My Pair Trading Journal

[malgohft]

pair trading is not for restless traders! it doesnt give a high like naked buying/selling profits (in no time)! it needs patience!

u need to take into a/c that for a spread of around 16 to generate, this pair took more than couple of months. so it cnt be reversed within a week!

Exited the LEADMINI-ZINCMINI Trade at a spread of 14.35, A profit of 2.2 point excluding rollover+brokerage. Not good looking at the huge time it took. So exited.

 

[GuluGulu]

Added new position today to the following pair:

+HDFCBANK @ 642.55
-KOTAKBANK @ 695.52

Let's see what happens.

GG

This position is in profit so far new. It seems the pair will eventually converge. Let's hope more by Grace of God.

 

[GuluGulu]

pair trading is not for restless traders! it doesnt give a high like naked buying/selling profits (in no time)! it needs patience!

u need to take into a/c that for a spread of around 16 to generate, this pair took more than couple of months. so it cnt be reversed within a week!

Good observation. In technical term that is the Half-Life of the pair. But better reinvest money elsewhere. My trading revolves around a third time factor. I waited in this pair for nearly a month.

 

[malgohft]

i understand ur impatience and value of money which cud fetch more else where?

infact, u even chose commodities as a pair which itself are slow moving compared to equities. thus the delay toooooooooo!!!

Good observation. In technical term that is the Half-Life of the pair. But better reinvest money elsewhere. My trading revolves around a third time factor. I waited in this pair for nearly a month.

 

[ethan hunt]

PTF gives buy/sell where as Arb gives out ??? ??? results for people like me

 

[ullastp]

Averaged existing position @ HDFCBANK Feb Fut: 642.00 & KOTAKBANK Feb Fut: 689.00

Now the current holding with average price is,
HDFCBANK +1000 positions @ 644.50
KOTAKBANK -1000 positions @ 684.50
Current P/L is -7,000.00

Im optimistic on this pair, and ready to take some risk.

Holding with unrealized Loss : -4,400/- (loss went up to 20,000/-)

Yeah, patience and cash reserve should be there for Pair Trading. Mean reversion will occur, but it may not be start exactly from our initial entry point.

 

[GuluGulu]

Holding with unrealized Loss : -4,400/- (loss went up to 20,000/-)

Yeah, patience and cash reserve should be there for Pair Trading. Mean reversion will occur, but it may not be start exactly from our initial entry point.

Hi ullastp, yes you are right. Patience pays. And sometimes we have to be quick. Yes, in the morning, at a time loss went to around 17K. (I got the first position at a slightly better price).

KOTAKBANK

HDFCBANK

However I have booked the last position when kotakbank touched 38% Fib retracement and hdfcbank is about to break the trendline UP.

booked at
-HDFCBANK @646
+KOTAKBANK @ 690.15

So it fetched around 4100/- after brokerage; which is now at breakeven position of the pair.

Now that first position remains.

Let's see what happens.

 

[ullastp]

Holding with unrealized Loss : -4,400/- (loss went up to 20,000/-)

Yeah, patience and cash reserve should be there for Pair Trading. Mean reversion will occur, but it may not be start exactly from our initial entry point.

Still holding with an Unrealized Profit: + 9,450.00

I hope now it is on our track and let it do some more mean reversion.

 

[malgohft]

JUST AN OBSERVATION/FEEDBACK (individuals may or may not agree)! BUT this is generally followed everywhere!

never get into a pair trade when:

• result season is ON or one of the stock's result is pending!
• any one of the stock is at the mercy of FIIs (e.g. HDFC Bank)
• stocks not from the same sector and not closelt related in terms of business model (e.g nifty+gold). GULUGULU - dont get me otherwise on this. but still cudnt figure out wt ws the reason? ws it that all the criteria were matching in PTF?
• value terms are not matching. here if there is a difference, then one can buy stocks in cash to nullify deviations!

still there are many reasons. but i cud figure out the relevant ones over here. now the question ppl will ask is - the universe becomes small basis these above conditions & thus the opportunities. well IT IS! but u have to live with that specially in the mkt like india!

 

[malgohft]

see a little wait of two more days would have given a spread of Rs. 2 more!! current spread is 12.3!!

extra 5000*2=10000 as opportunity lost!

pair trading is not for restless traders! it doesnt give a high like naked buying/selling profits (in no time)! it needs patience!

u need to take into a/c that for a spread of around 16 to generate, this pair took more than couple of months. so it cnt be reversed within a week!

Exited the LEADMINI-ZINCMINI Trade at a spread of 14.35, A profit of 2.2 point excluding rollover+brokerage. Not good looking at the huge time it took. So exited.