Hedge Execution: Long/Short same ticker simultaneously

You can use the algorithmic framework for this. See the link at the bottom.  

You have to make your own PCM, as I dont think that the default ones likes it when, going long and short the same symbol. They usually just take the last sent insights of the given symbol, and execute this.  I had do do this when making a pairs trading algo, and I got it to work 

If you have any questions, just reach out in the same thread. 

Thank you for your response. In simplicity, the PCM takes the Insights generated by Alphas to create Portfolio Targets. 

Yes, Current default PCMs such as equal weighting does not have hedging behavior. I wrapped the strategies into Alpha models already. Can you provide a backtest of how the custom PCM would be to allow hedging?

Thanks,

Hi JiTrue

We normally hedge by options or futures, rather than the stock itself. Unlike a CFD, the stock security itself ain't a contract to provide a unique position size to do what you want to, at least on the table balance sheet. 

One way was as Lucas has suggested, using a PCM with insights to handle the 2 signals (original & “hedge”). You may consider using a InsightWeightingPCM. Refer to the attached backtest as example. You may find the usage of InsightCollection in here.

Another way would be using a dictionary to store each order, such that you can calculate the quantity needed to repurchase after the hedge ends.

Best
Louis

How do you hold a short and long position for the same symbol in a single algorithm? For example if we do:

            holding: SecurityHolding = self.Portfolio.get(self.appl.Symbol)
            self.MarketOrder(self.appl.Symbol, 10, tag="first")
            self.Debug(" Quantity " + str(holding.Quantity))
            self.Debug(" AbsoluteQuantity " + str(holding.AbsoluteQuantity))
            self.MarketOrder(self.appl.Symbol, -5, tag="first")

            self.Debug(" Quantity2 " + str(holding.Quantity))
            self.Debug(" AbsoluteQuantity2 " + str(holding.AbsoluteQuantity))

We end up with a quantity and absolute quantity of 5 because the negative order sells some of first order instead of opening a new short position. Is there a way around this? For example is there a way to get a “totalQuantity” as 15 and a “shortQuantity” and “longQuantity”? Also, will the brokerage do something similar and actually cancel out some of your long position if you short? Then you need different brokerage accounts to hold different positions on the same security?

Hi Non Compete

It is not possible to hold both long and short position of the same security according to numerous regulations. LEAN also does not provide this functionality. Instead, you might consider using derivatives like options, futures & CFDs to archieve the same purpose. Most institutions are also using temporary future/option positions as overnight sepculation risk hedge.

Best
Louis