Blog Posts

From the outside, and among novice traders, there’s the widespread belief that trading is about predicting the future and being right.  Call the top, buy the bottom, predict what happens next.  Unfortunately, that mindset is why most traders have suboptimal results. It rarely works out. Taking into account the edge institutional traders have, plus the […]

Let’s say you’re trading a market and you want the upside, but want to limit the downside, but don’t want to pay an arm and a leg to protect against it. What do you do? In this article, we provide one idea.   Key Takeaways – Using Ratio Spreads to Finance Protection Goal: keep most […]

Exotic financial trading strategies go beyond traditional asset classes like stocks, bonds, and plain vanilla options. They often feature complex structures, unusual payoffs, and multiple market dimensions. We’ll discuss what “exotic” strategies are and examples of them.   Key Takeaways – Exotic Strategies “Exotic” strategies use complex, customized payoffs that depend on barriers, paths, or […]

Market impact is a concept in financial markets, referring to the effect a market participant has when buying or selling an asset. It is an essential consideration for large investors, such as financial institutions, as it can significantly influence investment decisions and overall profitability. This article will explore the nuances of market impact, its relationship […]

Are machines a substitute for human intuition in markets? The answer is layered. Machines – by which we mean quant models, algorithms, and AI – absolutely excel at certain aspects of markets, but they also stumble where human intuition remains hard to code.   Key Takeaways – Can Machines Really Beat Human Intuition in Markets? […]

Valuation is one of the most popular lenses through which to view the stock market. Whenever it becomes expensive you see headlines like this: Valuation metrics like the price-to-earnings (P/E) ratio are nonetheless limited when it comes to market timing.  Valuations demonstrate strong correlations with long-term returns, but they offer virtually no insight into short-term […]

Global macro trading and investing has traditionally been the domain of hedge funds, where managers trade broad economic and policy trends by shifting exposure across assets, asset classes, countries/regions, and currencies.  These strategies often include both long and short positions, derivatives (e.g., options, futures, swaps), and fast repositioning to take advantage of opportunities as they […]

Rising real yields (nominal yields minus inflation expectations) are often the market’s biggest wrecking ball because they represent a higher risk-free rate in “real” (inflation-adjusted) terms.  That reprices everything at once: Stocks – Future cash flows are discounted more heavily, hurting valuations (especially long-duration growth stocks). Bonds – Prices fall as yields rise. The longer […]

For traders and investors looking for returns and improved capital efficiency beyond traditional stock-only portfolios, a growing number of exchange-traded funds (ETFs) offer strategies that blend core equity exposure with futures-based or options-based overlays.  Traditionally, futures and options overlays are more active strategies pursued by both individual and institutional traders. These funds use derivatives to […]

This article is based on AQR’s paper A Half Century of Macro Momentum (PDF download), which tests a systematic global macro strategy running from 1970 to 2016, using backtested data. Instead of momentum based on price trends of the assets themselves, it applies momentum concepts to macroeconomic indicators (business cycles, monetary policy, trade, and risk […]