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Robust options strategy

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    StrategyTechnical Analysis In the business of managing money, there is a key word that often comes up but is easily misunderstood: robustness.

    Without it, you cannot make money in the markets, and are destined for losses.

    What does a robust strategy look like? Is it something that most investors find palatable?

    Look at the following returns for two different managers, Mr. Miss robust orange lineon the other hand, generates lumpy returns, compounding her capital to Although miss robust does, she offers a mini heart attack every now and then, robust options strategy the investor pleading for a third option. But wait!

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    Be careful, as this version of Mr. And the latter two are both leveraged plays on assets that have boomed during that same low rate environment.

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    Which brings us back to Miss robust. None of that matters when you focus on the big picture and take your inevitable lumps and losses as miss robust does.

    Is there a better way — using market direction pseudo-arbitrage? We cover in great detail how we define market states and how each of our seven trading strategies performs during up, down and sideways moving market conditions.

    Are we talking our own book as we write this letter? In short: robust returns are not smooth, cannot be smoothed out, must have drawdowns, and — most importantly — are meant to be impervious to whatever changes occur to markets both to participants and to underlying structures over the course of decades.

    Alex Krishtop January 25, PM Backtesting a quantitative trading strategy is essential in measuring its potential, but as everyone knows, past performance is not necessarily indicative of future results. The key to determining the performance of successful —on paper—strategies, is its robustness.

    A robust return structure is meant for building an investment career upon, rather than for making a quick buck over a handful of years. We look for opportunities where imbalance between supply, demand, and inventories where applicable may lead to a large price move.

    Position hold times vary from 1 month to years; no day-trading, no algorithmic trading.

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    Fundamental analysis is used to determine directional exposure, both long and short.