Trader Matt Busigin Asks about the Risk Profile of Our Algorithmic Trading Portfolio
Written by Michael Bigger. Follow me on Twitter.
Matt (@mbusigin) asks, “Do you run a delta-neutral book? Is there a long for every short? Do you manually adjust your exposure to the ‘risk trade’?”
Our answers:
1. We run a delta-neutral book -10 percent to +5 percent of net exposure. Right now, we run it at -8 percent (it has something to do with correlation). Our long position is 100 percent of capital balanced by a similar amount of aggregate short positions. Our gross exposure is about 200 percent of invested capital.
2. No. The number of individual long and short positions is not equal.
3. We do electronically hedge the aggregate residual “risk trade” exposure.
We hope these answers help you understand how we shape the risk profile of our algorithmic portfolio. Keep the questions coming!
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