Anybody pseudo pair trade using an ETF?

Discussion in 'Trading' started by ChkitOut, Jun 10, 2009.

  1. Like SPY and XOM for example.

    "Seems" like it offers much in the way of risk control while trading.

    Just for example if you think XOM is ready to bounce off previous days bottom then you would buy xom and simultaniously sell SPY. If the bottom falls out of XOM then SPY is likely to keep falling also. This way you could be very liberal with a stop loss and not feel like your falling off a cliff, SPY is your net so to speak. If XOM bounces off prev days low like you thought you take profit and look to unload the ETF at break even. Just a simple example.

    I have a feeling I'm grossly over simplifying and would be in for a rude awaikening in that an etf hedge, if you will, offers nothing in terms of positive expectancy?

    Anybody out there do this sort of thing?
  2. spinn


    isnt pairs trading just a failed methodology developed by Bright trading to double commissions?
  3. Spot on! Not only x2 comm but also x2 speed of pocketing rookie money.
  4. auspiv


    or maybe XOM would correlate better with something like XLE
  5. Right, but I think the idea would be to not have too much correlation because the risk arbs and algos are all over that shit.

    With something like SPY or ES for that matter you would have something that oscillates around your position.