Pair Trading Strategy Journal

Discussion in 'Journals' started by jonnysharp, Aug 18, 2008.

  1. saico

    saico

    Stopped out.

    Sold PVA @24.94 (-3.71%)
    Cov. SFY @29.91 (-3.89%)
     
    #1871     Feb 26, 2010
  2. coreed

    coreed

    Covered AB @ 26.69 (2.73%)
    Sold OZM @ 13.42 (1.44%)

    8 trades posted to forum:

    5 wins
    3 losses
     
    #1872     Feb 26, 2010
  3. saico

    saico

    New positions.

    Long PAA @55.24
    Short MMP@45.14

    Long SLF @28.39
    Short MET @35.98
     
    #1873     Feb 26, 2010
  4. Question> Wouldn't it be easier to be market neutral by just trading credit spreads or buying stock and having options against it as a hedge to be neutral?...seems this would be easier, no ?
     
    #1874     Feb 27, 2010
  5. Credit spreads are directional... against credit!
    Market neutral means that the beta of your PnL regressed against the market (let's say the S&P 500) is weak, or uncorrelated. So a stock protected with an option is going to be somewhat correlated to the market.
     
    #1875     Feb 27, 2010
  6. coreed

    coreed

    Credit spreads maybe. I don't know enough about the yield curve to respond fully. Selling options against an existing position is a hedge of some kind - even if the motivation is to earn extra income, so I am not sure the comparison is valid.

    Stat arb/Pairs trading although market/sector neutral is still speculation.

    You:

    A: Don't know if convergence/divergence is going to happen
    B: Don't know if none/one/both legs of pair are going to provide profits.
     
    #1876     Feb 27, 2010
  7. bone

    bone

    Regardless of the market space (energy, currencies, grains, metals, interest rates, equities) or the holding timeframe (months, weeks, days, minutes, high frequency stat arb) the basic tenets for relative value spread trading remains: capture the difference between the products either through selling convergence (narrowing spread) or buying divergence (widening spread).

    The trader's edge in spread trading is derived from: 1. the combination of instruments the trader chooses to trade, and 2. the statistical modeling or technical analysis the trader applies to the spread differential.
     
    #1877     Feb 27, 2010
  8. Selling options against a position is still directional...

    For example, everyones favourite: Selling the call against stock you own....you sell an ATM call against your stock....the stock has a delta 1 and your call -.5....you are still running a bullish position with net +.5 deltas...

    Longing one stock and shorting the other has neutral delta position as stocks are +1 & -1 respectively...

    ??

    99.99% any trade ever placed is speculation.....I don't think anyone here is arguing otherwise
     
    #1878     Feb 27, 2010
  9. coreed

    coreed

    New Trade: US Regional Banks

    Layer 2

    Bought FMBI @ 12.89
    Sold MTB @ 77.68

    No negatives about trade set up.
    Wld have liked % -> Mean to be higher
     
    #1879     Mar 1, 2010
  10. coreed

    coreed

    Sold RYN @ 42.43 (4.33%)
    Covered DRH @ 8.55(-3.51%)

    9 Trades posted to forum

    6 wins
    3 losses
     
    #1880     Mar 1, 2010