Questions tagged [trading]

Attempting to profit from short-term fluctuations in a security's price as opposed to investing in the security for use or income.

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25 views

How does Intrinsic and Time Premium factor into deep ITM options for leveraged securities

So I'm curious about the downside risk on this trade. Some backstory - I noticed the options chain for TZA had basically no volume or open interest for deep ITM calls about a week ago while also ...
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24 views

What BUY order type should I use if I have a limit price in mind, but I still want to capture best price if it goes below my limit?

I'm pretty new to trading, and I couldn't really find anything helpful online. Say I want to buy a stock for a maximum of 21 USD per share. However, if the price hits 21, I don't want my order to fill ...
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28 views

What is the name of leverage contracts where the worst case payoff is zero?

In a typical leverage futures contract the value of a position can be negative. That is to say, if you go long \$100 with 10x leverage at a price of \$50 and you then sell at \$40, the value of the ...
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54 views

Optimal withdrawal rate based on alpha and drawdown

My trading returns is about 50% monthly(alpha) and maximum drawdown is about 20%. Is there a mathematical way to define the optimal withdrawal rate X%(say when profit level reach y%) to avoid risk of ...
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34 views

Swap Spread Positions with Duration Bias

In practice, how are swap spread positions actually sized and constructed between the two legs? I would suppose the two legs are simply matched in notional terms. However, in practice, do traders ever ...
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22 views

estimate credit bond price out of trading hour

How to estimate a credit bond's price out of trading hour ? For example, how to estimated an U.S credit bond's price at 8am london time, when the US bond market is closed? We can decompose a credit ...
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94 views

Funding foreign asset purchase with repo

https://www.bis.org/publ/qtrpdf/r_qt1709e.pdf extract from page 38 An investor wants to buy a foreign currency security with domestic cash but does not wish to run FX risk. Then, three transactions ...
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62 views

When you rollover a FX Forward, do enter the FX swap at the spot rate or previous forward rate?

from below link: https://www.linkedin.com/pulse/distinction-between-fx-swaps-currency-risk-management-akubue-cfa/ "if the date of settlement of the export proceeds has been extended by three ...
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18 views

FX forward hedging with rollover

I was wondering when you enter a swap at the forward expiration under which scenarios you are hedged or not. For example, a European exporter buys a fwd to hedge a delivery of $1m in 6 months (long 6m ...
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63 views

FX swap par value

What is the relationship to apply so that an FX swap value is 0 at inception? For example, for a short 1y EURUSD swap with 1mm euro notional, at inception spot = 1.1000 and 12m fwd = 1.1022, EUR 1y ...
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85 views

Is the pricing formula for FX Forwards the same for FX Swaps?

If I use fwd_price = S*(1+r_term)/(1+r_base) to determine the theoretical value of a forward, how should I tweak the formula to price a FX swap? Assuming swap = fwd-spot, swap_price = S*(1+r_term)/(1+...
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133 views

Backtesting Period Effect

I am backtesting a stock trading strategy. I tested it over two time periods: 2000-2020 and 2015-2020 and compared the results against a buy and hold strategy. To be clear, I only changed backtesting ...
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74 views

What does it mean In FX trading you using a T/N swap to avoid physical delivery of the currency? [duplicate]

I understand you use T/N swaps to rollover FX positions and so avoid physical delivery but I dont quite get how this happens in reality. For example, if I am long EURUSD and need to deliver/sell USD ...
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111 views

Fixed Income Index, ETF Replication

Can anyone please explain how fixed income index are actually replicated (in an ETF) by asset managers ? I looked online, everyone says they do sampling (stratified sampling) which makes sense but I ...
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86 views

Machine Learning model forecasting on real time data in python

I’m building a Forex trading system based on machine learning with Python and brokers API. I get price time series data + fundamental data and then i train the model on that. Model means SVM, RF, ...
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36 views

Any experience with synchronization of time series to adjust for daylight saving time?

I am currently working on a trading project where I essentially have two time series. One is high frequency intraday trading data that does not take daylight saving into account. The second one is a ...
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129 views

Factor investing and PCA

I'm struggling to understand how Principal Component Analysis (PCA) is used in Factor Models of returns. For example, in the JPMorgan paper (p.19) the authors write: In a multi asset portfolio, factor ...
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46 views

Accesssing buyers and sellers of futures contracts

I'm attempting to access all futures contracts traded for a given day. Reading the Quandl blog: https://blog.quandl.com/api-for-futures-data to access futures contract use the python code: ...
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135 views

How are leveraged futures paid out if they are zero sum?

Alice buys 10 contracts from Bob at 100x leverage and a total cost of £100 - Bob's order was also at 100x leverage. Bob is 10 contracts short and Alice is 10 contracts long. Both have a margin ...
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58 views

SEC Rule 611 Trade Through (OHLC Data Distortions) - with visual example

Has anyone ever quantified or understand the impact of distortions to the High/Low of the day based on SEC Rule 611 pass through trades? These are trades that happen outside NBBO (national best bid ...
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22 views

How to use pivot points for a sell/buy order?

I have implemented some trading strategies like macd and sma. When the lines are crossing they give a sell or buy signal. Now I have calculated pivot points of one day ...
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29 views

What is the relationship between volume and size?

Here is a snapshot of information about the last trade (tick), best bid/ask and 24h volume of BTC-EUR: ...
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103 views

Machine learning algorithms that generate trading models (literature)?

Is there any academic literature on machine learning algorithms that are able to generate functioning trading models? Would this even be feasible at all, now or in the future? Could you point me to ...
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99 views

Can I use the Sharpe Ratio as an objective function in algorithmic trading?

I’m experimenting with custom loss functions for different trading rules and have come across a few articles citing success in directly using the (negative) Sharpe Ratio as a loss function, ...
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41 views

Cumulative returns from ROI of individual trades

I've a series of ROIs: $R(n) = [r_1, r_2, ... r_n]$ generated from taking $n$ trades. Each ROI value is in percent $[0, 1]$. How do I generate cumulative return $C(n)$ from this data? My understanding ...
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124 views

Why is PCA/ML not used frequently in trading?

I'm curious why things like PCA/ML aren't use frequently in trading? Is there an underlying philosophy that prevent this? What I was thinking, was that if PCA worked for making money, then everyone ...
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124 views

What kind of returns should I use for my model?

I'm building a machine learning model with the aim of learning a daily strategy of buy or sell the stock. I was wondering if I should use adjusted close price or something else to calculate returns (I ...
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31 views

Combining multiple securities' Net Asset Value time-series into one total NAV series

I have a number of individual securities that each have a Net Asset Value (NAV) time-series. For example: ...
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1answer
137 views

Continuous Percentage Profit and Loss calculation

I need to calculate a profit and loss for an equity timeseries. The position size (column D in the below table) is not binary (not moving from zero position to a position and then back to zero ...
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3answers
76 views

Is there any way to get a list of all trades that took place for a stock?

Let's say there's a sample stock, XYZ, that trades on NYSE (or maybe NASDAQ). I can look at the historical data for it (from any number of websites) to see its volume and OHLC data for any given time ...
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44 views

Which features based on orderbook information could be relevant for price prediction?

I have some orderbook data, including 5 ask prices, 5 bid prices, amount of asks and bids for every price, and midprice which is equal to (best bid + best ask)/ 2. I would like to predict absolute ...
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1answer
215 views

What's the explanation behind technical trading? [duplicate]

To begin with, pardon my amateurish question. I'm not into trading whatsoever, hence the following text doesn't represent practical expertise, it's based upon a train of thoughts and various sources I'...
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49 views

Where bonds are marked v.s.where bonds are traded

We can get bond live prices from various venues, for example, BBG's CBBT prices. Usually you would get bid/ask prices. Are these prices prices that people called bonds' marked prices ? are they ...
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55 views

Option trading strategy to test crash risk premium

I would like test if there are "crash risk premia" priced into out-of-the-money puts. My initial thought was to create a portfolio with a short positions in (deep) OTM put options and a long ...
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114 views

What is the disadvantage using the edge ratio?

I want to evaluate and optimize an algorithmic trading system. For this I want to follow a step by step approach - first looking at the entry, later at other aspects of it (money management, position ...
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27 views

What can one do with cross-sectional relationships?

This is somewhat of a broad question, but I think we all would like to find signals that predict something in the future. However, often times, we are just left with cross-sectional relationships (...
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55 views

How to estimate traded volume at each tick, given the quotes and the volume at the bid and ask?

I have some data which contains Bid and Ask prices as well as the number of units at the Bid and Ask. Since I'm just messing around and I don't have price of a trade, I will use mid price. But what's ...
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2k views

Is this how stock trading works?

I was told to move this question here from Money Stack Exchange, where some people have already provided some feedback. This is a very basic question about the Stock Exchange, and I was looking for ...
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1answer
47 views

Is this a new way to profit from earnings releases using long straddles?

How much can I reasonably make if I buy a long straddle just as soon as earnings release day is announced and ride the rise in implied volatility along with any movements till the earnings release ...
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88 views

How do trading firms that pay for order flow make money from “arbitrage”?

I understand that retail brokers pass their customers' trades on to trading firms, and receive a payment for order flow in return. These trading firms carry out the trades and presumably also have to ...
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392 views

Detect pattern from OHLC data in Python

I'm trying to create a script that, from standard OHLC data, finds patterns. The specific pattern i'm looking for right now is sideways movement after a move up, here is an example: So basically my ...
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66 views

More/less trading on Mondays and Fridays?

In market microstructure/high frequency finance, it is well known that the trading day has high activity in the opening hours and closing hours compared to mid-day. Can the same be said about the ...
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36 views

Spread determinants

Knowing that bond A is more liquid that bond B, i.e higher volumes are traded on bond A, does this information have any impact on the spread? Can we say that the large volumes traded on A will ...
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354 views

How can we estimate new stock price after a large purchase?

Suppose someone buys $4bn of a particular stock over the period of a few weeks. Depending on how much that stock is being traded, you would expect that the price goes up in a visible way compared to ...
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Why might a bulk annuity provider hedge their exposure to risks such as inflation, interest rates, and exchange rates on a weekly basis?

I was recently speaking to someone who works at a UK life insurer which offers defined benefit pension scheme buy-outs. He mentioned that the company employs traders (of bonds and swaps, mostly) and ...
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53 views

Digital height of an option

Could someone please help me explain the concept of Digital Height clearly in the options world? Thank you
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4answers
161 views

Which Nikkei225 futures contract to take?

I have a working (swing) trading strategy based on equity index futures in place. I enter and exit by giving market orders. The strategy generates roughly 40 trades per instrument per year. I want to ...
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146 views

How do you formulate trading ideas and strategies?

I have access to some tick data and Bloomberg data. Outside of data mining and hoping to find an economic rationale after the fact, what do you usually do to generate ideas before you look at the ...
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361 views

What are the main types of orders on an exchange?

I'm currently reading Michael Lewis' Flash Boys, which is about high-frequency trading. It was published in 2014 and it says that there are 150 types of orders on exchanges (mainly built for HTF ...
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35 views

Can a pay-for-order-flow wholesaler front-run orders it sees?

An argument I often hear (which was repeated here) against sending orders through "pay-for-flow" wholesalers is that those wholesalers can potentially determine if you are an "informed" trader (as ...

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