I've got to admit a real fondness for these little GE/QQQQ scalps. Since I mentioned the concept last Thursday I've received a number of e-mails from other traders who regularly trade the GE/Qs (and other) divergences. It turns out that one of the most profitable traders at a well known Las Vegas prop shop only trades GE but, as I mentioned Monday, the prop shops have capital, market making and auto trade capabilities than mere mortals like you and I can't easily replicate. There are ways to get close however, as per my closing scalp yesterday, although I need to study the details of the setup a little closer to verify that the typical trade risk/reward is acceptable. I'm also going to devote some time developing TS code to capture those divergences on 1 and 2 minute bars and/or a TICK basis. My trader buddy Larry, who introduced me to the GE/Qs trade already has such software, but I've seen it and believe it has some risk management flaws that need repair before I would throw money at it. Another project for my "to-do" list.
The Qs hit 33.08, so my Monday projection of 33.06 was off by .02. I'm always a little surprised by how well the LR30 channel manages to capture support and resistance levels, and when I fired up the charts today and saw the Qs intraday R1 pivot at 33.02 I knew the odds of the Qs getting there were about 100%.
5 comments:
Do you factor in dividend dates when your scalping...
George,
Since the scalp trades (so far) have only lasted 10 to 20 minutes, I'm not sure how ex-div dates would factor in. While there have been times in the past when the Qs and GE have diverged for days, that's not the focus of my current attention although there may, in fact, be some good risk/reward trades to be found there.
Interesting I have a friend that runs a quant prop shop and does index arb on the IWZ, IWN, and IWW. He has to have insane computers though and enough speed to process data from all those bid and ask orders. Have you ever done any index arb. I've done dividend arb with options before.
George,
The prop shops I know live by arbitrage. Bright Brothers use pair trading for the much of their trading bundled with MOO amd MOC tactics. In order to do it effectively I think you need to have a server farm and a few programmers like your friend has, plus a truckload of capital to spread the risk around. Although I've played with it in the past, I found it very time consuming and not always worth my effort, so I just stick to what works best for me. Since I firmly believe that algo trading is the future, why not hit up your buddy for an intership or other role in his shop? It may be the ticket for that home in the Hamptons and that summer place on the Cote d'Azur you've always wanted. And of course, you can always invite your ole buddy BZB over for a spin in your new 120' yacht when that gets delivered.
There is a reason that I am taking some computer science courses and learning a lot about R. I am also taking a lot of statistics courses in college... Im still a freshman... but yep im looking at some interesting internship opportunities for this summer.
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