2,532 reputation
414
bio website quant.stackexchange.com
location United States
age 37
visits member for 3 years, 8 months
seen Oct 1 at 2:05
  • primarily trade options(listed equities).
  • math background + quant masters
  • algorithmic developer

Apr
22
comment What type of investor is willing to be short gamma?
"being short gamma is being long volatility" - false. short gamma = short vol. "For ITM options, being short gamma is being long the underlying. " - false (eg short call (itm or otherwise) is short the underlying).
Apr
22
revised What type of investor is willing to be short gamma?
added 241 characters in body
Apr
22
answered What type of investor is willing to be short gamma?
Apr
21
awarded  Editor
Apr
21
revised How does return-based analysis calculate expected return of a trading system?
corrected typo
Apr
21
comment How does return-based analysis calculate expected return of a trading system?
instead of "clearly indicating that you should use this trading system" I mean clearly you should NOT use this system. Just compounding the returns returns (1.25*1.25*.6 - 1) gives u -6.25 (you can't add %'s together, you have to multiply them then it works.) (geometric return does this)
Apr
20
comment How does return-based analysis calculate expected return of a trading system?
@MilkTrader: don't use the arithmetic mean to calculate the expectation, use the geometric mean. this shows you the negative expectation in the case of your example, and the rest of the analysis still works. Geometric mean requires that all of your data samples are on evenly spaced data(like daily in your example). Also geometric mean is guaranteed to be always less than or equal to the arithmetic mean. (in your example the geometric mean is 93.75%, clearly indicating that you should use this trading system)
Apr
20
comment How does return-based analysis calculate expected return of a trading system?
@Milktrader Ahh, I see what you're saying, (trade vs return). This is why I mentioned the part about, "any level of granularity that you have data" So if daily returns is what you have, you still compute the average daily return, then look at min daily return, max daily return, and build a histogram, normalize, and go from there... This is a long way to say, YES... return based analysis uses the same approach as transaction based.
Apr
19
comment How does return-based analysis calculate expected return of a trading system?
@Milktrader: Technically it's the average of the daily returns. That is the expectation on any given day. However, normally this is not sufficient information. To make it useful one needs to look at winning trades vs losing trades and generate a histogram and then normalize(z-score) so that you end up with a confidence interval that allows you to say X% of the time the daily return will be within Z standard deviations of the expected daily return. Then you can choose how to size/risk decision upcoming trades.
Apr
18
comment How does return-based analysis calculate expected return of a trading system?
and don't forget the most important metric... max drawdown.
Apr
18
answered How does return-based analysis calculate expected return of a trading system?
Apr
5
answered Role of skewness in portfolio optimization?
Apr
2
answered Good quant finance jokes
Apr
2
answered Did farmers really buy options on the CBOE?
Mar
25
comment Heuristics for calculating theoretical probabilities of being ITM at time T for listed options
@Dragan: A heuristic for that is to calculate the breakeven, at price of the underlying for a given position, then take the delta for an option at that strike. that is your probability of success for the trade. (the probability that the underlying reaches that level by expiration it works for any options position)
Mar
24
answered Is statistical arbitrage on FX possible?
Mar
24
answered Heuristics for calculating theoretical probabilities of being ITM at time T for listed options
Mar
22
answered Quanto CDS modeling
Mar
22
answered Ultra-High Frequency Trading Help
Mar
22
awarded  Critic