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For my high school national trading competition (organised by the national stock exchange, officially starting in a week) I gathered a team of 3 friends and developed a simple pairs trading strategy. One of them fetched historical data of every stock in the exchange and the remaining two friends plugged the data to an open-source portfolio optimization library, to obtain an allocation we wanted to actually use in the game.

Later on (a month ago) after reading up the manual/rules of the platform I noticed the creators explicitly described what buttons to press to get into a short position on a stock. My teammate modified the script to fetch live data and made an email sending class, on the basis of which I implemented (and afterwards backtested) said pairs trading strategy.

Now the funny part: as the mock trading session started and we exchanged some messages with the organizers, it turned out the platform does not support shorting stocks.

With our whole amateur data pipeline working, and me in the process of extending it to include kalman filters/DDQN suggestions (the platform prohibits automatic trade execution, so we wanted to place orders by hand) I am frankly lost in what to do further. My ideas included:

  • running the script anyways to log the trades and see the returns in 3 months (because this is how long the game is)

  • find an alternative trading competition and deploy the strategy there. I couldn't really find any as the registration dates passed already and they require me to be a university student.

I would greatly appreciate any comments :) thanks

Edit: Apart from buying regular stocks/etfs the platform offers access to futures (which will be available only in the second stage)

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  • $\begingroup$ Is it possible to enter a future in this game? How about buying mini futures ( I mean the investment certificate)? How about other kinds of structured products? $\endgroup$
    – T123
    Nov 7, 2023 at 18:38
  • $\begingroup$ Are you allowed to buy options on your stocks? $\endgroup$ Nov 8, 2023 at 4:43
  • $\begingroup$ I've edited the question $\endgroup$
    – Filip
    Nov 8, 2023 at 9:45

1 Answer 1

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Suppose, without loss of generality, that your universe contains assets $A$, $B$, and $C$. You want to be long $A$, short $B$, and flat $C$. But you're not allowed to short single stocks. What do you do?

There may be an index that you can short using exchange-traded futures that consists of $A$, $B$, and $C$.

  • Short the index,
  • be long enough $C$ to offset your exposure in the index and flatten your exposure to $C$
  • leave $B$, so your exposure to $B$ is via the short position in the index.
  • be long enough $A$ to not only offset your exposure in the index, but be net long $A$.

However there is a risk that the index will be trading at some basis to your replicating portfolio.

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