Research on Trend Investing Strategy and Hedging Strategy

Research Article
Open access

Research on Trend Investing Strategy and Hedging Strategy

Xiaotong Feng 1*
  • 1 University of Warwick    
  • *corresponding author u2123923@live.warwick.ac.uk
Published on 13 September 2023 | https://doi.org/10.54254/2754-1169/22/20230322
AEMPS Vol.22
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-87-4
ISBN (Online): 978-1-915371-88-1

Abstract

An investment method based on traditional subjective judgments faces huge challenges, while the strategy of quantitative investment is to find the optimal alpha model to judge the best timing of selling and buying and designing the most effective investment portfolio. Therefore, compared with traditional investment methods, quantitative investment breaks through the limitations of subjective judgment with its qualitative and quantitative advantages. The futures market attracts many investors with its low transaction costs and the two-way nature of transactions. However, most of the investment strategies that are frequently used in the market have low stability and do not guarantee correlation with the general market trend. This makes the investments risky, particularly for individual investors. Therefore, this paper will explore both futures investment and risk hedging strategies, aiming to ensure that every buy and sell is the correct choice as much as possible, such that futures investment is relatively stable and has high returns. This article focuses on using the moving average cross strategy through the python programming language to achieve the judgment of buying and selling in the process of futures trading and drawing the net worth curve of the real-time futures market data and perform a correlation analysis to determine which commodity sector is the most suitable using the trend strategy. For risk hedging, the article mainly uses the correlation analysis to study the relation between the prices of different types of futures. Furthermore, the futures and options market price fluctuations are discussed in depth, and also analysed is how to use and balance hedge parameters for risk hedging.

Keywords:

future options, future, portfolio investment, moving average, greek letters

Feng,X. (2023). Research on Trend Investing Strategy and Hedging Strategy. Advances in Economics, Management and Political Sciences,22,273-282.
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References

[1]. Wangui, D. and Jagongo, A., 2019. Financial risk hedging practices, management strategies and debt capacity: Theoretical review. International Academic Journal of Economics and Finance, 3(3), pp.218-230.

[2]. Fu,yongjian, Cheng,xijun, Liu,feng, Futures Portfolio Based on Quantitative Perspective and Black-Litterman Model, Journal of University of Chinese Academy of Sciences, Vol. 31 No. 4, 2014

[3]. Chen,ke, Chen,wei. Empirical research on single moving average trading strategy in a share. Times Finance, vol.621 pp:129-132, 2016

[4]. Wu,Zheqiang, Model construction and empirical analysis of quantitative investment strategies, Jinan University, 2019

[5]. K.F.Riley, M.P.Hobson, S.J.Hobson, Mathematical methods for physics and engineering(Third edition), University of Cambridge

[6]. Bernal-Ponce, L.A., 2020. Impact of exchange rate derivatives on stocks in emerging markets. Journal of Business Economics and Management, 21(2), p.610.

[7]. John C. Hull, Options, Futures, and Other Derivatives(7th Edition), Pearson Education, Prentice Hall in Upper Saddle River, New Jersey, USA.

[8]. Bai, Y., 2022. Term Risk-Free Rates: Methodologies, Challenges, and the Future. The Journal of Derivatives, 29(3), pp.30-45.

[9]. Guo,Zihan, Black-based futures price prediction based on machine learning algorithms, Ministry of Commerce International Trade and Economic Cooperation Research Institute, 2022

[10]. Durga, S. and Podile, V., 2020. A PAPER ON A REVIEW ON STOCK FUTURES AND STOCK OPTIONS WITH REFERENCE TO NSE AND BSE. European Journal of Molecular & Clinical Medicine, 7(4), p.2020.

Cite this article

Feng,X. (2023). Research on Trend Investing Strategy and Hedging Strategy. Advances in Economics, Management and Political Sciences,22,273-282.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 2023 International Conference on Management Research and Economic Development

ISBN：978-1-915371-87-4(Print) / 978-1-915371-88-1(Online)
Editor：Canh Thien Dang, Javier Cifuentes-Faura
Conference website: https://2023.icmred.org/
Conference date: 28 April 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.22
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Wangui, D. and Jagongo, A., 2019. Financial risk hedging practices, management strategies and debt capacity: Theoretical review. International Academic Journal of Economics and Finance, 3(3), pp.218-230.

[2]. Fu,yongjian, Cheng,xijun, Liu,feng, Futures Portfolio Based on Quantitative Perspective and Black-Litterman Model, Journal of University of Chinese Academy of Sciences, Vol. 31 No. 4, 2014

[3]. Chen,ke, Chen,wei. Empirical research on single moving average trading strategy in a share. Times Finance, vol.621 pp:129-132, 2016

[4]. Wu,Zheqiang, Model construction and empirical analysis of quantitative investment strategies, Jinan University, 2019

[5]. K.F.Riley, M.P.Hobson, S.J.Hobson, Mathematical methods for physics and engineering(Third edition), University of Cambridge

[6]. Bernal-Ponce, L.A., 2020. Impact of exchange rate derivatives on stocks in emerging markets. Journal of Business Economics and Management, 21(2), p.610.

[7]. John C. Hull, Options, Futures, and Other Derivatives(7th Edition), Pearson Education, Prentice Hall in Upper Saddle River, New Jersey, USA.

[8]. Bai, Y., 2022. Term Risk-Free Rates: Methodologies, Challenges, and the Future. The Journal of Derivatives, 29(3), pp.30-45.

[9]. Guo,Zihan, Black-based futures price prediction based on machine learning algorithms, Ministry of Commerce International Trade and Economic Cooperation Research Institute, 2022

[10]. Durga, S. and Podile, V., 2020. A PAPER ON A REVIEW ON STOCK FUTURES AND STOCK OPTIONS WITH REFERENCE TO NSE AND BSE. European Journal of Molecular & Clinical Medicine, 7(4), p.2020.

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