Strategy

Machine Learning & SciKit Learn

I made the point to someone the other day that technology and coding is getting easier and easier to accomplish. I don’t think I would have been able to perform ‘machine learning’ five years ago but with the resources available today (Python, SciKit Learn, and pages upon pages of StackOverflow) even someone like me can fit a model and build ML algorithms. Machine Learning is also ridiculously “easy”. It’s literally 4 lines of code. It…

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2015 Year in Review

2015 is in the books and it had it’s moments, both good and bad. I had the opportunity this year to travel to 6 continents including an amazing trip to the edge of the world, Antarctica. Unfortunately, we had some health issues in the family as well but we are optimistic in that department for 2016. Leaving the firm last year offered me an amazing opportunity to travel extensively which is an opportunity very few…


Long Crude Oil via Inverse ETFs

My best idea for 2016! I started writing about this on twitter in December after a friend pointed it out: $DWTI short will be trade of 2016 h/t to Bensonhurst buddy for pointing it out #Prognastications #RemembertheSKFs? — LargeCapTrader (@largecaptrader1) December 18, 2015 $DWTI no options but $SCO does. Like me some 1×2 call spreads to finance downside puts or put calendars #2016 #Decay — LargeCapTrader (@largecaptrader1) December 18, 2015 I don’t have a strong…


Forward Testing & Path Dependency

Path Dependency is a fact of life in trading. Your success in the markets is likely directly related to the sensitivity to the path of the asset class. If you are a cash investor with a long time limeline you are exponentially more likely to make money then a hedge fund trader limited to 2%-5% draw down. I used to work with a highly successful special situation trader whose core position was a calendar spread….


Fun with Leverage

An old post regarding a simple asset allocation model that beat the average performance of the top ten hedge funds of the past 15 years got me thinking. As an aside, the average performance will be highly biased upwards as we only know in hindsight what the top 10 hedge funds were. Thinking can be dangerous. So can leverage. In the previous Python post, I tested a simple RV timing tool in VXX and combined…


Enhanced Covered Call Writing – AQR Paper

Covered calls are an extremely popular strategy utilized by large institutions and retirees alike. As chase for yield continues it will likely continue to be popular as it is sometimes viewed as an equity income trade or enhance income trade. Take a look at S&P index skew or call skew for most S&P underlying to see the downward pressure in pricing of calls versus puts due to flows. AQR put out an interesting paper in…


VIX ETP Performance in 2014

As pointed out by my friend @stkbullgod the VIX ETPs had an interesting year. Check it out: One would expect SVXY to be UP around 25% given where VXX is but that is not the case. There is a 36% difference! The VXX borrow rate was ~5% on last check so let’s say 30%. Similar results with XIV (I focus on SVXY as it is an ETF with options as opposed to XIV which is…


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XIV & ZIV historical data

Perusing the internet I found a neat little site: quantstrattrader.wordpress.comĀ  On one specific post, a commentator posted his link to reconstructed XIV, ZIV, VXX, and VXZ from 2004 using historical VIX futures and the methodology from the prospectus. Good stuff and huge thanks to quantstrat and Helmuth Vollmeier! VXX: https://dl.dropboxusercontent.com/s/950x55x7jtm9x2q/VXXlong.TXT XIV: https://dl.dropboxusercontent.com/s/jk6der1s5lxtcfy/XIVlong.TXT VXZ: https://www.dropbox.com/s/y3cg6d3vwtkwtqx/VXZlong.TXT ZIV: https://www.dropbox.com/s/jk3ortdyru4sg4n/ZIVlong.TXT   Edit 11/10/14: After some thought I realized the simulated XIV/ZIV data may be incorrect. While it follows the…


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Go home & get your shine box

An article in FT caught my attention with a clever headline: Why the new shoeshine boy trade is shorting volatility It immediately reminded me of Goodfellas. The basis of the article is comments from Christopher Cole of Artemis Capital. His pieces are well researched and always interesting. His original piece can be found here and I recommend reading it! One argument Mr Cole makes is that the market can simply be broken down into short…


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Quick Note on Vol

Being short vol has been no fun this year. Everyone wants to know how bad it will get. XIV has a short history but here’s the draw downs: Just eye-balling, the 2011 draw down took about 8 months or so to revert back to 52 week highs, with the next being about 4 months in summer of 2012. It looks to take about 2 months to reach it’s zenith or so before beginning to revert….