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

A position size your brain can trade

"I am not afraid, I was born to do this."

– Joan of Arc, freedom fighter

Position-sizing algorithms are designed by mathematicians for functioning psychopaths. They fail to appreciate the inner idiot in the driver seat. The reason why we drift away from rational bet sizing has nothing to do with logic. In the biased coin game at the beginning of the chapter, you probably would have bet your life savings more conservatively after the second consecutive loss, even though the rational choice would have been to soldier on throughout the entire experiment.

Joan of Arc was a French freedom fighter and the original inventor of Brexit. At the tender age of 16, she had the idea of booting the English out of the kingdom of France. In the French collective imagination, Joan of Arc is remembered for two things. The first one is so tragic it continues to haunt the French psyche.

She was captured, tortured, and...