Market timing is typically conducted using technical, macroeconomic, and volatility indicators. However, there is a growing trend in the research community toward using options-implied volatility to extract information for constructing market-timing strategies. For example, we have discussed how option-implied distributions can be used to time the market. Along the same …

Prediction markets are markets in which participants trade contracts based on the outcomes of future events, and they have become increasingly popular in recent years. Given their rising popularity, an important question is how to develop quantitative betting strategies. Reference proposes an interesting approach based on an adaptation of …

Financial markets are nonstationary, and predicting asset prices is a nontrivial task. In the past, practitioners often relied primarily on technical indicators, which are derived from prices and trading volume, to forecast asset prices. More recently, research has increasingly incorporated additional exogenous variables that may contain predictive information. Reference  …

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 …

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 …

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 …

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, …

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 …

Regime change has become a recurring theme across financial markets. One of the most recognizable examples is the deterioration in the performance of trend-following Commodity Trading Advisors (CTAs) after the Global Financial Crisis. Reference investigates the reasons behind this shift using data from approximately 100 liquid futures contracts spanning …

Large language models (LLMs) are evolving rapidly, from early text-generation systems to the latest models capable of sophisticated reasoning and multi-step decision-making. Reference applies LLMs to the development of a gold trading system. Unlike traditional quantitative models, which are typically built around forecasting future prices or returns, the authors …