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Michael Bigger is an investor and a trader who has been involved with trading technologies for more than twenty years. In 1992, Michael joined Citibank as head trader of U.S. single-stock derivatives, where he managed a $5 billion portfolio of equity derivatives. In 1998, he joined D.E. Shaw & Co., L.P. to trade the U.S. equity derivatives portfolio. (More)

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Friday
Nov162012

Trading Like a Math Geek

On Wednesday we held a webinar about Statistical Arbitrage Spread Trading.  We had a lot of people tune in, and there were some great questions.  Thanks to everyone who attended.  If you missed it, you can see the replay at the bottom of this post. 

Statistical Arbitrage spread trading is a way to harness your inner Math Geek to make more money trading.  There are a lot of mathematical concepts, but you can design your trading strategy to be very mathematically strict or just use the mathematics as a framework to exploit relative value opportunities.  It is up to you and your trading style.  In the webinar we discussed the mathematical concepts of cointegration, zscore, and half-life.  We went through a real-life example using the spread 1*BOH - 2*PACW.  You can bring up this spread in Spread Analyzer using this link. You can also look at some of the other spreads we talked about such as FDX and UPS, PEP and KO, or try coming up with some on your own. When you bring them up in Spread Analyzer, hit the "Tweet" button near the top of the output page and include my twitter id @slimshappy so I can see what spreads you are looking at. 

Please send me any feedback or questions on twitter or post them here.  I hope you can attend our next webinar!

Written by Jennifer Galperin.  Follow me on twitter and stocktwits.

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Reader Comments (2)

Great stuff. Just curious. Have you done any work with any shorter time frame mean reversion type oscillators? For example, 2 period RSI, or n up/down days in a row?

November 27, 2012 | Unregistered Commentertmantrader

We trade actively at the short term time scale using all kinds of recipes.

November 28, 2012 | Registered CommenterMichael Bigger

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