alexveden
commented
6 years ago a ATR sensitive, keltner risk reversal hedge in blue targeting $1000 of delta in the notebook below. https://10.0.1.2:8889/notebooks/Kelt_Risk_Reversals/SmartEXO-RiskReversal-CL-KeltnerChannel%20%2B%20delta%20multiplier.ipynb
I'm trying to understand the ATR logic and little bit concerned right now.
There the code snippet:
tick_value = 10 * 100
target_risk= 500
atr = ATR(ohlc.h, ohlc.l, ohlc.c, 10)
dollar_atr = atr * tick_value
.... 'delta_multiplier': dollar_atr / target_risk
Later in position management part:
# Open the position when keltner channel is down
pos.add_transaction(dt, opt_chain.find(dt, min(0.99, 0.50*logic_df['delta_multiplier']), 'P', how='delta'), 1.0)
pos.add_transaction(dt, opt_chain.find(dt, min(0.99, 0.30*logic_df['delta_multiplier']), 'C', how='delta'), -1.0)Later the strategy.run() output:
print('Delta multiplier', logic_df['delta_multiplier'])
Delta multiplier 1.96910574272 Delta multiplier 2.07419516845
I would say this algorithm has issues in delta multiplier calculations, I think the following is correct:
# Flip delta and target_risk
.... 'delta_multiplier': target_risk / dollar_atr
Later in position management part:
# Open the position when keltner channel is down
pos.add_transaction(dt, opt_chain.find(dt, logic_df['delta_multiplier'], 'P', how='delta'), 1.0)
Solution: Let the $ATR(10 days) = $3000 Let the Target Risk = $500
In other words, to get targeted risk for the position we need to open $500/$3000=0.166 contracts of the underlying futures. In fact, this is your target delta!
Using the current formula in the notebook the target delta becomes, $3000/$500*0.5 = 3 -> then min(0.99, 3.0) -> 0.99
nikolas-joyce
average $ 700 of risk spiking to twice that value.
averaging $700-$1000 of risk. spiking to 2 times that.
Averaging $400-600 of risk with 2-3 time that in spikes.
trying to demonstrate the degree to which moves in a down channel are muted compared to moves in up channel condition. I have been working with the idea of using a .80 delta hedge for out of trend moves and .20 delta hedge for in trend moves.
i am also trying to establish if there is a way to target a ATR budget of each long/ short strategy plus the respective hedge legs. here is the example.
here is a orange long alpha on CL a ATR sensitive, keltner risk reversal hedge in blue targeting $1000 of delta in the notebook below. https://10.0.1.2:8889/notebooks/Kelt_Risk_Reversals/SmartEXO-RiskReversal-CL-KeltnerChannel%20%2B%20delta%20multiplier.ipynb
https://10.0.1.2:8889/notebooks/alphas/Alpha%20V1%20Risk%20Reversal%20Hedge-CL-Multi%20V2%20Indexes.ipynb
when we target $1000 as the ATR for 1 delta we get a realized ATR for the cumulative (alpha plus hedge leg ) of $300-400. can anyone see a way to map the required dollarATR to the fixed fractional positions size like 2-3% of capital?
additionally we seem to be getting deltas for the dynamic hedge leg that seen to be larger than we would expect.
here is the example of the deltas .
we would expect the green bar plus the pink to not ever be more than 0 or less than 1
there seem to be some times where the net delta is negative. i cannot explain this based on the delta multiplier function.
i have made a campaign made of these 2 components that allows us to view the payoff diagram for the periods that have odd deltas here.
https://10.0.1.2:8888/notebooks/campaign_management/Campaign_Bidirectional_CL_ContFut_DSP%20for%20production_Sept5_w_enhancement-Copy%20ofr%20git%20.ipynb
To emphasize the goal is to alter the realized ATR of a set of alpha plus hedge to match some risk budget. Can we take a good futures alpha a get a version of it that targets x$ of realized ATR to the total portfolio plus increases the exposure to the futures signal when in phase and mutes the signal when out of phase? thx