Algorithmic Short Selling with Python

Leverage Python source code to revolutionize your short selling strategy and to consistently make profits in bull, bear, and sideways markets

Key Features

• Understand techniques such as trend following, mean reversion, position sizing, and risk management in a short-selling context
• Implement Python source code to explore and develop your own investment strategy
• Test your trading strategies to limit risk and increase profits

Book Description

If you are in the long/short business, learning how to sell short is not a choice. Short selling is the key to raising assets under management. This book will help you demystify and hone the short selling craft, providing Python source code to construct a robust long/short portfolio. It discusses fundamental and advanced trading concepts from the perspective of a veteran short seller.

This book will take you on a journey from an idea (“buy bullish stocks, sell bearish ones”) to becoming part of the elite club of long/short hedge fund algorithmic traders. You’ll explore key concepts such as trading psychology, trading edge, regime definition, signal processing, position sizing, risk management, and asset allocation, one obstacle at a time. Along the way, you’ll will discover simple methods to consistently generate investment ideas, and consider variables that impact returns, volatility, and overall attractiveness of returns.

By the end of this book, you’ll not only become familiar with some of the most sophisticated concepts in capital markets, but also have Python source code to construct a long/short product that investors are bound to find attractive.

What you will learn

• Develop the mindset required to win the infinite, complex, random game called the stock market
• Demystify short selling in order to generate alpa in bull, bear, and sideways markets
• Generate ideas consistently on both sides of the portfolio
• Implement Python source code to engineer a statistically robust trading edge
• Develop superior risk management habits
• Build a long/short product that investors will find appealing

Who this book is for

This is a book by a practitioner for practitioners. It is designed to benefit a wide range of people, including long/short market participants, quantitative participants, proprietary traders, commodity trading advisors, retail investors (pro retailers, students, and retail quants), and long-only investors.

At least 2 years of active trading experience, intermediate-level experience of the Python programming language, and basic mathematical literacy (basic statistics and algebra) are expected.

Table of Contents

1. The Stock Market Game
2. 10 Classic Myths About Short-Selling
3. Take a Walk on the Wild Short-Side
4. Long/Short Methodologies: Absolute and Relative
5. Regime Definition
6. The Trading Edge is a Number, and Here is the Formula
7. Improve Your Trading Edge
8. Position Sizing: Money is Made in the Money Management Module
9. Risk is a number
10. Refining the Investment Universe
11. The Long/Short Toolbox
12. Signals and Execution
13. Portfolio Management System
14. Appendix

Review

“Laurent conveys a determined passion for the short side that has driven him for over a decade. From choosing to enter or exit a position, to managing risk and position size, to visualizing and managing a whole portfolio, Laurent breaks down the process and psychology behind developing an effective long/short trading strategy. He also includes versatile source code in Python, which can be implemented on any stock, in any market, with the sole intention of limiting loss, and yielding above average returns” Michael Covel, Entrepreneur, Author and Host at Trend Following Podcast

“I read with satisfaction that Bernut’s book on short selling has a whole chapter on the pitfalls of short selling, describing perils such as short squeezes, sky-high borrow fees, and more. It is an excellent education for traders who are serious about generating alpha from short sales. Highly educational!” Ernest Chan – Founder, PredictNow.ai Inc 

About the Author

Laurent Bernut has 2 decades of experience in alternative investment space. After the US CPA, he compiled financial statements in Japanese and English for a Tokyo Stock Exchange-listed corporation. After serving as an analyst in two Tokyo-based hedge funds, he joined Fidelity Investments Japan as a dedicated quantitative short-seller. Laurent has built numerous portfolio management systems and developed several quantitative models across various platforms. He currently writes and runs algorithmic strategies and is an undisputed authority on short selling on Quora, where he was nominated top writer for 2017, 2018, and 2019.