ASX Stock Pairs Trade Journal

[FXanyone]

Been quiet in here lately.

How have people been getting along? July gone well for me so far. Really tightened up on some of my trading criteria and become ruthless regarding stops. Was probably on target for my best month till QBE's little stunt today. A profit warning slipped in a month after 30 June in the guise of converting to USD accounting.

Still there is more money in the bank than a month ago so cant be too upset...

 

[skc]

Too busy trading. July was OK... looking like a 6-7% increase depending on how I go the rest of the week.

Missed the QBE although it did drag down IAG for me yesterday (I had long AXA short IAG). Too bad IAG has a profit warning themselves today but I've already closed the trade

Reporting season next month (and confession season now) so tread carefully...

BTW anyone has a good reporting season calendar?

 

[FXanyone]

Too busy trading. July was OK... looking like a 6-7% increase depending on how I go the rest of the week.

Missed the QBE although it did drag down IAG for me yesterday (I had long AXA short IAG). Too bad IAG has a profit warning themselves today but I've already closed the trade

Reporting season next month (and confession season now) so tread carefully...

BTW anyone has a good reporting season calendar?

UBS put out a good one if you can access that

 

[SilverRanger]

UBS put out a good one if you can access that

Being a cheap non-professional trader I use Bell Direct's calender, the bad thing is that you need to do a look-up for each individual company (unlike Google Finance you get all the earning release dates for your portfolio)

July has been a bumpy ride for me as I started the month with 3 losing trades (lucky me), managed recouped some of my losses in the middle of the month and this week officially back in profit - up about 6% as of now, thanks to AAX/TSE

 

[skc]

Being a cheap non-professional trader I use Bell Direct's calender, the bad thing is that you need to do a look-up for each individual company (unlike Google Finance you get all the earning release dates for your portfolio)

July has been a bumpy ride for me as I started the month with 3 losing trades (lucky me), managed recouped some of my losses in the middle of the month and this week officially back in profit - up about 6% as of now, thanks to AAX/TSE

This one isn't too bad http://www.businessspectator.com.au...ALENDAR-pd20100727-7RA52?opendocument&src=rss

I have long AWB short GNC and they just announced a merger.... to merger at 1 GNC = 5.75 AWB. I entered at a ratio of 6.28

What a trade!

 

[Pairs Trader]

I have long AWB short GNC and they just announced a merger.... to merger at 1 GNC = 5.75 AWB. I entered at a ratio of 6.28

What a trade!

That is one bloody nice trade skc! Pair trade turned risk arbitrage, we call these one's the golden goose at the old hat factory, you just front ran a truck load of money from hedge funds putting the same trade on upon announcement I missed this one, my next Heineken is in your honor!

 

[skc]

That is one bloody nice trade skc! Pair trade turned risk arbitrage, we call these one's the golden goose at the old hat factory, you just front ran a truck load of money from hedge funds putting the same trade on upon announcement I missed this one, my next Heineken is in your honor!

Thanks PT. After more than 400 trades I bound to hit one of them at some stage

I closed the pair at a ratio of 5.82. The interesting aspect was that one could actually still do the merger arbitrage shorting after AWB/GNC first opened.

My position size on this trade was a bit smaller than usual unfortunately - AWB is not the most stable of stocks, and GNC not the most liquid... but a nice reward nonetheless.

 

[sleepy]

Hi skc,

Whats ratio of 5.82 mean in % return?
And are you currently trading pairs full-time and what tools are you using?

sleepy

 

[SilverRanger]

Hi skc,

Whats ratio of 5.82 mean in % return?
And are you currently trading pairs full-time and what tools are you using?

sleepy

Assuming a dollar neutral trade I think it's about 6.28 / 5.82 - 1 = 7.9%, very exceptional given on most trades you get around 1%~2% (for me anyway). What I like the most about this one is the smell of merger arbitrage, which is different to the normal stat arbitrage that we based our trades on

 

[skc]

Hi skc,

Whats ratio of 5.82 mean in % return?
And are you currently trading pairs full-time and what tools are you using?

sleepy

I trade full time and pairs trading is about 80% of what I do now. I use Pairs Trade finder software supplied by the poster here called Pairs Trader, and I use MFGlobal and IG as my CFD providers.

Assuming a dollar neutral trade I think it's about 6.28 / 5.82 - 1 = 7.9%, very exceptional given on most trades you get around 1%~2% (for me anyway). What I like the most about this one is the smell of merger arbitrage, which is different to the normal stat arbitrage that we based our trades on

Exactly. 7.9% return on position size. Probably not a great number compared to many directional trading, but it's a good gain on pairs.

There was no smell of merger arbitrage. I was surprised and the market was surprised. I was somewhat mindful that AWB is a potential takeover target (of sorts), but I had no idea that a merger would be announced between them when I open the trade 1 day before. Pure luck really...

A great trader would have picked up some GNC on the cheap on Friday (as a directional trade). They were drove down by the arbitrage gang, but they might actually emerge a better company from the merger.

 

[FXanyone]

I was short GNC against GFF.

Must admit had been concerned as GNC was v strong a few days ahead of the announcement - $ 6.10 or so high. Traded down to $ 5.60 post announcement. That had to hurt a few....I got out square and was delighted!

 

[skc]

I was short GNC against GFF.

Must admit had been concerned as GNC was v strong a few days ahead of the announcement - $ 6.10 or so high. Traded down to $ 5.60 post announcement. That had to hurt a few....I got out square and was delighted!

I traded a long CCL short GFF the other day and closed with a modest profit.

GFF's chart looked really bad and $1.30 was looking definitely shaky, but decided to reduce the number of positions I have open with reporting season coming up.

 

[FXanyone]

I traded a long CCL short GFF the other day and closed with a modest profit.

GFF's chart looked really bad and $1.30 was looking definitely shaky, but decided to reduce the number of positions I have open with reporting season coming up.

I decided the best times to take a holidays each year are the back end of August and February. I blackout a period a week before and a week after results (and major announcements) so doesnt leave me a lot to trade. Conveniently the end of August fits perfectly with a couple of major sailing regattas

 

[Pairs Trader]

New trade

Long QBE @ 17.42
Short PPT @ 32.18

I like the ratio chart, and will exit before QBE earnings on the 19th.

 

[skc]

New trade

Long QBE @ 17.42
Short PPT @ 32.18

I like the ratio chart, and will exit before QBE earnings on the 19th.

So you are positing trades again? Interesting pair. A pair that I don't actually have. I only keep QBE with its insurance peers and PPT with its wealth management buddies. The ratio chart however does look friendly.

QBE has recently posted a profit downgrade, and the price action since then on its own chart looks to be a good shorting opportunity (rather than long). Having said that, PPT looks like it will at least pause at current resistance if not head back south to test the minor support at $30.

Let's see how that works out.

 

[Pairs Trader]

So you are positing trades again? Interesting pair. A pair that I don't actually have. I only keep QBE with its insurance peers and PPT with its wealth management buddies. The ratio chart however does look friendly.

QBE has recently posted a profit downgrade, and the price action since then on its own chart looks to be a good shorting opportunity (rather than long). Having said that, PPT looks like it will at least pause at current resistance if not head back south to test the minor support at $30.

Let's see how that works out.

Yeah il post trades when I have time, yes I usually stick to same industry pairs, however its not necessary, Ive attached a 10 yr backtest (we have upgraded our software to back test up to 10yrs of data) of the ASX20 (top 20 Aussie stocks) and you can see out of all 190 possible pair combinations, using 10k trade size made $1.08million on 3,467 trades, with a avg profit per trade of $314, a 71.8% win rate and 2.02 win/loss ratio. The top 20 stocks come from a variety of industries.

So whilst its ideal to pair stocks in the same industry, you can still make good profits by pairing non-related stocks together. Once again, its mean reversion of the individual stocks that makes most of our profits, not correlation, being correlated just reduces your sector risk.

 

[Pairs Trader]

Exited trade

Sold QBE @ 17.02 (2.3% loss)
Covered PPT @ 29.92 (7.5% gain)

not bad for 3 days holding time

 

[SilverRanger]

Haven't had any active pairs for almost a week, kinda feel bad missing out last Thursday on both NWS/NWSLV at market close, and WAN/FXJ because the greedy me couldn't get a fill
Both could have been closed today with some modest profits...

How's everyone else doing?

Does anyone know tricks to get a list of indicative prices of stocks at market open and close auction?

 

[edman79]

Hi Pairs,
It would be great if you started posting trades again as I only started pair trading after you finished posting trades and missed out on the "real time" learning experience.

Ed.

 

[edman79]

Yeah il post trades when I have time, yes I usually stick to same industry pairs, however its not necessary, Ive attached a 10 yr backtest (we have upgraded our software to back test up to 10yrs of data) of the ASX20 (top 20 Aussie stocks) and you can see out of all 190 possible pair combinations, using 10k trade size made $1.08million on 3,467 trades, with a avg profit per trade of $314, a 71.8% win rate and 2.02 win/loss ratio. The top 20 stocks come from a variety of industries.

So whilst its ideal to pair stocks in the same industry, you can still make good profits by pairing non-related stocks together. Once again, its mean reversion of the individual stocks that makes most of our profits, not correlation, being correlated just reduces your sector risk.

Hi Pairs,
What signal settings did you use to get these results?

Ed.