LDMR (Long Derivative Mean Reversion)
(LDMR)Long Derivative Mean Reversion is primarily a tool for measuring risk and capital efficiency.
It's secondary functions include identify outliers in the assignment value of derivatives, maintaining a price target and producing trade placement recommendations.
This strategy has one simple input: the symbol of a correlated asset or index. It is recommended to use leveraged indexes in this input because they have a higher derivative correlation with those of round lots of the underlying.
When using this strategy you should always adjust the initial capital to what it will cost you to control 100 shares of the security.
If you intend to purchase shares then that value is 100x the close price.
if you intend to purchase call options to resell for premiums you use the initial premiums paid for the calculation.
If you intend to create a synthetic position you should add all deployed capital together, and that calculation will remain accurate until the max profit limit of your short option is reached.
Pyramiding is supported for trade placement. You should always review the historical depth and before placing the first trade ensure you have enough capital to cover the largest of those positions. Otherwise your results may be entirely incomparable to the risk and capital efficiency estimates the tool provides.
Let me know what you think. I am considering a private publishing and want to know what this is worth!
It's secondary functions include identify outliers in the assignment value of derivatives, maintaining a price target and producing trade placement recommendations.
This strategy has one simple input: the symbol of a correlated asset or index. It is recommended to use leveraged indexes in this input because they have a higher derivative correlation with those of round lots of the underlying.
When using this strategy you should always adjust the initial capital to what it will cost you to control 100 shares of the security.
If you intend to purchase shares then that value is 100x the close price.
if you intend to purchase call options to resell for premiums you use the initial premiums paid for the calculation.
If you intend to create a synthetic position you should add all deployed capital together, and that calculation will remain accurate until the max profit limit of your short option is reached.
Pyramiding is supported for trade placement. You should always review the historical depth and before placing the first trade ensure you have enough capital to cover the largest of those positions. Otherwise your results may be entirely incomparable to the risk and capital efficiency estimates the tool provides.
Let me know what you think. I am considering a private publishing and want to know what this is worth!
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