Fully automated futures trading
- Thread starter globalarbtrader
- Start date
- yes, of course. Thanks@globalarbtrader what are your thoughts on doing 'sell and hold' on VIX/VSTOXX, instead of EWMAC? This produces significantly higher Sharpe on backtest, and also seems to make 'fundamental sense' - or am I missing something?
Hi everyone, I am comfortable with trend following, but am seeking to diversify through some mean reversion. I know strictly speaking carry is a form of mean reversion, but does anyone knows of some good sources or strategies for mean reversion on futures?
In the simplest case you would want to determine if a time series is showing mean reverting behaviour over a time window and then act accordingly. There are a bunch of ways for accessing the mean reverting properties of a time series e.g by using the Hurst exponent https://en.wikipedia.org/wiki/Hurst_exponent
Slightly off topic to this thread, but i'm going to anyway as the quality of eyes on here is great! I'd like to get my feet wet with an options strategy. I've got this guys books and reading through them https://www.amazon.co.uk/Espen-Gaarder-Haug/e/B000APBMRA which are great.
I get the use of options as a hedging strategy but I'm still a little unclear about the overall aim of pure options strategies (when not using options to hedge). Are you trying to price options better than the other party? Meaning that you a feeding the models with a "more accurate" implied vol etc and also that you are arriving at a more accurate fair value price than your counter-party?
I get the use of options as a hedging strategy but I'm still a little unclear about the overall aim of pure options strategies (when not using options to hedge). Are you trying to price options better than the other party? Meaning that you a feeding the models with a "more accurate" implied vol etc and also that you are arriving at a more accurate fair value price than your counter-party?
IMHO with listed options you're not trying to do 'pricing model' arbitrage as you describe. Instead you're trying to better predict the path of realised and/or implied vol better than the other guy; either in an absolute sense or a relative sense.
GAT
I did some work on this. Two of the obvious options are:
- Mean reversion over shorter time scales. Trends tend to work on periods of more than a month, mean reversion in the shorter term.
- Trading a spread - e.g. long nasdaq short s&p.
Trading the spread- I went off this because it looked like I'd have to have a huge position in order to make a small profit; something I'm not comfortable with.
Currently it looks like I'm anticipating a Sharpe of around 0.9. I don't know of any hedge funds that do consistently better, so I'm not sure what the benefit would be doing much more.
What forecast types produces the Sharpe of 0.9?
I am getting 0.7 with long moving averages and carry only, target vol of 0.15
Just those two. I got around 0.7 as well, with equal weights in the portfolio. Then I bootstrapped the portfolio to find better weights, and that improved things. I'm a little concerned about overfit (I don't like this method), but I don't think equal weights is right either.
You can see my weights here: