Volatility Arbitrage Algorithm

We offer to license fully-automated trading algorithm.

QT Volatility Arbitrage Strategy is a pure volatility arbitrage strategy; the returns we generate are all alpha. The strategy looks to capture the difference between implied volatility and realized volatility using a proprietary model across a wide range of commodity and financial markets. We use Nongaussian Options Pricing based on Objective Vaule (ObV) theory.

Portfolio Manager Dr. Krzysztof Urbanowicz (since inception, February 6, 2015)
Markets Traded Diversified across more than 8 different options on futures/futures markets in grains, metals, energies, currencies, stock indices and interest rates.
Investment Strategy The key strength of the algorithm is the use of a new and not well-known options pricing model, based on our proprietary theory. We trade both calls and puts in either direction, mainly at-the money. We execute trades when the difference between fair value of options to market value is larger than threshold. The strategy is neutral against both systematic and volatility risk.
Dynamic hedging We seek to have Delta and Vega of portfolio close to zero. We developed our own algorithm to minimize cost of hedging.
Employed capital
Average Margin to Equity 25%
Broker Interactive Brokers
Performance month by month:

Capital Employed: $300,000

Current Maintenance Margin: $ 46,399.65

Net Profit: $ 29,781.15

performance table

equity 300k
Current portfolio:
  • Options on Futures / Futures
    • S&P500 (ES)
    • Crude Oil (CL)
    • EUR/USD (EUR)
    • Gold (GC)
Technical description of our options pricing model:
  • We use very few number of free-parameters in comparison to other methods.
  • All parameters are estimated using underlying assets, thus we do not need market prices of options.
  • ObV option pricing is the generalization of Black-Scholes option pricing, with one additional parameter Power-Law: α, which shows the difference between ObV and B-S. One can say that distance between ObV and B-S is given by 1/(α−2).
  • Power-Law is automatically estimated based on historical one year prices using of Maximum Likelihood Method. To calculate Power-Law we use only  prices of underlying asset and the model is not fitted to the curve described by implied volatility.
  • The strategy is neutral to both systematic and volatility risk, hence the returns we generate are all pure alpha.

Account Statement form Interactive Brokers (Demo Account):
Account Statement: 6 February 2015 – 12 June 2015

What you need to start trading using the algorithm?

  • Minimum Capital investment of $50,000.
  • Active account in Interactive Brokers.
  • More details how to use the algorithm for your capital:[link]

Fees: We charge only performance fee above benchmark and fixed amount of license fee.

For more details, contact us:

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