Did that diverge or converge?
Futures spread trading
- Thread starter Lucias
- Start date
I don't think it's quite that much of a no-brainer... One has to be aware of the inherent dangers of RV.
In terms of what I provide to clients, the custom technical studies I designed expressly for spreads takes convergence/divergence into account completely. The entries are actually fairly mechanical and are generated through the study - I want my clients to focus their resources more on sound profit and stop/loss targets.
Hahaha, yeah, as I said on another thread, you can call me Lord Helmet.
In general, I just want to make sure that people don't get lulled into a false sense of security. The dangers of RV are different, but no smaller for that. Just remember John Meriwether.
Any person requiring absolutes with their trading is in the wrong business.
Having said that, our typical portfolio is much more diversified than anything LTCM ever conceived of in terms of exposure to different market sectors and rules about compounded forward curve risk in the same space.
Having said that, our typical portfolio is much more diversified than anything LTCM ever conceived of in terms of exposure to different market sectors and rules about compounded forward curve risk in the same space.
inherent negative skew .. in MR RV.
Yep, exactly... Inherently short gamma, high leverage, short liquidity strategies that also make it very tempting to be short tail risks. It's a pretty toxic combination if you do it wrong. And I am not referring to Meriwether in the context of LTCM. He blew up twice on RV since LTCM. There's a whole variety of other names for whom RV proved to be the end of the road. To be sure, for me it still offers, on balance, superior edge, but you have to be careful.