ETF arbitrage day vs swing trades, eg TQQQ vs SQQQ

Just a suggestion but http://www.market-topology.com/ is a searchable database. You can very easily compare correlations of stocks and ETFs to build combos and pairs ideas. You could also look into building baskets or spreading baskets against ETFs to do similar types of trades.

The problem is that these are strategies that require significant capital to deploy under Regulation T margins. This is one of the reasons that I have chosen to focus on the index futures. Similar things can be done with index spreads and the margin is much less, since futures are margined according to the net historical volatility of all open positions. So for example a long NASDAQ 100 and short DOW 30 equally weighted spread (dollar volatility adjusted) can be put on for much less total margin than the cash equity instruments.

There is a reason that professional traders spread and hedge and/or cross hedge. There is money in it and the risk adjusted returns can be very good.

Good luck and good trading!
 
I day trade ETF arb pairs like SQQQ/TQQQ, TVIX/SVXY, NUGT/DUST, UWT/DWT, LABD/LABU. See my recent TASC articles. Need to adjust share size based on trading ranges. biggest challenge is figuring out how to scale in/use trailing stops for variety of types of trading days, eg strong trend vs sideways chop vs midday reversals.

I am 100% convinced that solving it provides a huge advantage, figuring out the details for consistency regardless of mkt condition is my #1 goal. One variant I've traded profitably is to wait til after initial move on strong-trending ORB day, eg TQQQ/SQQQ, then setting buy-stop orders .5 or so above market for each, then scaling into whichever one hits first.

my biggest failure as trader this last 20 years is extreme risk avoidance, trading small size. its why im still a vendor; i trade small. ETF arbs solves this, because with the safety net of "if one goes up, the other goes down, guaranteed" I have no fear of big stop losses, since gains in one offset losses in the other. solving to get past breakeven in all mkt types is the current challenge. often in chop days oil (UWT/DWT) or gold (NUGT/DUST) works best.

i haven't posted here in many years (thx Baron for #1 trading forum)... this topic is extremely worthwhile; solving it has the potential to beat the market. solving for swings is likely easier than daytrading. thoughts?
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If you are ken calhoun, sounds like you are; nice article, Tek Analysis Stocks & Co..................................................................................................SQQQ is a trading ETF for sure,LOL. Wisdom is profitable to direct. SPXL, UPRO have some nice investment trends; all liquid.
 
Thanks realmoney re http://www.market-topology.com/correlation/sqqq?etf=1 excellent tool; thats exactly the type of resource that can help. :) re capital, i often trade 100 shares or less, when testing.

the biggest pita is calculating volatility/#shares to trade of each, to be equal; i should use excel; auto-calc eg 100 shares SQQQ = __ of TQQQ etc

thx Murray re my TASC articles http://technical.traders.com/archive/combo/display5.asp?author=Ken Calhoun

currently with sustained trends i'm looking to swing arb NUGT vs DUST; I'm long 100 dust slightly in the red, will buy nugt if it breaks out
 
thx rm, there's also options strategies, plus futs; i like the idea of longNQ vs shortES

I read your articles in TASC and like the swing trading idea. What option strategies did you have in mind here? I'm not sure how you could properly pick strikes to capitalize on the spread between TQQQ/SQQQ for example.
 
step 1: calculate # of shares needed for near breakeven (these still need adjusting; LABD/LABU closest):

step 2: figure out traling stop/scaling strategy to produce winning daily P&L

ETFARBtest6sept.jpg
 
Hi Ken, Hope you're well and safe? Came across this post and looks like not much action since Sept 2019 (now 2020 amidst the Corona virus pandemic). I have been using this strategy for quite some time. Are you still using it? I do quant work. I read your article. Be good to chat sometime. Jay
 
step 1: calculate # of shares needed for near breakeven (these still need adjusting; LABD/LABU closest):

step 2: figure out traling stop/scaling strategy to produce winning daily P&L

View attachment 208496
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I trimmed most , not all of my TWM.
Even though the main trend in oil + DAL/LUV sector is still down.
Longs look like a V, as in Virus bottom. And a W type bottom is more common........................................................................................
 
Hi Ken, Hope you're well and safe? Came across this post and looks like not much action since Sept 2019 (now 2020 amidst the Corona virus pandemic). I have been using this strategy for quite some time. Are you still using it? I do quant work. I read your article. Be good to chat sometime. Jay

Right, was slow going til lately, now I'm using it with TQQQ/SQQQ VXX/SVXY. A couple weeks ago DWT/UWT JNUG/NUGT. It's a moving target, which pairs to arb/hedge

Scanning criteria is to sort a dedicated quote box by biggest percent gainers from open and trade outliers
 
Right, was slow going til lately, now I'm using it with TQQQ/SQQQ VXX/SVXY. A couple weeks ago DWT/UWT JNUG/NUGT. It's a moving target, which pairs to arb/hedge

Scanning criteria is to sort a dedicated quote box by biggest percent gainers from open and trade outliers
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That is most likely bearish for Russia+ oil market +may hurt them worse than US market ??
They voted to reduce RUSL from 3x to 2 times.LOL/True
 
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