begin to anticipate the seasonal trends and attempt to front-run them in order
- 9 years ago, 30 Apr 2015, 02:58pm -
New related paper to #20 - Volatility Risk Premium Effect [Quantpedia]
#20 - Volatility Risk Premium Effect Authors: Israelov, Nielsen Title: Still Not Cheap: Portfolio Protection in Calm Markets Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2579232 Abstract: Recent equity volatility is near all-time lows. Option prices are also low. Many analysts suggest
- 9 years ago, 30 Apr 2015, 02:27pm -
RUT Iron Condor - Dynamic Exit - 66 DTE - 20 Delta [DTR Trading]
In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC) options strategy, with 20 delta short strikes, with different profit and loss exits. This is a non-directional options trading strategy that seeks to profit from a market that
- 9 years ago, 30 Apr 2015, 02:25pm -
Skew Strategy Update [John Orford]
The Sentimental Skew Strategy is my test bench for the Backtesting IDE. I have documented the building of the strategy (while building the IDE). The strategy uses the CBOE implied skew index as an indicator to long or short the S&P 500. It was also instructive to understand the temptations
- 9 years ago, 30 Apr 2015, 06:11am -
A Few Twists To The “Sell In May” Phenomenon [Dana Lyons]
If you follow the stock market closely, you are no doubt aware of the “Sell in May and Go Away” adage. If not, you will likely be inundated with the theme over the next few days. This is our contribution. So what is the idea behind the “Sell In May…” phenomenon? It simply refers to the
- 9 years ago, 30 Apr 2015, 02:16am -
Bollinger Band Feature Analaysis Using a Random Forest Algorithm [Inovance]
Bollinger Bands are one of the more popular technical indicators with many traders using them to both trade the range as well as look for breakouts. However, what features and values should you really be looking at when you are using Bollinger Bands to trade? In this article we will use a random
- 9 years ago, 29 Apr 2015, 04:05pm -
Traders, Guns, and Money [Alpha Architect]
Gopal and Greenwood A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract: In this work, we investigate how mass shootings influence the stock price of firearms manufacturers. While significant anecdotal
- 9 years ago, 29 Apr 2015, 04:05pm -
Interviewed on Better System Trader [Alvarez Quant Trading]
I was recently interviewed on Better System Trader. Go here to listen to it. He also has some other good interviews with Jake Bernstein and Brent Penfold which I listened to. I need to get around to the Nick Radge interview because I am meeting him next month at the 2015 Australian Technical
- 9 years ago, 29 Apr 2015, 04:05pm -
RUT Iron Condor - Dynamic Exit - 66 DTE - 16 Delta Continued [DTR Trading]
This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC), with 16 delta short strikes, with different profit and loss exits as a percentage of the initial credit. Recall that these RUT ICs
- 9 years ago, 29 Apr 2015, 04:04pm -
One-Way Market Due For A U-Turn? [Dana Lyons]
We’ve mentioned before (alright, in nearly every post) that we have several major longer-term concerns with respect to the stock market. One such concern has to do simply with prices themselves – in both space and time. In a post last November, we highlighted the fact that relative to the
- 9 years ago, 29 Apr 2015, 03:03am -
How Smart are "Smart Beta" ETFs? [Alpha Architect]
Many consider smart beta to be a revolution in the asset management industry. For example, Bloomberg ran an article, “Funds Run by Robots Now Accounts for $400 Billion,” which caught our attention. According to this article, “Smart beta,” is one of the fastest growing segments of ETFs,
- 9 years ago, 28 Apr 2015, 08:15pm -
Can you avoid rising rates with high carry assets? [Flirting with Models]
First: the takeaways Expected return for an asset class is a combination of carry and price appreciation If carry is high enough, it can potentially dwarf price depreciation due to rising rates Higher carry assets (e.g. high yield bonds, MLPs, REITs, bank loans, EM debt, et cetera) have historically
- 9 years ago, 28 Apr 2015, 08:14pm -
Is That Back-Test Result Good or Just Lucky? [Adaptrade]
When developing trading strategies, most systematic traders understand that if you search long enough, you're bound to find something that looks great in back-testing. The question is whether those great results are from a great trading strategy or because the best looking strategy was the one
- 9 years ago, 28 Apr 2015, 08:14pm -
System building - Data capture [Investment Idiocy]
A while ago I ran a series of posts on how you would write some python code to systematically trade using the interactive brokers C++ API. Whilst I hope this was helpful it was just a starting point. There are at least two major projects to undertake before one could actually trade. The first is the
- 9 years ago, 28 Apr 2015, 08:13pm -
RUT Iron Condor - Dynamic Exit - 66 DTE - 16 Delta [DTR Trading]
In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC) options strategy, with 16 delta short strikes, with different profit and loss exits. This is a non-directional options trading strategy that seeks to profit from a market that
- 9 years ago, 28 Apr 2015, 08:13pm -
Weekly Commentary – A Curated Charcuterie of Links [Flirting with Models]
Newfound will be hosting its next monthly strategy review session on Thursday, May 14th from 2:00- 2:30PM EST. We’re fortunate enough to have a guest panelist joining us: Brett Hammond from MSCI. He will be discussing factor-based investing and MSCI’s portfolio construction methodologies that
- 9 years ago, 27 Apr 2015, 02:46pm -
Alternatives To Matlab [Only VIX]
Reader Eli asked in the comments "I used to program in Matlab a lot in the past. Now I feel that Python is a better way to go. Any thoughts? Yes, quite a few - however I also hope to hear some ideas from other readers. Matlab is an excellent tool for analytics, and I have been using it for over
- 9 years ago, 27 Apr 2015, 02:46pm -
9 Mistakes Quants Make that Cause Backtests to Lie [Augmented Trader]
“I’ve never seen a bad backtest” — Dimitris Melas, head of research at MSCI. About backtests A backtest is a simulation of a trading strategy used to evaluate how effective the strategy might have been if it were traded historically. Backtestesting is used by hedge funds and other
- 9 years ago, 27 Apr 2015, 01:59pm -
International Value Investing: Looks Like a Reasonable Bet [Alpha Architect]
A rich body of literature has shown that value investing, or buying stocks that are “cheap” based on a variety of valuation metrics, is robust across different markets. For example, Fama and French (1998) highlighted the value premium across world equity markets. The authors find that value
- 9 years ago, 27 Apr 2015, 01:58pm -
New related paper to #21 - Momentum Effect in Commodities and #22 - Term Structure Effect in Commodities [Quantpedia]
#21 - Momentum Effect in Commodities #22 - Term Structure Effect in Commodities Authors: Bakshi, Bakshi, Rossi Title: Understanding the Sources of Risk Underlying the Cross-Section of Commodity Returns Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2589057 Abstract: We show that a model
- 9 years ago, 27 Apr 2015, 01:58pm -
Upcoming Courses for 2015 [Augmented Trader]
New 3-part course Fall 2015 I will be offering a 3 part course, CS 7646: Machine Learning for Trading, online. It is equivalent to the on campus graduate course that I teach at Georgia Tech. The three parts are: • Part 1: Manipulating Financial Data in Python (about 4 weeks) • Part 2:
- 9 years ago, 27 Apr 2015, 01:58pm -
How to Avoid Losing 95% in Ford [Jay On The Markets]
No, we’re not talking resale value here (in which case losing 95% of your original investment is a distinct possibility). We are talking about stock ownership. In a nutshell, the answer is fairly simple: *It is OK to drive a Ford in late summer into fall. But it is NOT OK (apparently) to own Ford
- 9 years ago, 27 Apr 2015, 01:56pm -
When SOX Falls As NDX Has A Strong Day [Quantifiable Edges]
One interesting aspect of Friday’s action was the discrepancy between the NDX and the SOX. While the NDX rose 1.3%, the SOX declined 1.7% – which is very unusual action. Below is an updated study that looks at times the NDX rose by a least 1% while the SOX declined. Six days later 76% of the
- 9 years ago, 27 Apr 2015, 09:00am -
Blast Buy & Hold with this simple Bollinger Band strategy [Better System Trader]
In Episode 4 of the Better System Trader podcast, Nick Radge discusses some trading ideas he’s used to create profitable systems. He mentions a Bollinger Band idea which is also published in his book Unholy Grails. Nick says: the strategy that we did test and showed very promising results was an
- 9 years ago, 27 Apr 2015, 03:16am -
Parsimony [CSS Analytics]
Note: James Picerno of The Capital Spectator recently did an interesting piece evaluating the Self-Similarity Metric and provides some R code which is valuable for many of our readers. The principle of parsimony relates to being frugal with resources such as money or the use of computing time. It is
- 9 years ago, 27 Apr 2015, 03:16am -
Lessons from the “Flash Crash” regulatory fiasco [Mathematical Investor]
On April 21, 2015, the U.S. Department of Justice announced that it would press criminal charges against Mr. Navinder Singh Sarao, a 36-year-old small-time British day-trader. He is being blamed for nothing less than causing the “Flash Crash” of May 6, 2010, the second largest point swing
- 9 years ago, 27 Apr 2015, 03:15am -
Academic Finance Research [Alpha Architect]
Asset Allocation: Is it better to allocate portfolios to factors rather than to assets? (Cocoma, Czasonis, and etal) Tactical Asset Allocation with Market Valuations: Can’t even beat the simple 60/40 rule?? (Estrada) More on ‘Smart Beta” ETFs: How Smart are ‘Smart Beta’ ETFs? Analysis of
- 9 years ago, 26 Apr 2015, 03:56pm -
Do Iron Butterflies Need to be Adjusted? [DTR Trading]
This post will be a quick diversion from the iron condor posts. You may have noticed on my Twitter feed that I have been running backtests on iron butterflies, straddles, and strangles, using a range of entry and exit criteria. Today we will take a look at some statistics of a medium term, 43 days
- 9 years ago, 26 Apr 2015, 03:55pm -
“What Works Best?” Update [CXO Advisory]
We’ve updated “What Works Best?” to incorporate some recent research summaries and adjust interpretation of the body of research.
- 9 years ago, 26 Apr 2015, 09:32am -
70 days of suffering in WalMart [Dynamic Hedge]
Everyone says they’d like to buy blue chips on a pull back. The problem is that it take a lot to disrupt the returns of these glacial behemoths. So when they do pull back, they don’t look so nice from a fundamental or chart perspective. $WMT has some stink on it right now. It’s useless to get
- 9 years ago, 24 Apr 2015, 11:04pm -
The Case for Hussman Strategic Growth [EconomPic]
Well... maybe not the "case for". Rather, a "potential" use. If you are contemplating an allocation to the fund in a buy and hold manner (you're not... just saying)... I wouldn't. While John Hussman is without question a remarkable writer (and in my view a remarkable
- 9 years ago, 24 Apr 2015, 01:12pm -
Backtest Overfitting Demonstration Tool: An Online Interface
Unlike most links we share, this one is dated, but it was something new and interesting and I think worthy of a share. Hat-tip http://www.reddit.com/r/algotrading/
- 9 years ago, 24 Apr 2015, 12:29pm -
Pumping Iron. 20% bull market rallies in iron ore $SLX [@NautilusCap]
Pumping Iron. 20% bull market rallies in iron ore $SLX
- 9 years ago, 24 Apr 2015, 12:27pm -
RUT Iron Condor - Dynamic Exit - 66 DTE - 12 Delta Continued [DTR Trading]
This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC), with 12 delta short strikes, with different profit and loss exits as a percentage of the initial credit. Recall that these RUT ICs
- 9 years ago, 24 Apr 2015, 12:27pm -
The Worst Investment Strategy Ever [Irrelevant Investor]
Sarcasm Do you make bad decisions when your portfolio goes down? What if there was a way to automate the decision so that your emotions wouldn’t get in the way. Good news, I found a way! Here is the strategy, every time stocks drop five percent, you sell and wait for “clarity.” Why would you
- 9 years ago, 24 Apr 2015, 12:22pm -
How to Find Company Name given Stock Ticker [Quant at Risk]
Quandl.com offers an easy solution to that task. Their WIKI database contains 3339 major stock tickers and corresponding company names. They can be fetched via secwiki_tickers.csv file. For a plain file of portfolio.lst storing the list of your tickers, for example: AAPL IBM JNJ MSFT TXN you can
- 9 years ago, 24 Apr 2015, 02:31am -
Carry & Trend Effects Up Close [Larry Swedroe]
Two of the most well-known phenomena in investing are the carry effect and the trend effect. Trend is related to momentum. While carry is typically used in the context of currency markets (currencies with higher yields tend to produce higher returns than currencies with lower yields), it can also be
- 9 years ago, 24 Apr 2015, 01:21am -
Discretionary Spent ? $XLY [@NautilusCap]
Discretionary Spent ? $XLY
- 9 years ago, 24 Apr 2015, 01:19am -
The Most Important Decision When Selecting a Value Investing Fund [Alpha Architect]
We are huge believers in value investing. I personally started off as a fundamental value guy, spending twenty-plus years trying to pick stocks. I eventually ran into Wes, who convinced me that a systematic approach to value investing was the way to go. Wes, as many of you are probably aware,
- 9 years ago, 23 Apr 2015, 12:19pm -
About those Best Days in Bonds…. [Jay On The Markets]
I have written a couple of articles recently about “Good Days in Bonds.” One period of note is the last 5 tradng days of the month. In the articles I brushed with a broad stroke – to avoid exceeding a certain level of curve-fitting – including all 12 months. For the record though, FYI, not
- 9 years ago, 23 Apr 2015, 12:18pm -
RUT Iron Condor - Dynamic Exit - 66 DTE - 12 Delta [DTR Trading]
In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC) options strategy, with 12 delta short strikes, with different profit and loss exits. This is a non-directional options trading strategy that seeks to profit from a market that
- 9 years ago, 23 Apr 2015, 12:18pm -
A Simple Visual Test of CRBM Performance [Dekalog Blog]
Following on from the successful C++ .oct coding of the Gaussian and Binary units, I thought I would conduct a simple visual test of the conditional restricted boltzmann machine, both as a test of the algorithm itself and of my coding of the .oct functions. For this I selected a
- 9 years ago, 23 Apr 2015, 12:18pm -
New Research Paper: Minimizing Timing Luck with Portfolio Tranching [Flirting with Models]
Frequent readers of this blog know that I am somewhat obsessed with the concept of timing luck and portfolio tranching, with the ultimate goal of reducing the variance of active returns. For those less familiar with the topic, you can read our introductory white paper here. I recently wrote a more
- 9 years ago, 23 Apr 2015, 09:16am -
Smart Money Options Indicator Now 'Off The Charts' Bearish [Dana Lyons]
We have mentioned the put/call ratio of open interest on S&P 100 (OEX) options a handful of times over the past 6 months or so. The reason is that this historically “smart money” indicator has been flashing warning signs off and on during that period. On March 3, we posted our most recent
- 9 years ago, 23 Apr 2015, 09:15am -