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.|
|Average Margin to Equity||25%|
Performance month by month:
Capital Employed: $300,000
Current Maintenance Margin: $ 46,399.65
Net Profit: $ 29,781.15
- 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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