Smart investing with DIF-ATM Pair Trading
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DIF-ATM Pair trading is a market-neutral trading strategy built around an automatic algorithm. Being market-neutral, means it carries less risk than directional bets.
The algorithm selects the pairs to be traded and backtests the statistical relationship. The pairs need to be two different, highly correlated shares. The trade consists in going long on one share while shorting the other.
Subscribers to this service can expect complete management of the trades, including limit orders to close out all positions.
This is a trading strategy that does not need to guess which way the markets are heading, the goal is to make money on the price differential and not the overall direction, and should be part of your total portfolio.
The minimum investment is 25.000 euros and the management fee is 2% annual fixed fee, calculated based on the daily account value of the portfolio and charged quarterly. Trade commissions are not included.
What is Pair Trading?
(Source :Wikipedia) The pairs trade or pair trading, was developed in the late 1980s by quantitative analysts and pioneered by Gerald Bamberger while at Morgan Stanley. With the help of others at Morgan Stanley at the time, including Nunzio Tartaglia, Bamberger found that certain securities, often competitors in the same sector, were correlated in their day-to-day price movements. When the correlation broke down, i.e. one stock traded up while the other traded down, they would sell the outperforming stock and buy the underperforming one, betting that the "spread" between the two would eventually converge.
The difficulty with pair trading comes when the two stocks begin to drift apart. Unless the relative prices return closer to their historical levels, the pair trade will not be profitable. Consequently pair traders can support each others actions by buying the downward drifting stock restoring the relative prices.