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Algorithmic Short Selling with Python

You're reading from   Algorithmic Short Selling with Python Refine your algorithmic trading edge, consistently generate investment ideas, and build a robust long/short product

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Product type Paperback
Published in Sep 2021
Publisher Packt
ISBN-13 9781801815192
Length 376 pages
Edition 1st Edition
Languages
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Author (1):
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Laurent Bernut Laurent Bernut
Author Profile Icon Laurent Bernut
Laurent Bernut
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Table of Contents (17) Chapters Close

Preface The Stock Market Game 10 Classic Myths About Short Selling FREE CHAPTER Take a Walk on the Wild Short Side Long/Short Methodologies: Absolute and Relative Regime Definition The Trading Edge is a Number, and Here is the Formula Improve Your Trading Edge Position Sizing: Money is Made in the Money Management Module Risk is a Number Refining the Investment Universe The Long/Short Toolbox Signals and Execution Portfolio Management System Other Books You May Enjoy
Index
Appendix: Stock Screening

Net beta

In early 2005, the Japanese equities market had an epic year. It felt like this time, it was different. The party came to a screeching halt when the Japanese authorities decided to arrest Takafumi Horie, CEO of Livedoor (JT:4753) and symbol of the new Japan. High-flying small caps rediscovered Newtonian physics.

We long high-flying small caps with esoteric business models, and short a few asthmatic "structural shorts" along with index futures. The fund manager quickly responded to the crisis by selling futures. Despite a reasonable +30% net exposure, the ship was taking on water fast. As a self-appointed risk manager, I promptly brought to his attention that we were synthetically exposed on the beta, market cap, exchange, and liquidity sides. With small caps at 1.7 and beyond on the long side, agonizing shorts at 0.8, and futures at 1 on the short side, our net beta was hovering around 0.7. As one investor later pointed out, we had a "beta of 1.5 on the...

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