ASX Stock Pairs Trade Journal

[skc]

Beginning to think that working full time is making this just too hard!

PMV making me look like a goose, closing at $6.58 while PBG moved up only slightly

I also missed an exit on my PRY/RHC trade...and missed an entry on another that I hope I can get into on Monday (perhaps at better prices..)

Even if you are sitting in front of the screen full time doesn't guarantee you'd have the patience/skill/luck to get the best price.

Missed the PRY trade this morning myself -and I never left my chair

 

[DJG]

Whilst I wait for PTF to reply to my email, I've found that Incredible Charts can input a price ratio indicator.
I've compared RIO and BHP.
I don't know if it's in line with PTF software though so could someone please upload a chart to compare.

I'm not saying I would take a trade in this, just need to make sure I'm on the right page with a chart I can at least look at to gauge what is going on.


Thanks guys

 

[sinner]

Hello ASF pairs traders,

I spotted this article today on the TurnKey Analyst blog (which summarises lots of recent finance research) titled "Pairs Trading Kicks Butt!". Since the academic strategy proposed is quite interesting, but also quite different to what people are doing on ASF (including me), I thought I would share it for your potential benefit.

http://turnkeyanalyst.com/2013/06/pairs-trading-kicks-butt/

Interesting to note the chart of rolling excess returns and how they narrowed considerably as hedge funds started employing the strategy.

 

[VSntchr]

Going nuts today.

Had to do a complete re-install like SKC had a few pages back...

But now I can't get it going again...it won't let me create a new databse - error msg below:

 

[DJG]

I'm in the same boat. Post #1391

 

[VSntchr]

I'm in the same boat. Post #1391

Okay I found the fix.

Just uninstall SQL. Then delete absolutely every folder you can find that relates to SQL...there was only like 2 more that I could find after the uninstall.

Then follow the re-install process as per the guide.

Im back in action at last!

 

[VSntchr]

Exited the PRY @ 4.87/RHC @ 30.04 trade this morning for slight profits.

Entered Long AIO @ $4.71, Short TOL @ $4.97...already slightly underwater

 

[skc]

Entered Long AIO @ $4.71, Short TOL @ $4.97...already slightly underwater

I like the look of this trade.

Hello ASF pairs traders,

I spotted this article today on the TurnKey Analyst blog (which summarises lots of recent finance research) titled "Pairs Trading Kicks Butt!". Since the academic strategy proposed is quite interesting, but also quite different to what people are doing on ASF (including me), I thought I would share it for your potential benefit.

http://turnkeyanalyst.com/2013/06/pairs-trading-kicks-butt/

Interesting to note the chart of rolling excess returns and how they narrowed considerably as hedge funds started employing the strategy.

Thanks Sinner. There are many ways to skin the cat. My brand of pairs trading is really pairs scalping. I am pretty much arbitraging noise. It works well up to a certain size which I am no where near reaching.

What this paper proposed seemed much longer term (6 month holding period vs my typical hold of <2 weeks). I guess the bigger your size, the longer you need to hold. In fact their entries / exits will probably create enough noise to generate signals for my trades. To hold that long you are really banking that there's some fundamental mis-pricing going on. You are also exposed to more random and scheduled events which would change the return profile and equity curve a fair bit.

That's the advantage of a small-time trader I guess.

 

[VSntchr]

Opened:
Long CQR $3.89 / Short GPT $3.80

CQR is ex div on the 25th while GPT operates a different schedule so it should have a bit of support/buying pressure leading into that. On the flip side, I am pretty much restricted to exiting the trade before that date so there is a bit of extra pressure for this one to converge relatively quickly.

 

[skc]

Opened:
Long CQR $3.89 / Short GPT $3.80

CQR is ex div on the 25th while GPT operates a different schedule so it should have a bit of support/buying pressure leading into that. On the flip side, I am pretty much restricted to exiting the trade before that date so there is a bit of extra pressure for this one to converge relatively quickly.

Why?

 

[VSntchr]

Why?

I was thinking that without receiving franking credits when the stock goes ex-div it puts me at a disadvantage. I don't see it as a massive disadvantage but its there. Also once it goes ex-div it could potentially fall further in the current environment given the way it appears foreign money is getting yanked from this sector..

 

[skc]

I was thinking that without receiving franking credits when the stock goes ex-div it puts me at a disadvantage. I don't see it as a massive disadvantage but its there. Also once it goes ex-div it could potentially fall further in the current environment given the way it appears foreign money is getting yanked from this sector..

CQR dividends, like all other REITs, are unfranked.

And the beauty of pairs trading (esp when you are trading small), is that it it goes ex and falls further than it should, you can always choose to NOT exit at that price and wait/hope for further convergence.

If you come into profit that you are happy to take by all means take it, but I wouldn't impose an absolute deadline either.

 

[VSntchr]

CQR dividends, like all other REITs, are unfranked.

And the beauty of pairs trading (esp when you are trading small), is that it it goes ex and falls further than it should, you can always choose to NOT exit at that price and wait/hope for further convergence.

If you come into profit that you are happy to take by all means take it, but I wouldn't impose an absolute deadline either.

Ahhh, poor form on my half not even checking that - I'm too used to holding companies which are 100% FF.

Thanks for the tip

 

[DJG]

Still haven't fixed mine, I did rush through trying to do it, so will need to give it another crack sometime soon after exams. - suspect you didn't get an email reply?

I've tried to setup a similar price ratio etc on Incredible Charts (see post above #1402) - any chance your charts look similar when it comes to the price ratio part?
I can send an update version of the chart and/or another pair.

Thanks,

 

[VSntchr]

Update the chart and ill screen shot mine to show.


SKC Do you have any policies on what you do if you get a fill on one leg, then the other leg takes off before you can get in? Happened to me today on CHC/GMG...got into GMG short then CHC started flying...



As for my AIO/TOL trade, TOL is being a real jackass this week!!...just keeps rising !

 

[skc]

SKC Do you have any policies on what you do if you get a fill on one leg, then the other leg takes off before you can get in? Happened to me today on CHC/GMG...got into GMG short then CHC started flying...

Lol had a long CHC from yesterday

No set policies but there are several potential approaches.

1. Scrap the trade.
2. Trade the short as a directional trade with a stop, while sitting in bid waiting for the long to be hit.
3. Chase the long.
4. Find an alternate long

As for my AIO/TOL trade, TOL is being a real jackass this week!!...just keeps rising !

TOL got upgraded by Credit Swiss today so a pretty decent jump. I still think it's a good earning downgrade candidate. The AIO/TOL trade only widened by 1.5% today which is actually much better than some of my other trades...

 

[DJG]

Update the chart and ill screen shot mine to show.

Had another look at it. It shows the % deviation from the mean on the price ratio.
I don't think I can add an indicator to show the amount (standard deviations) from the mean.

This may have to do for now on a paper trade

 

[VSntchr]

No set policies but there are several potential approaches.

1. Scrap the trade.
2. Trade the short as a directional trade with a stop, while sitting in bid waiting for the long to be hit.
3. Chase the long.
4. Find an alternate long

Thanks! Yeah I actually went for what you describe as 2. I was waiting for the long but decided that I was happy enough to take the profits from the GMG short and call it a day. If I had have had more time I may have continued the trade and picked up CHC but I was happy to take the ~$160 and call it quits on that one.

TOL got upgraded by Credit Swiss today so a pretty decent jump. I still think it's a good earning downgrade candidate. The AIO/TOL trade only widened by 1.5% today which is actually much better than some of my other trades...

Damn you Swiss bastards lol

 

[VSntchr]

New trade:
Long SIP @ 0.755
Short RMD @ 5.12

These aren't perfectly fundamentally correlated so SKC might avoid such a trade, but statistically they show ~80% correlation. I have taken a small leg size of 6% and felt I got a pretty good entry so am happy to see how this one goes. I think SIP is not bad as a longer term story and the share buy-back seems to be providing decent support longer term also...

 

[VSntchr]

Opened:
Long CQR $3.89 / Short GPT $3.80

CQR is ex div on the 25th while GPT operates a different schedule so it should have a bit of support/buying pressure leading into that. On the flip side, I am pretty much restricted to exiting the trade before that date so there is a bit of extra pressure for this one to converge relatively quickly.

Closed this yesterday -
CQR $3.97 +2.06%
GPT $3.78 +0.53%
Commission -0.10%