ALGOSTOX TRADING

TRADING STRATEGIES

Betting against deficient instruments

Financial markets are flooded with complex instruments that have hidden inherent deficiencies. Inherent deficiencies guarantee that these instruments will underperform in the long term. We find such instruments and bet against them. In the meantime, we make sure the strategy is adequately capitalized and has proper risk controls until the markets discover deficiencies the hard way.

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Quantitative HFT strategies

We do not forecast or predict price movements. Instead, we focus on execution and position management. When we obtain a security at the lowest possible price, we are quite sure to liquidate it in the market for profit. Position management ensures that our positions are assembled from the cheapest inventory in the markets and that breakeven point remains below the market price.

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Optimization strategies

The firm's goal to produce superior returns is marked against the undertaken level of risk. To serve this goal investment strategies are optimized with the firm's proprietary methodology aiming for efficient use of funds and reduction of transaction costs.

RISK MANAGEMENT

The firm's trading approach does not allow to use traditional risk management models that are normally employed by financial institutions. To ensure adequate and proper risk management the firm develops risk models in-house. Each model is tailored to the strategy it controls and is validated to demonstrate adequate ability to capture actual risk generated by the strategy.

TECHNOLOGY

Unlike other companies with similar investment profile Algostox intentionally does not invest in latest HFT technological developments. The firm pursues only the opportunities that are based on inherent properties of financial markets and instruments. This allows us to build a sustainable business, in which profits will not fade away as technology advances.

LIQUIDITY AND PRICING

Quantum nature of financial markets

As we look at the details of price formation and order execution, we find that every trade in financial markets represents an elementary act of price measurement. This lead us to formulation of quantum theory of price formation.

MARKET VOLATILITY

How much is the current volatility?

Traditional measures used by financial companies to determine volatility fail to reflect the current volatility. By treating the market as a statistical ensemble, we are able to measure current volatility, which reacts to market changes many times faster than any of the traditional measures.

RISK MANAGEMENT

Adjusting for liquidity

Majority of instruments in financial world are not very liquid. Data gaps, mismatch and information scarcity make the traditional models useless. How do we evaluate market risk if we have illiquid positions in the portfolio?