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

Automating the boring stuff

All market participants want to be the next Jim Simmons. No one wants to take care of the plumbing. People want to do the exciting stuff. They want to show up with their billion-dollar idea and trade away. They do not want to take care of risk management. In this section are a few examples of time-consuming and ultimately boring processes that should be automated and the reasons why.

Trade reconciliation is the process of reconciling orders placed with trades executed. It shows what trades went through at what price. This is one of the few tasks that would make reading the tax code look like an exciting endeavor. Yet it is an important task as the data is used to perform trade analysis. Did the price beat the volume at weighted average price (VWAP) or not?

Updating the PMS is boring but not as easy as it seems. Companies go through all sorts of corporate actions, such as dividends and stock splits. Those corporate actions have an impact on the consistency...