Blog Posts

In quantitative trading and algorithmic finance, objective functions are used in defining and optimizing trading strategies. An objective function is a mathematical expression that represents the goal or desired outcome of a trading system. It provides a measurable target that the algorithm looks to maximize, minimize, or hold within a certain range, among many other […]

Measuring risk is a critical aspect of finance as it helps traders/investors, financial institutions, and companies make informed decisions about their trades, investments, and their overall financing activities. The importance of measuring risk in finance can be summarized as follows: Risk and return are intertwined: By and large, every investment involves a trade-off between risk […]

Designing a portfolio is a complex and multifaceted process that requires careful consideration of numerous factors. At least it can be. For long-term passive investors, it might involve regularly contributing to some index funds, with the main driver of success being their savings rate. For an amateur trader, it might first be experimenting, trading off […]

Collateral requirement management is a critical aspect of trading and risk management in financial markets. It involves the process of calculating, monitoring, and adjusting the collateral needed to secure various trading positions and financial transactions. Effective collateral management helps reduce counterparty risk, ensures compliance with regulatory requirements, and optimizes the use of available assets.   […]

Liquidity management is an important aspect of trading that involves ensuring sufficient funds are available to meet financial obligations while maximizing profitability.   Key Takeaways – Liquidity Management Maintain a cash reserve – Keep 10-15% of your capital in cash or highly liquid assets to meet obligations and seize opportunities without forced liquidations. Diversify wisely […]

A collar options strategy is a protective options trading technique used by traders to limit potential losses on an existing stock position while also capping potential gains. This strategy involves simultaneously holding shares of an underlying stock, buying an out-of-the-money put option, and selling an out-of-the-money call option on the same stock.   Key Takeaways […]

LEAPs, which stands for Long-Term Equity Anticipation Securities, are a type of options contract with an expiration date that is typically more than one year in the future. These long-term options provide traders with extended exposure to potential price movements of the underlying asset, usually stocks or exchange-traded funds (ETFs) – but can be applicable […]

How do professional traders think and trade? Everyone has different perspectives, but it’s by and large a function of their philosophies, beliefs, training, goals, risk tolerance, and analysis. In financial markets, traders and investors rely on various indicators to make informed decisions.  These indicators are often referred to as market signals, and provide insight into […]

Many market participants have negative opinions of short selling, but it’s essential to healthy, functioning financial markets. In this article, we explain the various benefits of short selling.   Key Takeaways – Reasons Why Short Selling Is Important in Financial Markets We cover the following: Hedging and Risk Mitigation Market Makers Need to Short to […]

Is success in day trading primarily a result of skill, or is it predominantly determined by luck or variance?  This article looks into the various aspects of this question, looking at the roles that both skill and luck play in day trading and trading more generally.   Key Takeaways – Skill vs. Luck in Day […]