investment strategy management team rob breakironcasey loop matt kemplauren gebbie
TRANSCRIPT
GAP Alpha Consulting, Inc.Investment Strategy
Management TeamRob Breakiron Casey LoopMatt Kemp Lauren Gebbie
What is GAP Trading?
Our Company
Strategy #1
Strategy #2
Risk Profile Profit Future
Upgrades Q & A
Black Box
Our Company Strategy Risk
Profile Profit Future Upgrades Q & A
• Works well in a defined bull or bear market
• Lower max drawdowns• Lower max returns• Higher Sharpe ratio
• Works well in a volatile market or sideways market
• Higher returns• Higher max drawdowns• Lower Sharpe ratio
Mean Reversion
Modified TRIX
Combine to create max alpha opportunities for our clients
GetPrices
In-Sample Data (2009-2010)
Gap Higher/ Lower
1010111001111010100
101011100111101011010111001111010
LT
P(Open Higher)
101011100111101011010111001111010
ST
P(Open Higher)
Why Did We Care?
• When PLT(Higher) > PLT(Prob) BUY
•When PLT(Higher) < PLT(Prob) SELL
Position Open: Closing Price of Day iPosition Close: Opening Price of Day i+1
Our Company
Strategy #1
Risk Profile Profit Future
Upgrades Q & A
Strategy #1 Mean Reversion
Our Company
Strategy #1
Strategy #2
Risk Profile Profit Future
Upgrades Q & A
Maximization
• Long > Short BUY• Long < Short SELL
Now What?
Monte Carlo Simulation
What We Found
Long Term: 300-200 DaysShort Term: 200-10 DaysFive Random S&P 500 Stocks5000 Iterations
Maximum Daily Return: .00093Minimum Daily Return: -.00023Average Daily Return: .000473
Selected Range: 252/44 Days.000845
S/T MA 42-47 Range: .00076-.00088
Strategy #1 Mean Reversion
Our Company
Strategy #1
Strategy #2
Risk Profile Profits Future
Upgrades Q & A
TRIX: The 1-period % ROC for a triple smoothed EMA1. Single-Smoothed EMA = X-period EMA of the opening price2. Double-Smoothed EMA = X-period EMA of Single-Smoothed EMA3. Triple-Smoothed EMA = X-period EMA of Double-Smoothed EMA4. TRIX = 1-period percent change in Triple-Smoothed EMA
Divergence: Bullish and bearish divergences form when the security and the indicator do not confirm one anotherwww.stockcharts.com
Strategy #2 Modified TRIX
Our Company
Strategy #1
Strategy #2
Risk Profile Profit Future
Upgrades Q & A
Strategy #2 Modified TRIXModifications• Signal threshold• MA period • S&P market divergence
check• Earnings check
Trading• Trade signal ran across all
500 S&P ~10% signal• Works in defined market
directions & stocks• Leading indicator
Risk Profile
Systematic Risk Control Report daily portfolio volatility▪ Based on stock weights and rolling covariance matrix
Sharpe Ratio Max Drawdown
Unsystematic Risk Control Track when earnings are reported▪ 3 day look forward, 1 day look back
Architecture supports expansion to new areas
Our Company
Strategy #1
Strategy #2
Risk Profile Profits Future
Upgrades Q & A
Earnings Reporting
Our Company
Strategy #1
Strategy #2
Risk Profile Profits Future
Upgrades Q & A
Earnings Reporting
Our Company
Strategy #1
Strategy #2
Risk Profile Profits Future
Upgrades Q & A
Apple Earnings
Our Company
Strategy #1
Strategy #2
Risk Profile Profits Future
Upgrades Q & A
Aon Earnings
Our Company
Strategy #1
Strategy #2
Risk Profile Profits Future
Upgrades Q & A
Google Earnings
Our Company
Strategy #1
Strategy #2
Risk Profile Profits Future
Upgrades Q & A
Future Enhancements
Sector distinctions Correlated earnings identification Additional strategies
Integrate a synthetic pairs trade Option mispricing
Our Company
Strategy #1
Strategy #2
Risk Profile Profits Future
Upgrades Q & A
Q $ A
Our Company
Strategy #1
Strategy #2
Risk Profile Profits Future
Upgrades Q & A
Questions?