Pair Trading Strategy Journal

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

  1. Ive kept my position sizing the same the entire journal as Ive been withdrawing most of my profits to enjoy life a little, snowboarding/surfing trips, other things. But this year Im going to really knuckle down in trading and re-invest my profits, increase size and let the positive effects of compounding begin.
     
    #461     Jan 23, 2009
  2. waltbx

    waltbx

    I wish it were this simple, and unless I'm misunderstanding something here, this won't work. It is an increase of 18.18% in the ratio, but the profit won't fall out by multiplying that by one side of the leg.

    Am I missing something?

    WB
     
    #462     Jan 26, 2009
  3. Let me give you an example;

    Long $10k ABC @ 100
    Short $10k XYZ @ 181
    Ratio = 0.55

    Sold ABC @ 118
    Covered XYZ @ 181
    Ratio = 0.65

    Profit on ABC = 18% ($1800)
    Profit on XYZ = 0% ($0)

    0.65 / 0.55 = 1.1818
     
    #463     Jan 26, 2009
  4. Hello Johnnysharp

    You are showing a profir of 18% but I think it is 9% because you need to calculate the profir on the TOTAL exposure that you have (both legs of the trade) since margin requirements for a PAIR TRADE are taken to be the 2 legs as independent trades.
     
    #464     Jan 27, 2009
  5. yes I know, in my orignal formula I said to multiply the ratio change by one leg only.
     
    #465     Jan 27, 2009
  6. One new trade;

    Long SFL @ 11.68
    Short VLCCF @ 15.13
     
    #466     Jan 27, 2009
  7. Exited two trades;

    Sold MT @ 26.48
    Covered SID @ 16.43

    Sold ETE @ 18.80
    Covered MGG @ 16.02

    Entered two new trades;

    Long TMK @ 34.80
    Short MET @ 33.27

    Long SPN @ 16.59
    Short NOV @ 28.95
     
    #467     Jan 28, 2009
  8. Hi jonnysharp,

    I really appreciate your thread. thanks for your continued contributions.

    btw... what's your return on capital since last August (either the 5 or so months or annualized)?

    thanks,

    Walt
     
    #468     Jan 28, 2009
  9. ROI = 64% since start of journal
    Annualized = 153%
    SP500 Outperformance = 102% since start of journal

    Also with less risk, exposure and volatility of SP500.
     
    #469     Jan 29, 2009
  10. slepore

    slepore

    Jonnysharp,

    How are you managing the ANV/GRS trade since GRS took off? Do you have an uncle point or just stay in now that it is even more out of whack and you are well diversified anyway. I noticed GRS has had positive news in the last few weeks with positive earnings and an upgrade. Do you even take that into account, even though it is after the fact? Seems like it made a difference although in a delayed way.

    Also, you mentioned you trade equal dollar amounts. Does that mean you trade stocks with equal beta's or do you not use beta?

    Thanks,

    Scott
     
    #470     Jan 29, 2009