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Hi Vindago I don't want to come across as critical, but perhaps other inexperienced people reading your first comment should also bear in mind the second... FWIW I think commissions and slippage are hugely important, but I don't need to repeat my comments elsewhere on the thread.

If you can't do that, its very hard to trade... One trick I found is to only look at drawdown in %. Makes it easier than cash terms. I admit it would be harder if last financial year hadn't been so amazing.

Yes (see my blog http://qoppac.blogspot.co.uk/2013/12/p-margin-bottom-0.html) Part of "everything by michael lewis"

Report since April 10th Market moves: Big falls in Korean bonds (7 daily sigma move), Aussie rates, Italian bonds (greek contagion?); all of which unfortunately are longs. Equities and US bonds were up, Korean equities biggest riser, also rallies in currencies against the $ (again, not great...

I run a fully automated system so the question is quite different, but still interesting. Do you: a) Turn the system off and close all positions? b) Turn the system off, but leave your positions on (Okay this isn't a serious proposal....) c) Leave the system on, but only allow it to do closing...

You must have a small desk :-) +1 for fortunes formula Behavioural finance: Thinking Fast and Slow Daniel Kahneman Beyond Greed and Fear Hersh Shefrin Strategies: More Money than God Sebastian Mallaby A history of hedge funds, but also a very readable guide to different strategies...

NMM is exactly right - I'm talking about a synthetic put not a real one. "Pricing" these puts (seeing the effect on your p&l) is difficult. You can do it with simulation, but if it only comes in at very deep drawdowns then its a matter of luck what the "cost" is. Its better to use monte carlo...

What you're doing is roughly equivalent to buying a synthetic put option on your own performance. Such an option can't be costless, although it might be in a particular simulation just by fluke. I've also done work on this kind of thing. I think its reasonable to "buy" a massively OTM option...

Thanks for the generous response. If I was trading spreads right now I'd definitely consider other markets. Although fixed income is where I have the most experience in the past I have dabbled in spread trading most futures although not equities; though I know the maths well enough. In fact...

I stumbled across this thread by accident, and looking at the subject line I realised I'm kind of trespassing, but its an interesting subject. I don't trade spreads any more (though I do have some relative value signals in my univariate system), but I used to, mainly in fixed income futures...

Nice video on risk aversion. Would be good to have one showing prospect theory... Instinct tells me if there's 'free money' (or at least positive expected return) there is probably a catch (not a fair coin?). But then despite my handle, I'm not into arbitrage....

Amusing article from the FT alphaville boys (and girl) Picture the scene in the London borough of Hounslow on Tuesday lunchtime, as police moved in to arrest one Navinder Singh Sarao, holed up in a humble end-of-terrace. There’ll have been prior discussion of the possible need for a special...

Interesting and as usual well informed take from Levine@Bloomberg (http://www.bloombergview.com/articles/2015-04-21/guy-trading-at-home-caused-the-flash-crash) Main interesting takeaway is that he wasn't actually active in the market during the flash crash. At best you can argue that his...

Thats not the same thing at all... there was no guarantee that Apple shares would have gone up as much as they have, whereas the OP is talking about a completely risk free yet profitable trade. Pure arbitrage opportunities are extremely rare and rarely last long. They're unlikely to exist in...

It seems most likely the world has changed then. Trading this quickly its very likely you're picking up on market patterns that don't last for a decade. You're going to need to a new system, and a process for finding a new one that will work for a couple of years before you most probably need to...

This suggests your 3 year performance has been unusually good compared to your backtest.

So you've had Sharpe Ratios around the 2.5 to 4.5 mark for several years and for the last 6 months you're Sharpe has been about -1. What was your SR in backtest? Have you just been lucky for 3 years, or did you expect that kind of performance? (bearing in mind backtests can be misleading; it...

It looks like free money. So it can't exist. The two year forward FX price would reflect the expected interest rate differential, such that the initial NPV of the trade would be zero. You'd only make money if you were receiving a floating rate; and the floating rate rose versus the 2 year fixed...

Whats the average holding period? Whats the average annualised standard deviation of returns?

Did the market trade there?