Automatic Support/Resistance using ML

I think an interesting application of ML could be generating the ‘features’ for inclusion in a trading algorithm, converting non-numerical data into numerical. For example, converting market sentiment or satellite imagery to count cars in a retailer’s parking lot. More examples here. I had written previously about Machine Learning for trading strategy design here. Thanks to code from @johnromero via @quantocracy I wrote a quick script to draw support and resistance lines automatically using machine learning on…

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Fama French Multifactor Model in Python

Factor modelling is everywhere these days. I wrote about smart beta here. It is good to quantify performance drivers but the usual caveats apply to quantitative studies utilizing backward looking data, “past performance does not guarantee future results”. I wanted to share a little exercise I did in Python comparing a fund, stock, or anything with a ticker available on Yahoo Finance with the Fama French 3 factor model – Market Returns, Size, and Book…

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Capital Allocation

  It seems there has been far more focus on Capital Allocation and specifically with Hedge Fund seeding/incubation in recent years. It has always been difficult to attract capital but are those with the capital actually doing a good job? How is investing in a fund any different, on the surface, from investing in an equity or CEO? http://www.hedgeworld.com/hw_blog/read_blog.cgi?section=mana&story=mana5078.html

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Conversations with Volatility Traders

I have been trying to post interesting articles relevant to volatility trading and VIX trading on a Linkedin Group I started. I contacted a few people from the group and had a few drinks to discuss their thoughts on the volatility market. Here are some highlights: 1) The volatility space is extremely crowded. There are many many funds utilizing systematic strategies to extract a return from the VIX products. This in turn makes volatility an…

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Rentech returns due to tax arbitrage?

Rentech is a quant shop that has been surrounded by mystery. The fund which I assume everyone has heard of has been racking up returns for years. From wiki: “For the 11 years ending in December 1999, Medallion’s cumulative returns were 2,478.6 percent.” Of course this pertains to Medallion results only. Bloomberg had an interesting article pertaining to their use of basket options to classify trading returns as Long Term capital gains as opposed to Short…

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Short Vol / Options Stategy

I am a big fan of shorting volatility as a strategy. There are many traders who are deathly afraid of what they deem “naked” risk and these traders are the same that tend to buy lots of weekly options or to buy options with no regard to the price they pay for the option. I believe there are ways to both “time” volatility and to trade short with defined risk. It’s not to say I…

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QCOM Vol @ 38

I’m trying out stocktwits and my first real-time trade ‘reco’ is short qcom vol via the 40 straddle, slightly bullish right now. Did a similar play on TM over the weekend but at the time of this writing, 40 ops were still showing 38% vol…. Update: QCOM vol closed at 32% on the 40 line. $$$!

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The Relentless March Forward

The market has been resilient. It’s not necessarily ‘fluctuated’ as JP Morgan once said but more like a slow, low volatile march higher. Where it goes is anybodies guess, but most people have guessed it should go lower. Admittedly I am in that camp and long VXX along with SPY Calendars (long vol, short delta). Normally I don’t waste time pontificating on the direction of the market, all my strategies require is movement! Up and…

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Give Me a Job Or I’ll Sue

CNBC ran with a story about Trina Thompson who is suing Monroe College for her tuition money because she was unable to find a job after graduating. Sentiment has been split between supporting her view that colleges over-advertise their ability to retain employment for graduates and the view that she is just lazy and whining. My personal view is that the answer is somewhere in between. Colleges and University spend a great deal of time…