Overview

The algorithm implements the mathematician Lyapunov-based approach to execute optimal overnight credit spread trades with precision.

The algorithm implements the mathematician Lyapunov-based approach to measure market stability and predictability by calculating a "lyapunov" exponent from price divergence patterns. It computes the logarithmic divergence between consecutive option prices, which captures how quickly small changes in the system amplify over time - a core concept in Lyapunov stability theory. When the Lyapunov exponent is high, the system is more chaotic and less predictable; when it's low, the system is more stable and potentially more predictable. Application in Trading Strategy: The Lyapunov exponent is then transformed into a trading signal through a composite calculation that combines market stability with predictability measures. The algorithm uses a hyperbolic tangent function to normalize the Lyapunov exponent, creating an inverse relationship where values closer to zero indicate higher stability. This stability measure is then multiplied by the R-squared value from regression analysis to create a composite alpha signal that combines both market predictability and stability. The algorithm uses this alpha signal to determine when to enter credit spread trades, with higher alpha values (indicating stable, predictable conditions) triggering long positions and lower values triggering short positions. This approach essentially uses Lyapunov theory to identify periods when the market is in a stable, predictable state suitable for systematic trading strategies.

Backtested Results

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Backtesting results are based on past data. Historical data does not guarantee future results.

Key Parameters

Drawdown

Risk : Reward

Frequency of trade

Risk

This algo is managed by...

Stratzy

INH000009180 SEBI registered algo provider

Algos in market24

Active since5 Years

Deployed by12.5K users

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Mathematician's Credit Spread Overnight

Overview

Backtesting results are based on past data. Historical data does not guarantee future results.