Butterfly Spreads for Harvesting Risk Premia

Posted on April 12, 2022 By Harbourfront Technologies

We have discussed trading strategies for harvesting volatility risk premium. In a similar context, Reference examined the use of butterfly option positions as a trading strategy for long-term investors. An option butterfly position is a limited risk, non-directional options trading strategy that is designed to take advantage of a …

Dispersion Trading Using Principal Component Analysis

Posted on April 9, 2022 By Harbourfront Technologies

Statistical arbitrage involves the simultaneous purchase and sale of two or more assets in order to take advantage of price discrepancies. For example, a trader might buy shares of Company A and sell shares of Company B if the two companies are in the same industry and the price of …

Market Intraday Momentum and Hedging Demand

Posted on April 6, 2022 By Harbourfront Technologies

Day trading is a trading strategy whereby traders aim to take advantage of small price movements in the market. To do this, they buy and sell securities within the same day. Day traders typically use technical, quantitative, or sentiment analysis to make decisions about when to buy and sell. There …

Price to Book (P/B) Ratio: Calculator, Example

Posted on April 4, 2022 By Harbourfront Technologies

We have already covered the Price-to-Book ratio in the past. It is one of the many financial ratios that investors need when evaluating a company. In this article, we will discuss this ratio with the help of concrete examples. An online calculator is presented at the end of this post. …

Lead-Lag Relationship Between VIX and SPX Futures

Posted on April 3, 2022 By Harbourfront Technologies

The recent market correction has shown, once again, that the financial markets are strongly interconnected. The sell-off in stocks has led to a sharp increase in the credit spreads. The rally in oil price has helped commodity currencies such as the Canadian dollar and Australian dollar appreciate against the US …

Trading Strategies Based on Roughness of Volatility

Posted on March 31, 2022 By Harbourfront Technologies

In quantitative finance, the asset price is often modeled as the Geometric Brownian Motion (GBM). The GBM model is a stochastic process that describes the evolution of a price or other measurable quantity over time, assuming that it is subject to small random fluctuations (or “noise”) at each point in …

Price Earnings (P/E) Ratio: Calculator, Example

Posted on March 29, 2022 By Harbourfront Technologies

You are certain to come across the P/E ratio in various areas as an investor. Although simple, it can be significantly useful when evaluating companies. We have covered the P/E ratio before. In this article, we will provide concrete examples of how to use it. An online calculator is presented …

Machine Learning: Is More Data Always Better?

Posted on March 28, 2022 By Harbourfront Technologies

Data science and machine learning are advancing at a rapid pace. They’re now being applied in areas as diverse as healthcare, retail, marketing, and finance. However, a key question that still needs to be answered is: how much data do you need to train these models? The answer, it turns …

How Retail Investors Trade Options

Posted on March 25, 2022 By Harbourfront Technologies

Options trading is often thought of as a professional’s domain. However, with the advent of online trading platforms, retail traders now have access to the same tools and information as professional traders. This has changed the dynamics of the options market, as retail traders can now trade options on a …

Is Machine Learning Useful in Trading?

Posted on March 22, 2022 By Harbourfront Technologies

Machine learning and artificial intelligence is a new technology that has the potential to change the finance and trading industries. It can make the decision-making process faster and more accurate, which can lead to better results for traders and investors. There is, however, an interesting discussion about why there are …