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| bio | website | quanttrader.info/public |
|---|---|---|
| location | Elgin, IL | |
| age | ||
| visits | member for | 2 years, 3 months |
| seen | yesterday | |
| stats | profile views | 257 |
Quantitative developer, writer, instructor, private trader, so-so musician
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Feb 3 |
comment |
How does pair trading work? I'm not certain that all quantitative trading of pairs involves cointegration. There can be other, quantitative reasons to trade a pair. For instance, I trade the crack spread: the 3-way spread between crude oil, gasoline, and heating oil futures. Those spreads get out of whack, creating trading opportunities, and we can fully quantify the relationship. But the futures are not cointegrated. |
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Feb 3 |
awarded | Supporter |
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Feb 3 |
awarded | Teacher |
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Feb 3 |
comment |
Who has introduced the term 'vega' and why? @barrycarter Good point, Barry. I don't know if it's an appropriate question, but it sure was fun digging through my dusty old option pricing books, looking for a clue. |
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Feb 3 |
answered | Who has introduced the term 'vega' and why? |
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Feb 2 |
comment |
Hedging stocks with VIX futures @jura25 Thanks for the reminder. I'm looking for alternatives to hedging via option purchases; paying those premia ticks me off. Hedging via option sales is a lot of work. I thought the VIX futures might present an efficient alternative. |
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Feb 2 |
comment |
Hedging stocks with VIX futures @Lao-Tzu Thanks. That's a useful observation regarding kurtosis. As for VIX ETFs, I am (very) unlikely to hedge using them: too flaky since I can't control the roll-forward process. I'm likely to stick with the VIX futures... although I'm tempted to experiment also with the synthetic spot (long straddle, adjusted to be delta-neutral through SP500 purchase/sale). |
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Feb 2 |
comment |
Hedging stocks with VIX futures @barrycarter @jura25 I think the situation with VIX and stock indexes is more nuanced than people realize. For example, the VIX futures and IWM (the Russell 2000 ETF) are cointegrated according to my R code (ADF p-value < 0.01, using 2 most-recent years of closing prices, hedge ratio 1:1800). If that's true, then the VIX could be an effective hedge for the R2K. My problem is that my portfolio is not perfectly correlated with the R2K, and its size changes over time. It seems the hedge is ripe with possibilities, but I'm not sure how to make the hedge work. |
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Feb 2 |
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Hedging stocks with VIX futures @barrycarter: Thanks, good point. I should have said they "often rise when stocks fall." I'm not looking for a perfect hedge, just a reasonable one. |
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Jan 31 |
awarded | Precognitive |
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Jan 31 |
awarded | Student |
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Jan 31 |
asked | Hedging stocks with VIX futures |
