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

Summary

Market participants tend to follow a predictable arc from the moment they proudly first set foot on the short selling terra incognita to the time they subconsciously abdicate sovereignty. The most important thing to remember is that the short side is not the inverse of the long. You cannot rely on mispriced stocks to revert to their fair valuations, and "structural shorts" are only profitable in the minds of short selling tourists. The short side obeys its own laws.

Among the challenges short sellers face that long-only market participants don't are overcoming a scarcity of information and bringing an abundance mindset to successfully counteract distorted exposures.

Now that we have dispelled a few myths about short selling and analyzed the idiosyncratic dynamics of the short side, the next parts of this book will be about building a short selling practice from the ground up. In Part II, The Outer Game: Developing a Robust Trading Edge, we will look...