Trading imbalances, , opening indications, chasing offers, U quotes
Old edges
- Thread starter cyoungmark
- Start date
I used to do conversions on Canadian Royalty Trusts. You had to buy the high dividend paying trusts (oil, REITs, ...) and then sell a call and buy a put. This was yielding about 8% unleveraged if I remember well.
I figured it out myself but later on it was featured in the book Millionaire Traders by Lien and Schlosberg. A guy in the book used to do it too.
The edge stopped when the Canadian government changed the tax laws that where advantageous to royalty trusts. But part of the edge was a risk premium because it was anticipated that the law would change. But still there was money to be made for some time.
I figured it out myself but later on it was featured in the book Millionaire Traders by Lien and Schlosberg. A guy in the book used to do it too.
The edge stopped when the Canadian government changed the tax laws that where advantageous to royalty trusts. But part of the edge was a risk premium because it was anticipated that the law would change. But still there was money to be made for some time.
Can you explain these for me?
Bullets:
In order to get around the short sell restriction you would buy the long stock + buy the put + sell the call (so you're synthetically flat... but you can "long sell" your long position to go short)
This loophole was closed by a law a few years ago... and made completely useless by the elimination of the tick check thanks to Reg SHO.
I heard rumors about the NYFIX/Millenium strategy, but what was it exactly? And was this before RegNMS?
Trading Imbalances-Before everyone knew about them it used to be a very profitable high risk/reward opportunity to trade on imbalance data provided by the exchanges each trading day 20 minutes prior to close. Especially in very high dollar illiquid stocks.
Uquotes- in the months following the implementation of reg nms, large market orders relative to average volume would cause the specialist to go in to U mode to gather shares to fill the market order..if you got there fast enough you could get "wrapped up" in the print and then flip the shares to ecns. Stupidly profitable for a while.
Chasing Offers-While the uptick rule was still in effect, large offers would "chase". you could get short in front of them and ride them down and then buy them up as they were just about to be depleted and ride the stock back up....very high probability set. It went away with the uptick rule.
Opening Indications- Trying to get the specialist's opening print when he was indicating an open far outside where the ecns were trading.
Old strategies are by definition old and known. Their secrets have been discovered. I'm no expert but I have a feeling that examining old strategies will help in the long run just to see how trading strategies have evolved. I don't think taking an old strategy and revamping it will result in a profitable strategy. The core mechanisms of strategies are what makes somebody money. What the trader needs to do is some fine tuning to make it applicable to a given instrument. Just out of curiosity though, is the Turtle strategy applicable to futures trading? I get a lot of futures resources from that site but I haven't seen anything about a turtle strategy, but I'm open to new things. At first sight this old strategy thing struck me as a good idea. But now it just seems like something a trading historian would do. Good luck to all who attempt it.
About 20 years ago I built a simple variation of the Triple Moving Average Crossover that was my âoldâ edge that worked profitably many times in the 1990âs. What I later learned is I had build a trend following system that bombed in congestion and volatility so I moved on.
Just Google triple moving average trading system to see what others have done with it. Who knows maybe you can build a variation that works for you.
Just Google triple moving average trading system to see what others have done with it. Who knows maybe you can build a variation that works for you.
The key to many old strategies (which is not so widely known) is money management rules. To profit from a 35% win rate, you need to make your position sizes much bigger on the winning trades, compared to all the stop outs.
Think kickboxing....... good fighters don't get anywhere against each other until one of them makes a mistake. Then the other guy goes all in......... exploiting the situation.
So it goes with the phat tails that give trend followers your $$$$$$$$
Think kickboxing....... good fighters don't get anywhere against each other until one of them makes a mistake. Then the other guy goes all in......... exploiting the situation.
So it goes with the phat tails that give trend followers your $$$$$$$$
example for one of the "old" turtles strategies, is,
to wait for a new High after at least 4 bars between the last high and go short on the new high or wait for the next bar until price starting to go down and short then - mostly traded on the daily chart, exit was about 2 - 3 daily bars after that, or if price would move extremely, exit would be on the end of that bar - day......
This still happens all the time, its just testing of high and lows.
But to trade like i describe above, is just to simple and thats why it is not really successfull, maybe it still have a success rate of 30%, i dont know.
you must imagine they traded it without any indicator......
to wait for a new High after at least 4 bars between the last high and go short on the new high or wait for the next bar until price starting to go down and short then - mostly traded on the daily chart, exit was about 2 - 3 daily bars after that, or if price would move extremely, exit would be on the end of that bar - day......
This still happens all the time, its just testing of high and lows.
But to trade like i describe above, is just to simple and thats why it is not really successfull, maybe it still have a success rate of 30%, i dont know.
you must imagine they traded it without any indicator......