004 - Two Quants - Moritz Seibert & Moritz Heiden (Part II)
Sep 21, 2023
auto_awesome
Two quants from Takahe Capital discuss their funds, strategies, and trading philosophy. They talk about automation and scalability in trading, creating and selling indices, volatility control, the Bitcoin basis trade, structural changes in European dividend index futures, trading strategies and market efficiency, and their experiences with trend following.
Trend following is a resilient and robust approach that captures trends across various markets without customization, providing full control and adaptability.
Commodity calendar spreads offer profitable trading opportunities with limited downside risk and provide diversification benefits when combined with trend following strategies.
Deep dives
Importance of Trend Following and Building Own Systems
The podcast episode discusses the importance of trend following in trading and the benefits of building their own systems. The guests emphasize the value of trend following as a resilient and robust approach, utilizing breakout-based systems with longer-term holding periods. They highlight the advantage of building their complete data infrastructure, backtesting engines, and automation in-house. Their systems are designed to capture trends across various markets without the need for customization per market. By relying on their own systems, they have full control and can quickly adapt to changing market conditions.
Use of Commodity Calendar Spreads as an Additional Strategy
The guests also delve into the use of commodity calendar spreads as an additional trading strategy. They explain that calendar spreads involve trading futures contracts of the same commodity but with different maturities. Their research indicates that there is momentum in spread markets, making these spreads profitable with limited downside risk. Unlike individual market trend following, these spreads have a shorter holding period due to their natural maturation point. Nonetheless, the guests highlight the diversification benefits of combining the trend following system with the spread momentum strategy, as they are uncorrelated to each other, providing a resilient and potentially higher upside profile.
Discretionary Use of Options for Risk Management
The podcast episode reveals the discretionary use of options for risk management purposes. The guests explain their approach of buying options to prime and magnify potential outlier trades. They focus on adding long convexity and long upside to their portfolio. While the guests mention that they cannot systematize options trading due to its complexity, they share examples of using options strategically during specific market conditions. This includes replacing linear futures delta with long-dated call options to transform linear risks into positively convex nonlinear risks. Additionally, they highlight instances where they buy options as insurance against potential downside risks.
No Specific Allocation Recommendations
The guests mention that they do not currently have discussions with institutional clients regarding specific portfolio allocations. They note that they haven't conducted extensive backtesting with their programs added to traditional portfolios. However, they express confidence in the enduring features of their trend following and spread momentum programs. The guests prefer to keep their own investments within their funds, aligning with their trend following approaches and minimizing conflicts between personal and trading philosophies.
Part II of our discussion with the Two Quants of Takahe Capital (make sure you go back and listen to Part I first!). In the back half of our chat with Moritz Seibert and Moritz Heiden we delve into their funds, the strategies they trade and the guiding philosophy for all their trading.
Their website: takahe.capital
Our website: thealgorithmicadvantage.com
Enjoy!
Get the Snipd podcast app
Unlock the knowledge in podcasts with the podcast player of the future.
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode
Save any moment
Hear something you like? Tap your headphones to save it with AI-generated key takeaways
Share & Export
Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode