Khaled Tamim's Avellaneda-Stoikov Strategy by ktamim
By ktamim
Performance Metrics
- Author: ktamim
- Symbol: BITSTAMP:BTCUSD
- Timeframe: 1 minute
- Net P&L: +6,501.00 USD (+0.65%)
- Win Rate: 63.2%
- Profit Factor: 1.206
- Max Drawdown: 4,501.00 USD (0.45%)
- Total Trades: 258
- Sharpe Ratio: 0.324
Description
Description:This strategy applies the Avellaneda-Stoikov (A-S) model to generate buy and sell signals for underlying assets based on option pricing theory. The A-S model estimates bid and ask quotes for options contracts considering factors like volatility (sigma), time to expiration (T), and risk aversion (gamma).Key Concepts:Avellaneda-Stoikov Model: A mathematical framework for option pricing that incorporates volatility, time decay, and risk tolerance.Bid-Ask Quotes: The theoretical buy and sell prices for an option contract.Inventory Management: The strategy tracks its long or short position based on signals.How it Works:A-S Model Calculation: The avellanedaStoikov function calculates bid and ask quotes using the underlying asset's closing price, user-defined parameters (gamma, sigma, T, k, and M), and a small fee (adjustable).Signal Generation: The strategy generates long signals when the closing price falls below the adjusted bid quote and short signals when it exceeds the adjusted ask quote.Trade Execution: Buy and sell orders are triggered based on the generated signals (long for buy, short for sell).Inventory Tracking: The strategy's net profit reflects the current inventory level (long or short position).Customization:Gamma (γ): Controls risk aversion in the A-S model (higher values imply lower risk tolerance).Sigma (σ): Represents the underlying asset's expected volatility.T: Time to expiration for the hypothetical option (defaults to a short-term option).k: A constant factor in the A-S model calculations.M: Minimum price buffer for buy/sell signals (prevents excessive churn).Important Note:This strategy simulates option pricing behavior for a theoretical option and does not directly trade options contracts. Backtesting results may not reflect actual market conditions.Further Considerations:The 0.1% fee is a placeholder and may need adjustment based on real-world trading costs.Consider using realistic timeframes for T (e.g., expiry for a real option)Disclaimer: This strategy is for educational purposes only and does not constitute financial advice.