AnthonyFJGarner @anthonyfjgarner - Tumblr Blog

Trading "Educators"

Trading “Educators”

Here are some of the more amusing phrases and words which crop up over and over again in the Financial Twatter-sphere:

serial entrepreneur I live and breathe the importance of price action through my podcast and books I give my personal support make the big money massive trend following profits my proprietary research and systems performance (not his or her own, Obs!) solution for massive returns g…

View On WordPress

Lex:

I think there are alot of people on the QC forums like myself that are lurking but there hasn’t been anything engaging enough to jump aboard yet. I’m a big fan of the slack channel though, very helpful. The thing I miss most about Quantopian is the QS500 & QS1500 universes (a real shame you can use them in live trading anymore) as well as their research environment for testing factors & portfolio construction. Ideally QC would manage the live trading component but leverage the open source tools that Quantopian provides.

I haven’t managed (or perhaps bothered) to work out slack: you seem to have to have a paid subscription? Also I am very puzzled by “Broadcast”. Only one system there? For python at least? Had not realised there is no S&P 500 universe.

It all seems very inactive and Jared and his mates seem pretty slow to answer questions. Probably setting up Lean or Zipline in the cloud is the best alternative and buying your own data? But is it worth it? Last time I tried with Zipline I gave up in frustration – perhaps it’s now improved and uses docker or at least some better method of deployment.

Frankly, looking at all the track records of all the hedge funds and CTAs out there over the years I wonder whether the whole enterprise is worth it anyway. It is well worth it if you are a manager of course – your big profits come through management fees.

But as an individual trader? Well there you either have to shoot the lights out on a small amount of capital and take the risk of blow up or deploy a large amount of capital and settle for lower vol, lower returns.

And let’s face it, given the huge, overwhelming number of professional and amateur quants and coders out there these days, is much left to be discovered? I think not.

I’m a strong believer in AI in the long term

https://anthonyfjgarner.net/2017/12/12/can-artificial-intelligence-dream-of-electric-sheepdaviddeutschoxf/

But even then, even if we had general AI, would it necessarily have any better method of prediction? I don’t know.

For me it all boils down to one simple observation: outperformance / performance is highly probably mean reverting. Here today gone tomorrow. And I do not believe any amount of clever maths or statistics will change that.

Hence in my view one probably wants to stick to a simple carry trade and hedge it to the best of one’s ability with non correlated (ha ha) assets. Anything else is probably great for marketing but probably not much better over the very long term than a traditional 60/40 or simple risk parity approach.

Which is why I have re-named myself the financial grynch.

Call me a spoilsport but I have seen too much hype over the years and been in and out of too many hedge fund investments and strategies to believe otherwise.

Nothing wrong with Quant, nothing wrong with analysis. But if I was younger and keener and enjoyed people contact I would concentrate on building AUM in a low vol, relatively simple, unexciting fund and make my money that way. Now that IS a carry trade.

And good luck to Q and QC: I wish I had the energy and people skills to tag along.

Thoughts on Quantopian, Quantconnect and mean reversion in fund performance Lex: I think there are alot of people on the QC forums like myself that are lurking but there hasn't been anything engaging enough to jump aboard yet.

@Quantopian use and abuse I have been absent for a while and was wondering briefly whether to change the habit of a lifetime and do some short term automated trading.

Can Artificial Intelligence dream of electric sheep?@DavidDeutschOxf

Can we create general artificial intelligence?

I have been captivated for many years by the thoughts of David Deutsch and was relieved to hear he is still a believer, still an optimist. Physics has created the human mind; physics aided by the human mind can certainly create general artificial intelligence.

Deutsch’s intuition is that general AI will only emerge when we have a shift, a giant…

View On WordPress

The Salesman and his “10,000 Things”, with apologies to the Taoists.

The universe, it is said, is slowly dribbling its life blood away. It’s called entropy, a grand winding down over geological time, where whatever it is that makes the universe tick slowly unwinds. We are left (to quote Elliot) not with a bang but a whimper.

So, why do the nations rage and the peoples plot in vain? Or to go East, why concern ourselves with the 10,000 things?

There is unity,…

View On WordPress

It is true that the XIV started traded only in late 2010. But you can easily re-construct (using pandas or even Excel) VXX and XIV back to 1990 by using their underlying indices.

Quantconnect discussion on Trading VIX

No, you can not go back to 1990 by using indices.

While the VIX index itself goes back as far as 1990, futures on the VIX only commenced in 2004 and options in 2006. Without futures there is no contango/backwardation and no XIV or VXX.

The S&P Index on which XIV is based only goes back 10 years. What you need to do it to use the actual futures contracts to simulate XIV and VXX and you need to interpolate the front and second month as per the index. The left hand chart above is the drawdown chart obtained by maintaining a 1x short position in the VIX front month futures contract since 2004. No interpolation applied.

The right hand chart above is the drawdown of the S&P 500 VIX Short Term Futures Inverse Daily Index TR since 2007. As you can see the drawdown for XIV in the last crash would have been close to 90%. Not pretty!

No, you can not test Short Vix back to 1990 by using VIX index. It is true that the XIV started traded only in late 2010. But you can easily re-construct (using pandas or even Excel)

VIX Strategy testing on Quantconnect

Simple Vix System

Given Quantopian’s abandonment of personal automated trading I’m not surprised the refugees come over here. Especially since Python is now possible. What I would really need to trade VIX algorithmically is an automatically generated front month concatenated futures contract also showing spot VIX so as to be able to compute my favoured measure of contango/backwardation.

Although…

View On WordPress

A Trader's Dance of Death to the end of the Rainbow.

A Trader’s Dance of Death to the end of the Rainbow.

A search of Amazon UK produces just 12 books containing the word “random”, appropriately located in the “Science and Nature” section. “Randomness” produces a more satisfactory 520 results. “Complex Adaptive Systems” produces 407 results.

But now for the real fun. Gambling: 19,574 results. Trading systems 2,292. Trading 30,806. Speculation 4,607.

Turning to Google, “systematic trading” produces…

View On WordPress

Will bonds protect you in the coming crash?

Much angst and gnashing of teeth is going on about the fact that bond prices have nowhere to go and hence the traditional protection of a mixed bond/equity portfolio will not avail you this time round.

But what many fail to realise is that the return on bonds over time is almost 90% from coupon and only 10% from price. This applies in both bull and bear bond markets.

The charts and figures below…

View On WordPress

CBOE VIX Tail Hedge Index - is it useful? Was it constructed with the benefit of hindsight?

CBOE VIX Tail Hedge Index – is it useful? Was it constructed with the benefit of hindsight?

CBOE VIX Tail Hedge Index

I have spent a great deal of time backtesting VIX Options. My object has been to seek some way of hedging a short volatility position with OTM VIX calls. Here are the details of the CBOE procedure which holds 30 day VIX calls.

What I did was to assume the sale and purchase of a single 30 Day VIX call option at the mid price each month in accordance with the same…

View On WordPress

Maintaining a Short Position

In the products section, I offer a Microsoft Excel 20016 spreadsheet showing what happens when you fail to adjust your short position in accordance with your P&L and how you might address that problem. Many systems sellers on the internet claim you can just sit back and relax. You cant: if you do this is what happens to your P&L: over time it will flatline. It should be obvious to most of us…

View On WordPress

Maintaining A Short Position

This is a Microsoft Excel 20016 spreadsheet showing what happens when you fail to adjust your short position in accordance with your P&L and how you might address that problem. Many systems sellers on the internet claim you can just sit back and relax. You cant: if you do this is what happens to your P&L: over time it will flatline. It should be obvious to most of us that if you maintain a…

View On WordPress

3x Leveraged Inverse ETF System on Long Bonds and S&P 500

There has been much criticism of leveraged ETFs. Perhaps rightly so, although they may serve a purpose for some. These products are new so we don’t know how they will behave in a severe market turndown. Leveraged ETFs are known to suffer from a number of disadvantages including “volatility drag”.

Shorting the US Long Bond and the S&P 500 Index is likely to be a disaster in the long term but may…

View On WordPress

The Financial Grynch

I have renamed myself The Financial Grynch. A grinch or grynch is generally thought of as a combination of the following:

Moaner

Pessimist

Moaner

Wet Blanket

Grouch

Doomsdayer

Partypooper

Prophet of Doom

Whiner

I am all of those things but I try not to let it get to me. There is a great deal about the world that I dislike and it is not getting any better as I settle into my role as grumpy old…

View On WordPress

Juypter Notebook (HTML format) to Calculate Theoretical SPX Option Prices

I have to thank these guys for the idea: Financial_Hacker

I recommend you do not buy this product unless:

You are familiar with Python and it’s most important dependencies; and

You have downloaded and inspected SPX2017Opt.csv which is sample output from the code for calendar year 2017.

For each trading day (as drafted), up to 24 expiries are listed.

Cut this right down if you want to look at…

View On WordPress

Don’t go Down the Rabbit Hole?

“Alice was beginning to get very tired of sitting by her sister on the bank and of having nothing to do…..when suddenly a White Rabbit with pink eyes ran close by her. Alice started to her feet, for it flashed across her mind that she had never before seen a rabbit with either a waistcoat-pocket, or a watch to take out of it, and burning with curiosity, she ran across the field after it, and was…

View On WordPress

Financial -Hacker - "ersatz" option prices

Financial -Hacker – “ersatz” option prices

Financial Hacker

Nope. It doesn’t cut it. You can’t use a single measure of historic volatility for everything from a one month option to an expiry 24 months out. Perhaps the whole scheme is invalid. For instance IV for an SPX two year maturity is currently 15%+ while an option expiring in the next few days is 5% ish.

It may be invalid to use manufactured data at all. Except if you treat it as…

View On WordPress

Trending Blogs

Recently Viewed Blogs

AnthonyFJGarner