I woke up this morning and couldn’t care less about what had happened in the overnight trading session. The book I took home on Friday was delta neutral; $50,000 long, $50,000 short between two separate pairs trades. When the market opened, I quickly identified another pair whose 30 day spread had widened out to nearly four standard deviations. I quickly decided to setup the pair with $15k on each side. Almost instantly, the trade rallied $1.20 in my favor and generated $500 of P&L.
In this incredible bull run we have witnessed, many investors have been left scratching their head in anticipation of the pullback that hasn’t come. It is a time when the collective intelligence has been collectively uncertain as to the direction of the next big move. In a market like this, I have found great comfort in a market neutral strategy. By substituting speculation for statistics, I have been able to remove market bias from my trading and put the odds in my favor.