Book Image

Algorithmic Short Selling with Python

By : Laurent Bernut
Book Image

Algorithmic Short Selling with Python

By: Laurent Bernut

Overview of this book

If you are in the long/short business, learning how to sell short is not a choice. Short selling is the key to raising assets under management. This book will help you demystify and hone the short selling craft, providing Python source code to construct a robust long/short portfolio. It discusses fundamental and advanced trading concepts from the perspective of a veteran short seller. This book will take you on a journey from an idea (“buy bullish stocks, sell bearish ones”) to becoming part of the elite club of long/short hedge fund algorithmic traders. You’ll explore key concepts such as trading psychology, trading edge, regime definition, signal processing, position sizing, risk management, and asset allocation, one obstacle at a time. Along the way, you’ll will discover simple methods to consistently generate investment ideas, and consider variables that impact returns, volatility, and overall attractiveness of returns. By the end of this book, you’ll not only become familiar with some of the most sophisticated concepts in capital markets, but also have Python source code to construct a long/short product that investors are bound to find attractive.
Table of Contents (17 chapters)
14
Other Books You May Enjoy
15
Index

Timing is money: the importance of timing orders

In 2005, the Japanese market experienced an exponential rise. Zombie stocks were alive again! In late January 2006, the police raided the party, literally. They arrested the poster child of this new-Japan paradigm. And suddenly, it felt like a nightclub closing. Crude neon lights were suddenly switched on. Haggard drunk people were staring at each other on the dance floor, confused and disoriented. Reality was back with a vengeance. The levitating zombies had rediscovered Newtonian physics. Unfortunately, the availability and cost of borrow on any single issue was dissuasive, so with my buddies on the Merrill Lynch stock lending desk, we came up with a Credit Rating Asset Price (CRAP) basket-swap idea. We dumped in all the zombies we could find. The cost of borrow was an affordable 2%. The price would be end of day closing price. Capacity was virtually unlimited. At a composite beta of 2.3, it had far more torque than index futures...