Articles by kafka

Interesting volatility measurement

December 10, 2010 | kafka

Long time ago I stumbled across interesting volatility measurement at The idea is following: take 3-day historical volatility of S&P 500 index and divide that by 10-day historical volatility. Then mark all points which are less that 0.25 and measure the volatility of 3 following days. On average, the ... [Read more...]

3 weak days in a row

December 6, 2010 | kafka

Recently, Trading the odds posted one of many flavors of mean reverting strategies and I decided to get my hands dirty by writing R code and testing it. You can find full description of the strategy by following latter link above. Long story short – if SPY shows lower open, high ...
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Millionaire’s advice

October 2, 2010 | kafka

Viktor Uspaskich is euro-parliamentarian delegated by Lithuania. His was born in Russia, Arkhangelsk Oblast and later on he moved to Lithuania where he made his fortune and first millions. Recently, I saw an interview with him and I found interesting to test his claim, that  gold and oil are negatively ...
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Mean reverting strategies and volatility

September 27, 2010 | kafka

Mean reverting strategies are beating on mean reversion of the prices. There are various flavors of mean reverting strategies, but as a proxy I chose RSI(2). You can find many entries on blogosphere about this strategy, but nowadays its popularity dried up. What made me wondering is that there was ...
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Intraday volatility of OMX Baltic stocks

August 16, 2010 | kafka

Usually, intraday volatility exhibits a “smile” – it is high at open and close and it is lower during the trading day. DJI index, 5 min. intervals, CET time: MOS stock, 5 s. intervals, CET time: Because many readers of this blog are trading Nasdaq OMX Baltic stocks, it is worth to share ...
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R package Blotter

April 6, 2010 | kafka

How many times have you been disappointed by nice trading system, because neither trading cost or slippage or bid/ask spread were included into back-test results? Did you find difficult to back-test a portfolio in R or many portfolios with different stocks? Blotter package is supposed to solve these problems. ...
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Predicting April month return

March 31, 2010 | kafka

Bespoke blogged about average monthly returns of the DJI and emphasized April. Before jumping on that information, let’s check some weak points. In that post, only average returns are presented. We need at least extreme points (min;max) and confidence ranges. Second problem – the normal market have upward trend ...
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Returns on Easter week and one week after

March 21, 2010 | kafka

Inspired by CXO group report, I did a rerun of the same strategy on my data. Easter’s dates can be find at wikipedia. Overall, my results are similar to CXO group’s results. In the graph below, I plotted daily returns on Easter week (Monday to Thursday) from 1982 to 2009. ...
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Strategy: what if SPY & VIX are up?

March 10, 2010 | kafka

Recently, I was busy testing the following strategy: If SPY and VIX daily returns are positive, then short SPY at close and keep it for one day. The strategy is dump simple and it has very good feature – short side. There are not so many successful short side strategies. For ...
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End of the month investment

March 1, 2010 | kafka

It is know, that the first day of the month provides bullish edge. According to Quantifiable edges not all the months are equal. So, I made a test on S&P500 index, from January, 1980 until February, 2010. It is true, March isn’t the best month to run this strategy. Only 3 ...
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Gas price seasonality

February 18, 2010 | kafka

Last spring I read “Quantitative Trading” by Ernest P. Chan. In his book, he suggested to buy gas futures contract at the end of February and sell it later, in March. Today, I decided to test this strategy by using R-language. The most important thing for such investigation is data. ...
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Sugar price seasonality

February 16, 2010 | kafka

Recently, Orion securities have issued a “BUY” recomendation for Cugar ETF. Because, neither I follow the recommendations nor I’m big fan of TA (I have to admit, that I was…), I decided to check sugar price seasonality. Voila, the mean of monthly returns are presented in the graph. February, ...
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Go long on close and sell on open

October 29, 2009 | kafka

I found a description of supposed to be profitable strategy on Bloomberg. The strategy is simple – buy S&P500 index on close and sell it on next day open. So, I tested this claim and got nice P/L curve: Yes, since 1993 this strategy has generated the profit __300%. But, neither ...
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Oil vs gas

October 5, 2009 | kafka

Recently, friend of my, got investment advise from his broker – long gas, because the price of gas is very low compared to oil. The broker didn’t indicate neither profit target or stop loss… I got hooked on the idea. First of all, I ran linear regression on monthly prices ...
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High yield spread

September 23, 2009 | kafka

Last week I had opportunity to participate at NYU, where one of the lecturers was Z-score man’s. He spent same time talking about the high yield spread as measure of the macro economy. Then spread is high (junk bonds become very cheap and Treasuries become ‘gold’) -  crisis is ...
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