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

Long/Short Methodologies: Absolute and Relative

In this chapter, we will be comparing methodologies, with a particular focus on absolute versus relative series. Absolute series are the Open High Low Close (OHLC) prices you can see on any website or platform. They often come either adjusted for dividends, stock splits, and other corporate actions. Relative series are the above absolute series divided by the closing price of the benchmark, adjusted for currency.

We hope to demonstrate the weaknesses of the absolute method, and strengths of the relative weakness method, which will define our methodology for the rest of the book. We will cover the following topics on the way: