Peter Ciampi
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​​I'm a Private investor focused on closed-end fund events and statistical arbitrage of ETFs

Note 3: Musing on Trump-North Korea; Performance

8/13/2017

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​Sending an alert during the North Korea-Trump events made me reflect on probability. Here are my thoughts plus a performance report.
 
Recent performance. Since early July we’re had 3 signals. The table shows 0.43% profit from trading at 11:50 and 0.32% profit from trading at 12:00.
 
SPY at 11:50
​SPY at 12:00
​SPY MOC
SPY Change 11:50 to MOC
SPY Change 12:00 to MOC
2-Aug
246.86
246.81
247.44
0.23%
0.26%
3-Aug
​246.99
​246.95
246.96
-0.01%
0.00%
9-Aug
246.73
247.10
247.25
​0.21%
​0.06%

​One reaction has been, “Wow such small profits.” Well that’s normal. The following histogram shows most returns since Jan 2013 were between -0.1% and 0.4%. And it’s pleasing to see only 9 returns less than -0.1%.
spypm.pdf
File Size: 27 kb
File Type: pdf
Download File

But most importantly, a statistical system can’t be evaluated in 1.5 months.
 
Economic Probabilities versus Certain Probabilites. I realize the phrase “Certain Probabilities” is an oxymoron but it supports a distinction I’d like to make. When one flips a coin there’s a 50% chance it’s heads. When one draws a card there’s a 25% it’s a diamond. After recording millions of draws from a jar with red and blue jellybeans one can calculate the probability of a red draw. Exogenous events in the future don’t change these “certain probabilities” in closed systems.
 
Economic probabilities, however, are estimated from history and continuously change – with some stability we hope. For instance, signals from my model found SPY rising 78% of the afternoons over the last four years but it’s unlikely 78% will hold over the next 4 years. In fact, probabilities in each year were: 74%, 91%, 80% and 69%.
​

Since no afternoon in the prior 4 years had a war scare I issued the warning: “North Korea and Trump willing” in my August 9th alert.
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    May23 Return .31%


    Out-of-Sample return 62%








    Updated at 12 and 4:15pm on trade days

    Author

    Peter Ciampi is the Managing Director of CEF Events LTD, a British Virgin Islands business company and the Managing Partner of Time-Zone Arbitrage,a Delaware LP. Both companies invest in special situations of closed-end funds and statistical arbitrage of international ETFs.

@ 2017 Peter Ciampi
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