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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1 answer
117 views

Why GameStop is a case of "predatory trading"?

Predatory trading is defined as below by Brunnermeier, 2005 This paper studies predatory trading, trading that induces and/or exploits the need of other investors to reduce their positions. We show ...
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1 answer
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How to clarify "Predatory trading" process?

Brunnermeier, 2005 studied the "predatory trading" This paper studies predatory trading, trading that induces and/or exploits the need of other investors to reduce their positions. We show ...
1 vote
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38 views

Is there an Ops Risk in being short a bond on the redemption date?

I am trying to understand whether everyone needs to be long or flat when a bond is redeemed, or being short a bond at that time is also not an issue
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1 answer
479 views

Alternatives to Kelly Criterion

I am preparing for Quantitative Trading interviews and I know that they basically require you to solve problems on the probability of winning in a given game and then they would ask you: How much ...
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trading exit strategy

I have the following exit strategy under consideration. Suppose I have n shares of stocks that I want to sell. When the price reaches n/(n-1) of the original price, I sell 1 share. When the price ...
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2 answers
162 views

Calculating win-ratio

I want to quantify the performance of a trader and as I see in the books, there's a performance measurement called win ratio for this. In a book, it is defined as: ...
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3 votes
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Inflation effect on FX rates

With UK's inflation surging to 3.2% as per the published figures today reported by the FT, it is interesting to ponder the effect of rising inflation on FX rates. The article linked above points out ...
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3 votes
2 answers
463 views

How can momentum trading strategies work if returns are not serially correlated?

Returns are demonstrably not serially correlated in most financial time series (Day 1 returns are uncorrelated to Day 2 returns etc.) . Since this is the case, how can momentum trading strategies work?...
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327 views

Spot-Vol covariance and risk reversals

I have been looking into the covariance between log spot returns and log IV returns over a variety of tenors and lookback windows. However I am not sure how these numbers relate back to the outright ...
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1k views

What does it mean to be long the skew?

Consider an equity option such as SPY and I'm long the skew, do I make money if puts raise in price and calls decrease or the opposite?
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Dice question - expected winnings of rolling dice $2$ times

Typical trading interviews consider gambling problems such as rolling a dice and winning its face value. The expected winnings are $\\\$3.5$, $\\\$4.25$, $\\\$\frac{14}{3}$ for one throw, two throws, ...
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Mini Nikkei Futures Contract - Tick and Point Value

for the Mini Nikkei Futures Contract traded at the Osaka Japanese Exchange, it states that the Tick Value is 500 Yen per Tick. But the actual contract is quoted in 5 Point Increments. Is the correct ...
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6 votes
1 answer
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Is publication of Black-Scholes in 1973 and founding of CBEO in 1973 coincidental?

Apparently, CBOE was founded in 1973 and opened on 1st January that year (source = Google), to start trading listed options. The famous Black-Scholes paper was published also in 1973. I am wondering ...
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3 votes
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Is day-trading not a zero-sum game in practice?

I would consider day-trading (by which I mean people sitting in front of their screens, buying and selling assets when they find it appropriate based on (to me very mysterious) indicators such as ...
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1 answer
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How should Aggressive Limit Orders be Processed in a Limit Order Book

I am a little confused about how orders get processed in a limit order book, hope to get a better understanding with this post. If we start off with an order book ...
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Is this an Example where Maximum Adverse Excursion (MAE) is not useful for a Stop-Loss?

Below is an attached screenshot of a scatter plot of a long position Percentage Return of a Asset Security on the Y-axis, and the Maximum Adverse Excursion (MAE) Percentage on the X-axis. Green dots ...
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Maximum Adverse Excursion Formula - Short Trade Position?

Is the formula for the Maximum Adverse Excursion for a Short Selling Trade the (Open - High) / Open, or (High - Open) / Open ?
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2 votes
1 answer
439 views

Quantlib Black Model for Commodity Options (Interest Rate Options) is extremely light on gamma and price vs BBG, is model incorrect?

I am using the QuantLib developers example to try and price a TY option. The Delta is pretty close but the price and gamma are way off (almost by a factor of 2). Am I using the model wrong or is the ...
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Implied cross currency curve

For EM countries without a liquid xccy curve, how I can imply it from local government bonds or swaps?
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why am I seeing a value error? adv_fml. lopez de prado

This code is a snippet from Lopez De Prado Advances in Financial Machine Learning page 44 ...
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1 answer
66 views

Why does a name error appear? adv_fml_lopez de prado. python 3.7 colab

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2 answers
224 views

Trading futures, how does it work in practice?

If my understanding is correct, then owning a future essentially means owning a contract which obliges to buy/sell something at a certain time for a certain price. But what I don't understand is how, ...
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1 answer
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Questions regarding a “lite/kindergarten” Barbell investement strategy implementation

The idea for this question is more or less taken from a slight hint regarding how Universa Investments L.P. functions from Taleb's Antifragile (obviously the real case is far more complex but this is ...
2 votes
1 answer
105 views

Futures Market Open

I've been reading a book recently about trading ORB (Opening Range Breakout) in the futures market. I haven't been able to figure out when exactly the open is for futures. I know the futures market ...
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2 votes
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312 views

How is forex market Quote-Driven?

I am new to the field, and trying to understand structure of spot currency market. As it is stated here, Quote-Driven Market ... only displays the bid and asks offers for a security from designated ...
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1 answer
152 views

Hedging Renminbi with EUR

Hedging Renminbi with EUR. What is the reason why FX traders sometimes go long EUR to hedge shorts in RMB?
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Does the Integrity of Tick Data Vary by Vendor?

My firm is currently looking at various vendors to purchase historical tick data from. The purpose of this question is not to ask for opinions on the best vendor, but purely on whether there is a ...
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2 votes
2 answers
219 views

Trading OTC FX options: choosing expiries

For FX options that are traded OTC vol quotes are given on a standardised grid, e.g. expiries 1D, 1W, 1M, 3M, 6M, etc. maturity and for each of these expiries you have quotes for ATM, 25 delta Risk ...
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FX hedged investments

I was reading FX hedged investments do not have an impact on the FX rate. For example, a Japanese fund buying US treasuries fully FX hedged. I understand the hedging is usually done through short term ...
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Covariance Shrinkage - Am I getting the right variances?

I am looking into a quite simple task: shrinking the sample covariance matrix of a minor sample of monthly returns data on 5 different assets. I am using Python to process my data and have been using ...
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350 views

A decent model to calculate hedges

Is there an option pricing model that wouldn't be too time consuming to set up in Python (for example) and that would provide better delta hedges than Black-Scholes? This would be mainly for equity ...
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Futures positioning reported by CFTC

How is the net futures position calculated by the CFTC? For instance, GBPUSD net contract is positive in the CFTC report, what does it mean given that for each buyer there is a seller?
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How to interpret negative fixed rate in Vanilla IRS [closed]

Currently a vanilla 4Y EUR vs. 6M Euribor IRS has a negative price e.g. -0.35%. I do not understand how to interpret the swap when the fixed rate is negative. If I am the fixed rate payer in this swap ...
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1 answer
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India's FX foward market

https://www.bloomberg.com/news/articles/2021-05-04/india-asks-state-banks-to-protect-dollar-assets-on-cairn-concern Based on this article USDINR forward premium has spiked as there is abundant USD ...
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The most appropriate volatility model

Which would be the most appropriate models to find volatility trading opportunities (i.e. plot a theoretical volatility smile I can rely on) for the following instruments: Options on equity Options ...
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1 vote
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959 views

FX Options price vs implied vol

From the screenshot below, what is the difference between the option price by strike in the table versus the implied volatilities by delta in the chart at the bottom? https://www.investing.com/...
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Calculating performance decay of a strategy

Came across this thread which basically advises t-test for difference in means across periods to calculate whether our edge is deteriorating. The catch being that this test will probably not be ...
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2 answers
213 views

looking for recommendation for a var/vol swap trading book

I am aware this book - volatility trading by Euan Sinclair, and it's nice book. But I am looking for book focus on var/vol swap trading, i.e., introduce about trading strategy/ideas by using var/vol ...
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1 vote
2 answers
162 views

Currency trades

I usually read statements as the below: "Bank A recommends long positions in the yuan against the Singapore dollar" How are these trades usually implemented? Borrow SGD and convert into CNY (...
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Cyclic analysis for trading signal generation

I would like to build trading signals using cyclic analysis in order to obtain a forecast afterwards. I had a look in literature and Hurst analysis, Fourier, etc, are used However, I am struggling to ...
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Use of CNY and CNH derivatives

I was wondering what are the reasons why investors use USDCNH forwards vs NDF on USDCNY? Do you usually pick CNH for trade reasons, while CNY more for speculation as these are USD settled?
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1 vote
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probability on strategy expected return

I’ve been thinking about this for awhile and couldn’t figure it out myself. Assume you have a trading strategy, which return is normally distributed. strategy return has a mean of 1 basis point and a ...
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612 views

How is calculated the futures/forward convexity adjustment for FX?

I could find lots of stuff online for IR derivatives but it seems there isn't too much on FX for this specific adjustment.
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How does one actually create a derivative of a given underlying security? [closed]

Let's say I'm an investment bank and I want to create a derivative whose value tracks that of gold. I don't want this derivative to in any way trade in the underlying security, so no futures or ...
2 votes
1 answer
538 views

Formerly profitable algorithmic trading strategies?

Since algorithmic trading strategies often stop being profitable after a while, I wonder if any such formerly profitable strategies have been made public, and if so, where can I find them?
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To what degree is volume correlated with price impact?

There is question from 2017 here but the answer given doesn't really go into any detail. How correlated is volume with price impact? Especially with regard to wash trading; For example, wash trading ...
8 votes
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2k views

How long do algorithmic trading strategies typically remain profitable?

As I understand it, an algorithmic trading strategy could lose profitability, if, for example: it's rediscovered by others employee turnover leaks the strategy to others market conditions change ...
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3 answers
225 views

Tech companies valuation

Usually tech companies/stocks are valued using one of the two methods: DCF (discounted cash flows) method that is sensitive to interest rates raise (if rates up value down) EBITDA or revenues ...
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4 answers
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FX official rates

How are "official" FX rates calculated? Are these given by an average across all big dealers or brokerage systems (eg EBS, Reuters)?
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1 answer
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Australian banks funding

"Typically, Australian banks pay a small premium to swap foreign currency into Australian dollars. This premium is also referred to as the basis, which is the difference between the implied cost ...
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