Summaries and key ideas, written by Stratmill's research agent, of the books, papers, articles and code our AI agents read. Each page links to its original.
24 documents
The article explains why VIX futures can trade at premiums or discounts to the VIX index and examines how the futures curve changes with market conditions. It introduces a cash-and-carry comparison: futures require less cash than a stock purchase, leaving…
The article advises new trading businesses to begin trading with available skills and tools, then build operational capabilities in response to real market experience. It argues that constructing a large technology stack before trading can waste effort…
The article builds intuition for option pricing by comparing expiration payoffs with possible underlying prices. Calls pay the amount by which the underlying finishes above the strike, while puts pay the amount by which it finishes below. Before expiration,…
The volatility risk premium (VRP) is the tendency for option implied volatility to exceed the volatility that later occurs. The article explains this as compensation for bearing the risk of sharp volatility spikes, comparing option selling to insurance:…
The article frames the cost of SPX options as a comparison between option-implied volatility and a forecast of future volatility. It suggests treating options as expensive when the forecast is well below the implied level, and cheap when the forecast is well…
The article presents a formula for the probability density of an asset’s future price under geometric Brownian motion (GBM), along with an R function that evaluates the density at a given price. Inputs include the starting price, per-step expected return,…
The document summarizes proposed cross-sectional signals for judging whether equity options are relatively cheap or expensive. Its central comparison is implied volatility against volatility that later realizes: options may be candidates to buy when implied…
The document frames consistent participation in markets as a way to grow capital over time. It points to the time value of money and the no-arbitrage principle as the main ideas for understanding how investments can earn more than a baseline return, though…
The article examines whether US election dates coincide with unusual S&P 500 returns. It describes aligning historical index returns to the nearest election, grouping observations by days before or after election day, and comparing average returns across the…
This essay argues that most traders gain little by trying to forecast market direction from macro announcements unless macro trading is their specialty. It recommends knowing when major events occur because volatility can rise, then making a deliberate…
The article explains option value through an everyday example: the right to use a truck. It identifies three drivers of that choice’s value: how useful the truck would be now, how uncertain the holder’s future need is, and how long the choice remains…
The article presents a framework for judging whether an observed market feature is likely to persist: consider its economic rationale, inspect historical evidence, check consistency across time, and compare across markets. It illustrates the process with…
This brief research note explains why asset prices are difficult to analyze directly: a broad equity index can drift over time, making price levels from distant periods poorly comparable. It distinguishes a predictive question from a contemporaneous…
This tutorial shows how to export a factor measured at trade entry from a Zorro simulation and compare it with subsequent trade returns in R. The example records rolling volatility before entry, attaches it to closed trades, and writes asset, entry date,…
Rolling estimates such as 30-day volatility share most of their underlying observations from one day to the next. A naive comparison of adjacent estimates can therefore appear highly persistent even when much of that relationship is mechanically caused by…
The document explains how UVXY’s daily leverage target and maturity maintenance lead to recurring portfolio rebalancing, and uses spreadsheet models to examine two trades: shorting UVXY with periodic rebalancing, and shorting a basket of UVXY and an inverse…
The document offers practical guidelines for trading equity options, emphasizing that the many contracts available on one underlying tend to have thinner liquidity and wider spreads than the underlying stock. It recommends using options when the trading…
This guide explains volatility-targeted position sizing and describes tools for calculating target exposure, visualizing it over time, and simulating rebalancing. The position is scaled according to the ratio between the desired portfolio volatility…
The article compares the equity risk premium (ERP), the expected compensation for holding risky equities, with the volatility risk premium (VRP), the tendency for implied volatility to exceed realised volatility. It frames the ERP as a long-term return…
The article explains how to estimate the volatility risk premium (VRP) by comparing option implied volatility with volatility that is later realised. Using ORATS data, it describes a practical alignment issue: implied volatility looks forward across calendar…
This article explains ARIMA models for forecasting a time series’ mean and GARCH models for its changing conditional variance, then combines them in a directional EUR/USD strategy. It fits models to a rolling window of daily log returns, selects ARIMA orders…
The article proposes a speculative daily strategy for SPX options. It compares recent realized open-to-close SPX moves with the moves implied by at-the-money 0DTE straddles. If realized moves have averaged larger than implied, the next session’s straddle is…
This review surveys the research topics covered in Euan Sinclair’s book on positional option trading. It highlights potential sources of returns involving the implied volatility forward curve, cross-sectional equity option returns linked to fundamental…
The document describes cross-sectional signals for ranking equity options by potential volatility mispricing. It outlines value, company size, idiosyncratic volatility, beta convexity, implied volatility term structure, the implied versus realized volatility…