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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)

Creative Flow

In Praise of Speculation

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    « My Little Tricks for Profitable Spread Trading Webinar | Main | Day-Trade Coach Earnings »
    Wednesday
    Aug082012

    Day-Trade Priceline Earnings 

    DateWednesday, August 8, 2012 at 9:00AM | by AuthorMichael Bigger | CommentPost a Comment
    Tuesday in the after hour market, Priceline ($PCLN) reported earnings and gapped down 13%. Expedia ($EXPE) followed and went down 4% on the news. I quickly went to our Spread Analyzer to run a 2 year query on $PCLN versus $EXPE (see the results below). I noticed that the Pearson correlation of 20.83% was very low for the pair and that there was a good chance for $EXPE to bounce back some. I bought $EXPE for 56.5 and quickly flipped it for a $.50 per share profit.  I was able to use the Spread Analyzer's stats to exploit the relationship between the two stocks. In this case I did not catch the falling knife, but used a non-correlated competitor to take advantage of the news.
      
    There are all kind of ways to use stats and pairs trades to make money. Anything you want to add?  
      
    Written by Michael Bigger. Follow me on Twitter and StockTwits. 
      
      
      
       

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