For how long have BRIGHT traders been pairing nasdaq stocks...I know for a long time they did not.
pairs trading
- Thread starter renegade trader
- Start date
For how long have BRIGHT traders been pairing nasdaq stocks...I know for a long time they did not.
RIG(30bil) is much bigger than DO(13bil) almost 3x as big....so how do you short DO and buy RIG?
Am I missing something here?
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Don Bright
Bright Trading, LLC
Registered: Oct 2001
Posts: 7851
07-06-07 09:27 PM
A lot of money was made by the guys long HLT Short MAR (or even short HOT). Not "hell" in my book.
Don
__________________
Don Bright (not an alias)
http://www.stocktrading.com
Hooked2000
Registered: May 2004
Posts: 154
07-08-07 12:20 AM
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Quote from Yisterwald:
A little advertising maybe, Don? I'm not quite willing to call bullshit on you here, but a look at that spread both fundamentally and technically pre-merger doesn't make me think long HLT short MAR was a do.
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Agreed
Looking at a (hlt - .8mar) spread was at upper end of range going back to 2003
Reversion pair trader would not be in this...trend followers might.
fundamentally with hlt at 35 and mar at 44 the pair trade was a push based on P/E...it is understood that brights pair traders use a trailing p/e for some reason.
Market cap was slightly in favor of buying spread
price to book was right way to be buying spread
peg ratio was wrong way to be buying spread
price to sales ratio was wrong way to be buying spread.
Given the level the spread was at before merger announcement it was a marginal do at best
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I was not bashing at all, just trying to understand the logic of being in a spread that was marginal ( for a reversion trader).
Don Bright
Bright Trading, LLC
Registered: Oct 2001
Posts: 7851
07-06-07 09:27 PM
A lot of money was made by the guys long HLT Short MAR (or even short HOT). Not "hell" in my book.
Don
__________________
Don Bright (not an alias)
http://www.stocktrading.com
Hooked2000
Registered: May 2004
Posts: 154
07-08-07 12:20 AM
--------------------------------------------------------------------------------
Quote from Yisterwald:
A little advertising maybe, Don? I'm not quite willing to call bullshit on you here, but a look at that spread both fundamentally and technically pre-merger doesn't make me think long HLT short MAR was a do.
--------------------------------------------------------------------------------
Agreed
Looking at a (hlt - .8mar) spread was at upper end of range going back to 2003
Reversion pair trader would not be in this...trend followers might.
fundamentally with hlt at 35 and mar at 44 the pair trade was a push based on P/E...it is understood that brights pair traders use a trailing p/e for some reason.
Market cap was slightly in favor of buying spread
price to book was right way to be buying spread
peg ratio was wrong way to be buying spread
price to sales ratio was wrong way to be buying spread.
Given the level the spread was at before merger announcement it was a marginal do at best
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I was not bashing at all, just trying to understand the logic of being in a spread that was marginal ( for a reversion trader).
Wondering why the discussion is so focused on stock pairs trading. I mostly trade futures outright, but a big chunk of my trading is spread between index futures pair. Like ES-ER2. Chart it and see. (Many other combinations possible + lot's of fun in fx pairs - but I haven't gone there yet)
All standard pair trading "wishdom" applies. However,
1) neither leg would get "taken over"
2) spread margins are downright sexy
3) No interest cost, ever
4) more intraday noise than you can handle
5) dream of leg-in / leg-out crowd
It's hard to get completely market neutral based on notional values of the contracts unless you are trading very big size, but I am willing to live with it. I personally don't see it as a problem actually
All standard pair trading "wishdom" applies. However,
1) neither leg would get "taken over"
2) spread margins are downright sexy
3) No interest cost, ever
4) more intraday noise than you can handle
5) dream of leg-in / leg-out crowd
It's hard to get completely market neutral based on notional values of the contracts unless you are trading very big size, but I am willing to live with it. I personally don't see it as a problem actually
I think that trade occurred during Don's days at ENRON. 100% hit rate on their merger and pairs arb! Just don't trade shares >$100 or you'll be escorted off the premises. Stick to the pure arbs [for Bright's commission rake]; the ooh ooh opening orders and mean reversion pairs. I bet those have been working swimmingly in this vol!
Remember kiddies... you need meeellions to do the sophisticated stuff. Not any turd can sell one stock and buy another.
A few years now....since we expanded the pairs program widely. We have always traded nasdaq, but have preferred listed because of trading methods, not because of the nasdaq stocks themselves.
Don
And, just to respond to the "fun stuff" with the Enron deal.... there is no way we would have been long Enron, fundamentals were never there.
I just asked what the portfolio did, not for a full explanation why they did it. I'll ask today for the reasoning.
Don
I just deleted a post, check your PM Becket, thanks.
Don
Don
From my research department:
We were long HLT against MAR because while their P/E and Market Cap were pretty comparable, HLT's price to book displayed a 75% better value than MAR's.
That's all I can really say about that....
Don