Tag: quantopian

Backtesting the Implied Volatility Long/Short Strategy (12/31/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts individual equity returns up to 6 months! ABSTRACT Stocks exhi

READ MORE →

Backtesting the Implied Volatility Long/Short Strategy (12/06/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts individual equity returns up to 6 months! ABSTRACT Stocks exhi

READ MORE →

Backtesting the Implied Volatility Long/Short Strategy (11/16/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts individual equity returns up to 6 months! ABSTRACT Stocks exhi

READ MORE →

Does Factor Rank Matter for the Implied Volatility Skew Strategy?

Post Outline * Strategy Summary * Results * Conclusions/Analysis Strategy Summary First, if you're unfamiliar with the Implied Volatility Skew Strategy you can find a recent deep dive into the strategy and its performance here. In this short post, I look at the effect of using only the top N ranked ETFs from each Long/Short portfolio. In this case, N is equal to 3. This is an arbitrary selection and this study could be done with the top 1, 2, 4, etc. This differs from the original strate

READ MORE →

Backtesting the Implied Volatility Long/Short Strategy (10/18/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts individual equity returns up to 6 months! ABSTRACT Stocks exhi

READ MORE →

Backtesting the Implied Volatility Strategy - A Deeper Dive (10/03/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) * Deep Dive into the Weekly Strategy using Quantopian's Pyfolio * Strategy Concerns Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their

READ MORE →

Backtesting the Implied Volatility Long/Short Strategy (9/27/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts individual equity returns up to 6 months! ABSTRACT Stocks exhi

READ MORE →

Backtesting the Implied Volatility Long/Short Strategy (9/20/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts individual equity returns up to 6 months! ABSTRACT Stocks exhi

READ MORE →

Backtesting the Implied Volatility Long/Short Strategy (9/14/16)

Post Outline * Strategy Restart * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Restart After a ~2 month pause, the implied volatility long/short strategy has returned! If you were previously unaware this strategy relied on aggregating free options data via the now defunct Yahoo Finance Options API. After some time I was able to track down another free, reliable, source for options data via Bar

READ MORE →

Institutional Level Long/Short Strategies in Quantopian (OCF/EV)

Post Outline * Background * Strategy Summary * Implementation Details * Strategy Results and Analysis * References (Notes) Background Recently I was blessed with an introduction to S&P Global-Market Intelligence's Director of Business Development, Matt Morrissy and gifted a trial membership to the S&P Capital IQ platform [1]. Specifically, I was given an opportunity to review and provide feedback for their "Alpha Factor Library." Their team, the Quantamental Group [2], has researched an

READ MORE →

Backtesting the Implied Volatility Long/Short Strategy (7/12/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Update (Target Leverage=1) * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts ind

READ MORE →

Backtesting the Implied Volatility Long/Short Strategy (7/6/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Update (Target Leverage=1) * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts ind

READ MORE →

Backtesting the Implied Volatility Long/Short Strategy (6/28/16)

Post Outline * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Update (Target Leverage=1) * 1-Week Holding Period Strategy Updated (Target Leverage=2) 4-Week Holding Period Strategy Update Download the spreadsheet here. 1-Week Holding Period Strategy Update (Target Leverage=1) Results simulated using quantopian platform 1-Week Holding Period Strategy Update (Target Leverage=2) RESULTS SIMULATED USING QUANTOPIAN PLATFORM I'll post the components of each of the

READ MORE →

A Dead Simple 2-Asset Portfolio that Crushes the S&P500 (Part 2)

In Part 1, and Part 1.5 I introduced a simple 2-asset portfolio that substantially outperformed the SPY ETF since 2009. In Part 1 I examined the performance of an "inverse risk-parity" approach where the ETF with the largest volatility contribution to the portfolio was weighted more heavily. In Part 1.5 I examined the performance of the actual "risk-parity" approach, where the ETF with the smallest volatility contribution is weighted more heavily. In this post I will examine some of the conceptu

READ MORE →

A Dead Simple 2-Asset Portfolio that Crushes the S&P500 (Part 1.5)

In Part 1 of this series I shared a simple strategy which showed outsized performance relative to the SPY ETF since 2009. I made a small error in the implementation. The previous portfolio was not rebalanced according to a risk-parity framework. It was actually the inverse. The strategy was rebalanced such that the ETF responsible for the highest percentage of the portfolio's volatility was weighted more heavily! Surprisingly this error did nothing to substantially alter the performance of the p

READ MORE →

A Dead Simple 2-Asset Portfolio that Crushes the S&P500 (Part 1)

I'm going to share a portfolio with you that has absolutely annihilated the performance of the market (as proxied by SPY) since the recovery began in 2009*. The strategy has not had a down year since. This portfolio maintains constant exposure, has 1 un-optimized parameter and wins on a risk-adjusted basis even after considering reasonable transaction costs. I can't claim credit for the general idea. I found it in the comments section while reading a SeekingAlpha article written by Jonathan Kin

READ MORE →

Backtesting the Implied Volatility Strategy with Quantopian (2/17/16)

#block-yui_3_17_2_3_1455744353210_9420 .social-icons-style-border .sqs-svg-icon--wrapper { box-shadow: 0 0 0 2px inset; border: none; } To see the origin of this series click here. I've been tracking this strategy for ~7 weeks now and it appears to have substance. To summarize, the strategy calculates a SKEW measure using ATM calls and OTM puts for a collection of ETF symbols. It then sorts the symbols into quintiles based on the SKEW metric. Using daily close/close return calculations for th

READ MORE →