Wealth-Lab Creator Has New Site

[ironchef]

I took a quick look. After they went live (out of sample data), I didn't see any beat SPY after 5 years running. I was not able to find risk adjusted returns so don't know if their Sharpe are better.

On a side note, anyone who uses a levered SPY strategy could beat SPY for the last 10 years. But that is not edge, just lucky that the period coincides with the raging bull market.

 

[bashatrader]

I was looking at this article in PAL blog of how to capture SPY returns at much lower DD with long-short strategy. I cannot afford the DLPAL LS product but it looks ingenious. When this raging bull market ends long-short could have better chances.

 

[cruisecontrol]

Does anyone have any insight on how the "ETF pairs arbitrage" system works? It looks to me like it has a real edge which is different from any that I'm familiar with.

What I gathered:

-It is simply timing the nasdaq 100 index both long and short (there is no actual "arbitrage" involved here)
-It is based on a 2005 article from active trader magazine and/or a book by James Altucher. (Does anyone have a copy of these or know where to find them?)

My Strategy ETF Pairs Arbitrage is based on Active Trader Magazine Articles from 2005, and where improvements were made were mathematical corrections to the inherent theory of finding overbought oversold thresholds and what makes this strategy the best in the world is how the thresholds change relative to the volatility of the ratio of QLD to QID.

BW (quester on the old WL site) also demonstrated some pairs systems that were from Altucher's book.

 

[Option_Attack]

I found a description of it. It is just another way of using overbought-oversold. I suspect it will work, just as some others such as RS2, Bol Bands, fib or percentage levels, etc. But how well they work and how to handle them when the market is dropping and dropping and dropping...that is the question!

This unique unilateral pair trading system is disclosed by James Altucher in his book, "Trade Like a Hedge Fund," Wiley (2002). Normally pairs trading implies a market neutral strategy where one goes long one asset and short the other. In the author's words: "The key difference in using unilateral pairs trading is that we will not trade both sides of the spread, but the side that is historically more volatile. The idea is that the more volatile side is most often the culprit for why the spread has gone awry. For this reason we will treat QQQ and SPY as a pair, but we will trade only QQQ." The stated trading rules are:

1. Calculate the ratio of the QQQ price series over the SPY price series.
2. Calculate the 20-day moving average of that ratio.
3. For each day, calculate the difference between the ratio and its moving average.
4. Calculate the 20-day moving average of those differences.
5 For each day, calculate how many standard deviations the difference in ratios is for that day from its moving average. Calculate the standard deviation for each day using its prior 20 days.
6. For each day, if the standard deviation calculated is greater than 1.5 and QQQ is 2 percent greater that the prior day, then short QQQ.
7. For each day, if the standard deviation calculated is less than -1.5 and QQQ is 2 percent lower than the prior day, then buy QQQ.
8. Sell/cover when the standard deviation of the difference in the ratios is less than 0.5 (in the case of a short) or greater than -0.5 (in the case of a long).

 

[cruisecontrol]

I found a description of it. It is just another way of using overbought-oversold. I suspect it will work, just as some others such as RS2, Bol Bands, fib or percentage levels, etc. But how well they work and how to handle them when the market is dropping and dropping and dropping...that is the question!

This unique unilateral pair trading system is disclosed by James Altucher in his book, "Trade Like a Hedge Fund," Wiley (2002). Normally pairs trading implies a market neutral strategy where one goes long one asset and short the other. In the author's words: "The key difference in using unilateral pairs trading is that we will not trade both sides of the spread, but the side that is historically more volatile. The idea is that the more volatile side is most often the culprit for why the spread has gone awry. For this reason we will treat QQQ and SPY as a pair, but we will trade only QQQ." The stated trading rules are:

1. Calculate the ratio of the QQQ price series over the SPY price series.
2. Calculate the 20-day moving average of that ratio.
3. For each day, calculate the difference between the ratio and its moving average.
4. Calculate the 20-day moving average of those differences.
5 For each day, calculate how many standard deviations the difference in ratios is for that day from its moving average. Calculate the standard deviation for each day using its prior 20 days.
6. For each day, if the standard deviation calculated is greater than 1.5 and QQQ is 2 percent greater that the prior day, then short QQQ.
7. For each day, if the standard deviation calculated is less than -1.5 and QQQ is 2 percent lower than the prior day, then buy QQQ.
8. Sell/cover when the standard deviation of the difference in the ratios is less than 0.5 (in the case of a short) or greater than -0.5 (in the case of a long).

Very interesting, thanks a lot for digging that up for us! Looking forward to playing around with it when I get some time.