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
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15
Index

Entry

"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."

– Warren Buffett

Great poker players do not play their hand. They play other players' hands. To be successful, you need to systematically tilt probabilities in your favor. Markets happen to be a probabilistic game. The way to achieve greatness is not only to play your hand but the market's invisible hand as well.

The first way to play the market's hand is something we saw in Chapter 5, Regime Definition. Let the market decide on which side stocks should go. Let's be honest for one second. Market participants who short bubbly stocks are repressed revenge traders. Deep down, they are angry at their shadow selves for not participating on the long side. Maybe they closed out too early. Maybe they dismissed that boat altogether. Either way, they vent their frustration by putting other people's precious...