The Trading Basket

К оглавлению1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 
17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 
34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 
51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 
68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 
102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 
119 120 121 122 123 124 125 126 127 

The strategy works b y trading stocks within the basket that duplicate

the S&P 500 stock index. When buy and sell programs hit the

market the stocks within the basket move. This momentum will

drive a few of the stocks within the basket in a trend direction for an

hour or more. This strong trend move is what basket traders are

looking for, and most stocks will be impacted for a short period of

time, moving fractions of a point. The basket trader wants to identify

the few stocks in the group that will have a sustained trend giving

the trader potential points over a short period of time. Many

times, the stocks thai move like this represent early moves into or

out of key sectors.

The second part to this strategy is to create baskets of stocks,

each holding three o f the top stocks in a specific sector. A total of

ten sectors are represented and are divided into two groups of five

sectors with three stocks in each basket. The total number of stocks

in all baskets is 30. The baskets can be further divided into 15

stocks on the NYSE and 1 5 on Nasdaq markets. Some basket traders

trading strategies 59

increase the number of stocks to 60 by building two different basket

groups, 30 holding stocks on NYSE and 30 holding stocks on the

Nasdaq.

If you know which sectors are showing strength or weakness,

you can use this information to your advantage. Having already constructed

the sector baskets, you can find stocks to trade long or

short. Taking advantage of both program arbitrage and sector rotation

makes trading baskets a viable strategy to consider.

The strategy works b y trading stocks within the basket that duplicate

the S&P 500 stock index. When buy and sell programs hit the

market the stocks within the basket move. This momentum will

drive a few of the stocks within the basket in a trend direction for an

hour or more. This strong trend move is what basket traders are

looking for, and most stocks will be impacted for a short period of

time, moving fractions of a point. The basket trader wants to identify

the few stocks in the group that will have a sustained trend giving

the trader potential points over a short period of time. Many

times, the stocks thai move like this represent early moves into or

out of key sectors.

The second part to this strategy is to create baskets of stocks,

each holding three o f the top stocks in a specific sector. A total of

ten sectors are represented and are divided into two groups of five

sectors with three stocks in each basket. The total number of stocks

in all baskets is 30. The baskets can be further divided into 15

stocks on the NYSE and 1 5 on Nasdaq markets. Some basket traders

trading strategies 59

increase the number of stocks to 60 by building two different basket

groups, 30 holding stocks on NYSE and 30 holding stocks on the

Nasdaq.

If you know which sectors are showing strength or weakness,

you can use this information to your advantage. Having already constructed

the sector baskets, you can find stocks to trade long or

short. Taking advantage of both program arbitrage and sector rotation

makes trading baskets a viable strategy to consider.