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..)
I'm in the same boat. Post #1391
Entered Long AIO @ $4.71, Short TOL @ $4.97...already slightly underwater
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.
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?
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.
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!
Update the chart and ill screen shot mine to show.
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.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
Damn you Swiss bastardsTOL 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...
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.
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