I heard the same argument (the edge has been exploited) before. What does it means ? There was imbalance in vols between components and Index 15 years ago ? And now its gone ? Riskarb mentioned it too once and I read the same on the internet. Then , what about the perfect option's pricing theory ? You cannot have both in the same time. IOW , if basket's components were price too high OR Index vols too low , one could successfully trade one leg as a stand alone strategy. I would like to hear from the pros why vols arbitrage works one BUT not working anymore. BTW , I don't belive that its an "arbitrate' per se ; I can create an end of the month scenario with guaranteed neg PnL for any given position. M2 , this was a bit of subject , feel free to delete if you want. Good luck
IV> Here is a document I found a while back on dispersion trading: http://www.nuclearphynance.com/User Files/2/Dispersion - A guide for the clueless 1.1.pdf Talks about why it worked. It seems that this edge became pretty well known causing that opportunity to end (realized dispersion came in line with implied dispersion).
Well a market beating June due to some major gains in the portfolio during the last week: Model: -0.28% Since start of journal: Portfolio: +5.02 S&P 500: -1.05 Dow Jones Industrial Average: +2.17 Nasdaq Composite: -5.82 Russell 2000: -1.03 Wilshire 5000: -0.89 July list posted on www.aeroscapital.com/equities.htm Note: I have decided not to publicly post the long/short list, at least not yet. I shall be posting those picks to some people. No I do not charge (nor do I accept) any fees/donations/whatever other people call it.
Sorry for the lack of updates. I have been busy with my core FX systems and have been focused on working on a new modelling process. I have stopped trading the equity investing system for now as I simply don't have the time to focus on this. However, as some of you are still following this I shall keep it updated with results and the monthly picks for the hedged model. Returns for the hedged model: July: -2.81% (first month of implementation) August (as of now): -1.09% Total: -3.87% Rather typical drawdown for the hedged model which had a very good run up prior to July. Returns for the long only model: July: -8.17% August (as of now): +3.47% Total (since start of journal): -0.22% S&P 500 (since start of journal: +1.07% The long only model suffered a greater than expected drawdown in July. Returns bolstered by the recent rise in the markets have helped it recoup much of the losses. I expect the markets to end up at around 1400 (8% higher from these levels). As for the website, it was registered by my friend (as noted earlier in this journal) and has expired. I will try and contact him to renew the domain and start posting the picks on there. I have attached the picks of July and August.