Introducing SpreadTraderPro

When I traded single-stock derivatives at D. E. Shaw, my boss traded S&P options spreads, and he made money consistently though he took very little risk. He was a trading magician. He knew his options market, especially the S&P, and he knew how to trade spreads. He constantly traded in and out, squeezing juice out of the lemon. The lemon never ran out of juice! It was a wonderful thing—a winning trading method.

Most of the best traders I have met trade spreads. They spread different options, stocks versus stocks, indices, stocks against indices, etc. They even trade cash against stock. Think of it as trading a stock against its intrinsic value. This is taking advantage of a spread between two values. The number of combinations is endless.

These traders are good at identifying pockets of value (be it statistical, against value, momentum, and so on) among the securities they trade, and they rotate their inventory to take advantage of these discrepancies with no net increase in market exposure.

On the statistical front, the biggest challenge is dealing with data; you have to narrow down the universe of stocks and spread candidates (millions) into the small subset of spreads that are cointegrated, meaning they tend to revert to the mean. This alone has made it very difficult for individual investors to trade statistical spreads. You may have encountered this problem if you have used our free Spread Analyzer, only to find out that very few of the spreads you can think of are in fact cointegrated at any significance level. It’s very frustrating!

We faced the same issue. We dealt with it by developing our proprietary market scanner to identify cointegrated spreads. Now, for the first time ever, we are making this tool available to the broader trading community. It is called SpreadTraderPro.

Say goodbye to the frustration of searching manually for profitable spreads. Using SpreadTraderPro, you can trade statistical spreads just like the pros do. No programming is required. It really is that simple!

Are you ready to complement your current trading strategies with statistical spreads for more profits and diversification? Click here to find out more about SpreadTraderPro.

Written by Michael Bigger. Follow me on Twitter and StockTwits.