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 …

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. …

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 …

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 …

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 …

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 …

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 …