Pair Trading Strategy Journal

Quote from trom:

Any thoughts on shorting VXX / VXZ?
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I've been trading this pair (-150VXX+100VXZ) intraday (RTM). Starting after the flash crash in May 2010 it worked just beautifully for a couple of months. And then this nice predictable behavior suddenly disappeared. I don't see there any intraday mean reversion anymore.

And yes, as the guy mentioned in the article above, the trend of the pair on yearly charts looks incredibly straight.
 
Quote from fredman007:

check that: http://seekingalpha.com/article/198661-a-vix-etf-pair-trade-vxx-vxz?source=feed

it works until the markets goes down :)
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Look at the various spreads amongst the VIX futures.

VXX constantly rolls from front month to second month - and must be getting killed on the roll, similar to USO used to (or still does...)

VXZ rolls from 4th month to 7th month, maintaining average maturity exposure of 5th month. At this point in time, the spread between front month and 2nd month is almost double the spread from 4th to 7th.

Couldn't this partly explain the consistent under-performance of VXZ? Look at a ratio chart since this things came out. Straight down.
 
Quote from fredman007:

what do you think of

Long KBE
Short KRE ?
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Hi fredman007,

I think it is very good pairs with good correlation and high cointegration.
http://www.catalystcorner.com/index.../2010&dateto=10/18/2010&capital_employed=2000

I sold this pair once when it started diverging for DFM (diverge from mean) purpose and closed out on Oct. 14, 10 with 1+% profit for both side. For this bullish market it is better to wait until the pair starts reversion. I feel that this kind of market DFM is more profitable. My pair GLD/SLV was already stopped out several day ago waiting to go back in. Are you still holding yours.

PA
 
Anyone know how to set a profit stop with a trailing limit with IB? Is it possible?

Example, instead of setting a profit stop at $xx, I want to have a trailing limit of say, 10% activate at $xx. So I can capture additional profit, but if it drops 10% I sell at market.

Walt B
 
Quote from waltbx:
03/05/10

The biggest factor is to analyze the Ratio Graph and avoid betting on pairs that have diverted on the wrong side of the trend -- ie: with the trend is bad; against the trend and you have the chance that the ratio will revert before the mean changes to meet the ratio. You want the ratio to change direction to move back to the mean average, not continue on to follow the trend.


WB [/B]
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High WB,

I read your post on the above date. Would you please clearify that the pair that divert against the trend of the market or the trend of it's own ratio should do well. I think that the RTM pair is not doing to well in bullish market like now.

Thanks,
PA
 
Quote from dukatu1:

Forgot to post this one.
I initiated it 2 days ago however I still think it's gonna rally 5% from today's price levels.
Enjoy.

S MA 223.00
B 10x MSFT 24.15
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Reversed that today at 4.3% loss.
 
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