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

Summary

In this chapter, we outlined the benefits of switching from absolute OHLC prices to the relative series. Absolute participants are laggard indicators while relative players lead the pack. Market participants who adopt the methodology outlined in this chapter will have a distinct edge. They will be able to build and liquidate positions ahead of the crowd. They will look like prescient investment geniuses. They will have more ideas to choose from. Their portfolios will have lower correlation to the markets, and lower volatility as well. These are traits investors are looking for.

Once all stocks are rebased relative to the benchmark in fund currency, the next step is to reclassify the investment universe according to their regime: bullish, bearish, sideways. We take this up in the next chapter.