This is a summary of links recently featured on Quantocracy as of Monday, 07/28/2025. To see our most recent links, visit the Quant Mashup. Read on readers!
-
Options: Iron Condor Strategy [Trading the Breaking]The iron condors appeal is statistically seductive: a high-probability, defined-risk structure promising steady income from time decay and volatility erosion. Yet beneath its deceptively flat payoff profile lies a quantitatively intricate realityone where theoretical win rates often mask a negative expected value. This isnt a flaw in the strategy itself, but a consequence of its dynamic
-
The Equity Overnight Anomaly ETFs [Falkenblog]TL;DR The overnight return anomaly became much less anomalous around 2009 The failed ETFs designed to capture it suffered from horrible timing, but also transaction costs Transaction costs are much greater than fees, and also greater than fees + (ask-bid)/2 The overnight equity anomaly is that most of the total equity returns are generated from the opening to the close. When I was an active
-
From Defense to Offense: A Tactical Model for All Seasons [Quantitativo]Basketball is a game of adjustments. Bob Knight. Bob Knight was the last coach to lead an NCAA team to a perfect season: 32 wins, zero losses. That record still stands nearly half a century later. His secret? He was a masterful tactician. Obsessed with preparation, relentless on fundamentals, and unmatched in making in-game adjustments. Knight believed basketball wasnt about memorizing
-
How to Identify Ponzi Funds? [Quantpedia]Can we spot a Ponzi scheme before it collapses? That question haunts regulators, investors, and journalists alike. But what if some modern investment funds operate on dynamics that, while not technically illegal, closely resemble Ponzi-like behavior? A new paper by Philippe van der Beck, Jean-Philippe Bouchaud, and Dario Villamaina examines whether certain actively managed funds inflate their own
-
The Risks of Passive Investing Dominance [Alpha Architect]Fueled by the persistent failure of active management (as evidenced, for example, by the annual SPIVA scorecards), passive investing now commands the majority of assets under management. This structural shift is not without consequence. Chris Brightman and Campbell Harveys May 2025 paper Passive Aggressive: The Risks of Passive Investing Dominance, along with recent academic and industry
-
Sentiment as Signal: Forecasting with Alternative Data and Generative AI [Relative Value Arbitrage]Quantitative trading based on market sentiment is a less developed area compared to traditional approaches. With the explosion of social media, advances in computing resources, and AI technology, sentiment-based trading is making progress. In this post, I will explore some aspects of sentiment trading. Using ChatGPT to Extract Market Sentiment for Commodity Trading A Large Language Model (LLM) is