Many investors use fundamental or technical analysis when making investment decisions, with many only using technical analysis when picking their trades. Many traders use technical indicators to spot potential trading opportunities. Technical indicators are mathematical calculations based on the price, volume, or open interest of an underlying asset. They fall …

Black-Scholes-Merton (BSM) is an option pricing model for valuing European options. It was developed in the 1970s by Fisher Black, Myron Scholes, and Robert Merton, of whom two were awarded the Nobel Prize in Economic Sciences in 1997 for their work. The BSM model has become one of the most …

Futures spread trading is a type of trading in which two different futures contracts are bought and sold at the same time, with the aim of profiting from the price difference between the two contracts. If the futures contracts are on the same underlying asset, then the spread is referred …

We have already covered the debt/equity ratio formula in detail before. However, you should also know what it is and how to use it. In this article, we will discuss this ratio with the help of concrete examples. What is the Debt/Equity Ratio? The debt/equity ratio compares the different elements …

One of the most important steps in developing a profitable statistical arbitrage trading strategy is choosing the right pairs of stocks to trade. This can be a difficult and time-consuming process, but it is essential in order to find pairs that are likely to produce profitable results. There are a …

Statistical arbitrage is a classic quantitative trading strategy that attempts to take advantage of statistical differences in the prices of assets. The strategy is based on the idea that if two assets are not perfectly correlated, then there is an opportunity to profit from the difference in their prices. Statistical …

Short volatility is a popular trading strategy that seeks to profit from selling volatility through Exchange Trade Notes or listed options. It is understood that the profit comes from the volatility risk premium, i.e. the fact that implied volatility generally overstates actual volatility. Some investors even consider this overstatement a …

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 …

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 …

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 …