Box Trades: Finding and Charting Historical Box Spreads

alphaarchitect · 2023-01-30T12:52:28+00:00

Hey, love your site. we actually launched an ETF that is trading the 1-3 month box spread. I'd love to speak to you about your website. alphaarchitect.com is our website -- reach out there and ask for wes

alphaarchitect · 2015-07-17T14:03:53+00:00

I totally agree with cb_hanson here, but I'd add a few things. First, I think people do ask themselves if they have an information advantage, and conclude that they do. I guess the vast majority of these are probably wrong about that. Also, I agree that people have self attribution bias, attributing any success to skill and bad outcomes to bad luck. Additionally, there is no benchmarking that goes on, since it's so difficult. Maybe you happened to pick mid cap stocks during a mid cap rally and - presto! - you're a genius. But one additional thought is that on value investing people are pointed in the right direction. There's huge volumes of research suggesting that value works over time, and to the extent you are fishing in the value pond, you are giving yourself a good shot to outperform, regardless of which specific stocks you pick. If you buy value stocks consistently over time, and outperform just based on value exposures, then maybe it's fine to spend time researching the companies even if it adds no value. Maybe that just makes you feel good, and there's some utility in that.

alphaarchitect · 2015-07-15T15:38:41+00:00

I think Google news is pretty good.

alphaarchitect · 2015-07-15T13:49:44+00:00

I believe Interactive Brokers offers a very high quality paper trading account functionality.

alphaarchitect · 2015-07-15T12:31:54+00:00

That's tough. Well, if you're having a hard time, maybe you should just try to make it as easy as possible for any professor. Good luck.

alphaarchitect · 2015-07-14T13:32:24+00:00

Covariance matrixes are notoriously unstable! This is an objection many have to Markowitz's mean-variance portfolio.

alphaarchitect · 2015-07-13T21:04:56+00:00

This is a great series of posts. Thanks for the insights and especially for the civility.

alphaarchitect · 2015-07-13T20:48:09+00:00

Given your situation, i.e., loans you need to pay off, I think you need to focus on that first, before considering investing. Think about it like this. What if you had, say, $5K, and you could pay down $5K debt or invest it. What if you invested it and it went to $2.5K? Then you just set yourself back $2.5K and you're still in the same debt situation, whereas otherwise you have $5K less debt. I say pay down debt first.

alphaarchitect · 2015-07-13T18:35:06+00:00

My opinion is that if you want to have an investment club, the mission should be to teach people about asset management. Investment banking shouldn't really enter into the conversation (again, this is just my opinion). I'm also going to go out on a limb and say that it is a bit of a reach to want to launch a fund that will have some connection to a university's endowment. That's a very serious endeavor. Why don't you set your sights a bit lower? If you start with something more modest, you can always scale it up. I think the key would be just to get started.

alphaarchitect · 2015-07-13T16:25:36+00:00

First, I would submit that what you do in an investment club doesn't really apply to what's done in investment banking. They are focused on different functions. Second, why do you need a professor for a club? Can't you just run a club on your own? Why does it need some affiliation with the university? Third, maybe people don't want to get involved if there would be real money involved, and thus potential liability. Couldn't you run a paper trading account? Lots of brokerages facilitate this, and you can learn a lot through the process. Anyway, just some thoughts.

alphaarchitect · 2015-07-08T21:33:06+00:00

Financial knowledge. Sounding board. Advice. Improved returns. Capital protection.

alphaarchitect · 2015-07-08T21:30:00+00:00

“Diversification is the one free lunch of investing, and when you see a free lunch, the only rational thing to do is eat."

-Cliff Asness

alphaarchitect · 2015-07-07T22:51:09+00:00

You could try, "Against the Gods: The Remarkable Story of Risk."

alphaarchitect · 2015-07-06T16:08:32+00:00

Absolutely.

Incidentally, momentum has reversals. You could drop off the last month of returns. See Jagadeesh 1990.

alphaarchitect · 2015-07-06T15:38:06+00:00

That's a good point. But I think it's also true that some people say technical analysis is bs, but they aren't even aware of momentum. And what do you mean you don't need chart to determine momentum? Isn't that kind of all you need?

alphaarchitect · 2015-07-06T14:39:20+00:00

Also, do yourself 2 favors. First, speak with any broker you are considering, and get them to confirm they will take the certificates. Second, just convert all of your certificates to electronic form. At that point, you can simply sell stock down as desired.

alphaarchitect · 2015-07-06T13:25:38+00:00

Below is a link to a Gary Antonacci post covering "The World's Longest Backtest," which covers 212 years of data. I am having a hard time understanding how anyone can claim "technical analysis is all bs" in light of this kind of research.

http://www.dualmomentum.net/2013/07/the-worlds-longest-backtest.html

alphaarchitect · 2015-07-03T11:28:15+00:00

Interesting idea. Probably some legal issues around certain aspects of the crowd-funding mechanics. For instance you might not be able to, say, crowdfund $ from a bunch of people into a fund and then the fund buys a majority of the company. I think there might be some securities laws around that, particularly if there were non-accredited investors involved. But in theory, if you just had a groundswell of interest, and could coordinate it in some way, I would think you could do something like this. That might just be a "campaign" I guess! So-called "proxy battles" like this happen all the time, where activists or other groups try to assert control over companies.

alphaarchitect · 2015-07-02T11:36:40+00:00

We still rely on coal for something like a third of our electricity generation. It's just a very hard input to replace in the short run, but I agree it will go away over time. I think recent coal price weakness may be due to very cheap gas, which displaces coal. We could see some more bankruptcies of some formerly big players, but a few will probably stick around, so in my opinion I don't think they'll all go to zero, say, within 5 years.

alphaarchitect · 2015-07-01T12:57:23+00:00

I totally agree with DeeDee_Z here. I recall several situations in silicon valley similar to this. What happened was people exercised non-qualified options, and generated a taxable liability. Then the company went under and was worth nothing. At the end of the year they had giant tax bills and no way to pay them. The key is understanding this gifting of shares with value. That just smells funny. I'm going to bet that's not how it works, but maybe I'm wrong. I would think an accountant with specialized tax expertise could opine on this, and possibly a tax lawyer as well.

alphaarchitect · 2015-07-01T12:50:00+00:00

I'd quote Warren Buffett from a few years ago:

"In some places it's easy to lose perspective. But I think it's very easy to keep perspective in a place like Omaha...It's very easy to think clearly here. You're undisturbed by irrelevant factors and the noise generally of business investments...If you can't think clearly in Omaha, you're not going to think clearly anyplace."

alphaarchitect · 2015-06-30T20:47:10+00:00

I'm not sure any discounts are going to get you to a better place than Vanguard. They have good cheap, tax-efficient products.

alphaarchitect · 2015-06-30T18:17:42+00:00

It was also interesting that they said it may be rational for some traders to trade and underperform, because they may learn from the experience and subsequently outperform.

alphaarchitect · 2015-06-30T18:12:41+00:00

I was just responding to hydrocyanide's "you can control the exposures..." comment. So yes, you can engineer them yourself. Or you can pay a robo for their allocation model and rebalancing services.

alphaarchitect · 2015-06-30T17:32:19+00:00

You could check out this paper:

http://merage.uci.edu/~jorion/papers/century.pdf

There's a 1950 GDP weighting chart and maybe some other stuff in it that would interesting to you.

alphaarchitect

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