1. Convexity. 2. The historical excess of implied volatility versus realized volatility. 3. The historical performance of calendar spreads under volatility term structure inversion. 4. Reversion to mean under strictly defined conditions. 5. Scheduled event mispricing. 6. Regulatory change arbitrage. 7. Fading MaximumPossibleSuffering. For further details, send $5.00 or a bottle of booze to: MaximumPossibleSuffering C/O Groundskeeper Leroy Easy Time Trailer Park 123 Lazy Daze Lane, Number 2 Yakima, WA 98908
Here is one from me. A big problem with moving average cross over is that the wip-saw almost eats away the profits of the last trend. You get an edge by sizing up your position at approximately the wip-saw heights. Now when a long trend comes in, it allows for a large number of size ups in position, as opposed to the wip-saws. The 'where' and 'how' of sizing up has to be worked out and may well be different for each instrument. Also worth noting is that this works better for tighter moving averages, again tighter is different for different instruments.
Enron. Also a good example of media dissemination arbitrage AKA fading the hype, which there was a lot of before Enron’s fall.
I don't understand...what's a wip-saw height...can you post a chart of this concept involving moving average crossover eating away the profits of the last trend ? Also, can you show how tighter moving averages are different between two different instruments ? Any statistical analysis to support this edge ? wrbtrader