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.
4,613 documents
The discussion asks whether traders can legally short stocks promoted through unsolicited emails. The answer says that, in the respondent’s experience of Canadian markets, there is no rule barring the trade. It shifts attention from legality to whether a…
The document works through a hedge for a company planning to issue 180-day commercial paper. Because the company benefits from higher short-term rates when issuing the paper, it can short Eurodollar futures; the example scales the position by comparing the…
The post considers how to compare profit factors across forex strategy runs when trades arrive in bursts. The author proposes treating nearby orders as one cluster and weighting each trade according to the number of subsequent orders within a short window. A…
The document asks how to compare options with positive or negative net credits and estimated expected values, including credit trades and a debit trade. Its brief answer defines a simple return measure for a short option position: divide the premium received…
The note diagnoses a failure in an equal risk contribution portfolio optimizer that returns its starting weights after one iteration. The central bug is in the objective function: although the optimizer passes candidate weights into it, the calculations…
The document derives the continuous Kelly objective for a portfolio split between a risky asset following geometric Brownian motion and a continuously compounded risk-free asset. With a fraction of wealth invested in the risky asset, portfolio drift is the…
The question frames a best-of-seven series bet as a binary payoff and asks how to reproduce it using wagers placed on individual games. It proposes estimating the value of the position after the first game from the remaining-game win probabilities, then asks…
The document clarifies how funds are allocated when placing a lay bet on a betting exchange. In the example, the layer offers odds to a backer and risks an amount equal to the backer's potential winnings. If the selection loses, the layer receives the…
The document considers how often and how heavily to trade a favorable card-drawing wager when capital is finite. It distinguishes the decision to accept a positive-expectation trade from sizing repeated bets, and presents expected utility as a way to…
The note addresses why Treasury basis traders commonly express a bond-to-futures hedge using conversion factors rather than a DV01 ratio. Its central point is that the two approaches are equivalent when the futures contract’s DV01 is calculated from the…
The document distinguishes a rough estimate of trade capacity from a precise execution model. Its central answer is that immediate market-order capacity depends on the quantity available on the relevant side of the order book when the order reaches the…
The document poses a sequential choice problem: a decision-maker visits rooms in order, observes each picture’s value, and may take only one, with the final room forcing a choice. Values are assumed to follow a uniform distribution from one to one hundred.…
The question explores whether borrowed money can fund a stock purchase whose shares are sold periodically to cover loan installments. It asks about break-even price growth, sale timing, and the return required, while proposing an installment estimate based…
The discussion explains how bond DV01s measure each bond’s approximate price sensitivity to a one basis point move in its own yield, under a parallel shift assumption. Because the 5-year and 30-year bonds respond to different points on the yield curve, a…
The discussion compares position sizing in proportion to inverse volatility with sizing in proportion to inverse variance. In a simple portfolio of normally distributed assets, inverse volatility sizing is associated with risk parity: it treats assets as…
The document addresses how to summarize a sequence of trading gains and losses when positions occupy capital for different lengths of time. It recommends using the internal rate of return (IRR) on actual dollar cash flows rather than averaging return per…
The document explains why the Kelly criterion chooses a position size by maximizing expected logarithmic wealth growth rather than expected wealth or simple return. Because wealth compounds multiplicatively across repeated bets, log returns add across…
The document derives how many shares a fixed budget can purchase when each successive share raises the price by a constant multiplicative factor. It represents the total spend as a finite geometric series, with the first share priced at the initial stock…
The document asks how to move from evaluating a machine-learning model on historical test data to producing forecasts from newly received broker data. The author describes training several model types on price and fundamental inputs, currently using a random…
The note asks how to size option positions so a strategy reaches a chosen long-run daily volatility. It considers strangles and risk reversals, and compares sizing from the historical P&L volatility of one unit, from implied-volatility and vega estimates, or…
The document describes a two-asset risk-parity objective: compute each asset’s share of portfolio variance from its weight and the covariance matrix, then minimize the distance between those shares and equal contributions. The initial attempt uses a…
The document derives the return on a stock position financed partly with investor cash and partly with a loan. Starting from the stock’s terminal value as its initial price multiplied by one plus its return, it subtracts the investor’s initial contribution…
The document explains how an Ornstein–Uhlenbeck process models reversion toward a long-run level and identifies the inverse reversion speed as its characteristic timescale. It notes that first-passage-time formulas can estimate how long a process takes to…
The document asks how to size a four leg iron butterfly and warns that expiration payoff calculations alone do not capture risks while the position is open. The response highlights execution costs, liquidity, assignment, margin, and the possibility of forced…