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Dollar-Cost Averaging or Buy the Dip?

Posted on September 3, 2026 By 
Dollar-cost averaging (DCA) is an investment approach in which a fixed amount of capital is invested at regular intervals, regardless of market conditions. Reference examines an interesting problem: suppose you have a steady stream of relatively small cash flows, such as a paycheque. Should you practice DCA, or set …
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Generating Multivariate Synthetic Data for Asset Prices

Posted on August 30, 2026 By 
Backtesting is a necessary step in strategy development, but it is not sufficient to establish that a strategy is robust. A rigorous validation process is also required. One inherent limitation of conventional backtesting is that it evaluates a strategy against a single realized historical price path, providing no information about …
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Market Timing Using Option-Implied Distribution

Posted on August 26, 2026 By 
Option prices contain useful information about the underlying asset. The most well-known quantity that can be extracted from option prices is implied volatility, which can be used for various purposes in portfolio and risk management. Reference goes further and proposes that the probability density distribution extracted from option prices …
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The Performance of Subscription-Based Option Recommendations

Posted on August 22, 2026 By 
Retail options trading volume has increased significantly, attracting growing attention from both market practitioners and academics. We have previously discussed how retail options trading is changing volatility dynamics. Along the same line, Reference studies this issue but focuses on a small subset of retail options traders. Specifically, the authors …
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When Trading Strategies Look Too Good

Posted on August 18, 2026 By 
Designing a robust trading strategy is not a trivial task. Many systems look good at the design stage but break down or experience deteriorating performance once deployed. There is a small but growing body of research addressing the issue of system robustness. For example, we recently discussed why system performance …
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Path Dependence in Option P&L

Posted on August 14, 2026 By 
The P&L attribution of an option portfolio is highly important, as it aids in portfolio and risk management. Most often, the daily P&L of an option is broken down into four components: theta, delta, gamma, and vega. This decomposition works well in most cases, especially when the market moves orderly, …
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Impact of Spot-Volatility Correlation on Option Returns

Posted on August 10, 2026 By 
It is well known that equity indices tend to exhibit a negative correlation with their volatility. There is some research on this relationship, often linking it to the leverage effect. Recently, we observed that the equity market has been behaving unusually, with the spot-volatility correlation turning positive. It is therefore …
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Effectiveness of Volatility-Based Exit Rules

Posted on August 6, 2026 By 
In the trading literature, we often see discussions about entry rules, but much less about exits. Some practitioners claim that exits are more important than entries. Is this really the case? We have discussed how the effectiveness of exit rules depends on market conditions. Reference continues this line of …
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Retail Participation in the 0DTE Options Market

Posted on August 2, 2026 By 
Retail options trading has become an important force in today’s financial markets, particularly with the rapid growth of short-dated options trading. As a result, researchers have increasingly focused on understanding retail trading behavior. A previous study we discussed found that retail traders tend to buy short-dated options, especially out-of-the-money contracts, …
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Optimization in the Indicator and Parameter Space

Posted on July 29, 2026 By 
In today’s era of supercomputers, artificial intelligence (AI), and machine learning (ML), many tasks that once required hours or even days can now be completed in a fraction of a second. Parameter optimization is a common technique in systematic trading in which the parameters of a trading indicator or strategy …
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