Trading Strategies and Market Colour: The Benefits of Friendship with Quantitative Analysts and Financial Engineers

Abstract

This paper acts as a collection of various trading strategies and useful pieces of market information that might help to implement such strategies. This list is meant to be comprehensive (though by no means exhaustive) and hence we only provide pointers and give further sources to explore each strategy further. We can broadly classify trading ideas and client market colour material into Delta-One and Derivative strategies since this acts as a natural categorization that depends on the expertise of the various trading desks that will implement these strategies. For each strategy, we will have a core idea and we will present different flavours of this central theme to demonstrate that we can easily cater to the varying risk appetites, regional preferences, asset management styles, investment philosophies, liability constraints, investment horizons, notional trading size, trading frequency and other preferences of different market participants. As an illusrative example, we consider in detail an investment strategy, titled “The Bounce Basket”, designed for someone to express a bullish view on the market by allowing them to take long positions on securities that would benefit the most from a rally in the markets. The central idea of this theme is to identity securities from a regional perspective that are heavily shorted and yet are fundamentally sound with at least a minimum buy rating from a consensus of stock analysts covering the securities.