Quantocracy’s Daily Wrap for 06/01/2015

Over the last four blog posts we looked at eight different exit approaches for a standard SPX iron condor with 25 point wings. These exits included: STD – NA%:NA% – exit at 8 DTE. STD – NA%:50% – exit if the trade has a profit of 50% of its initial credit OR 8 DTE. STD – 100%:50% – exit if the trade has a loss of 100% of its initial credit OR if the

Ignore the Margin Debt Alarm The margin debt alarm has seemingly been sounded every few months when investors realize absolute levels of margin debt has reached new all-time highs (inferring that risk taking has too reached all-time high levels and stocks are at risk). This brief post highlights why any such alarm (and any future margin debt alarm) should likely be ignored.

Simple Monte Carlo analysis tools are often used to assess the risks of trading systems and to determine appropriate capitalization levels. However, simple trade reshuffling algorithms can produce misleading results in many cases and fool their users. There are several Monte Carlo analysis tools available to traders. Some of these are even distributed for free via popular f

The first formal asset pricing modelthe capital asset pricing modelwas built on certain assumptions, including that investors are risk-averse; will maximize the expected utility of absolute wealth; and care only about the mean and variance of return. However, academic research has found that these assumptions dont necessarily hold. In the real world, some