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Gate.io Research: Hedging Strategies—Umbrella of Options Trading
Gate.io Research: Hedging Strategies—Umbrella of Options Trading
2020-07-26 09:21:03 UTC
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In 1936, British mathematician Alan Turing put forward the concept of Turing Machine, opening up a new chapter for the research of Artificial Intelligence (AI). Today, we have reached a point where deep learning plays a more prominent role and it has become a hot topic on how to apply AI in the financial sector. In this report, an artificial Recurrent Neural Network (RNN) called Long-Short-Term-Memory (LSTM) is applied to forecast the implied volatility of Bitcoin (BTC) prices, along with the mainstream hedging strategies explicitly illustrated. It has been found that the LSTM architecture can play a role in predicting BTC volatilities.
Key Takeaways:
-Options trading risks emerge when the applied model fails to predict market movements in an appropriate manner.
-In typical hedging strategies, sellers tend to put stop loss orders as an attempt to hedge the price volatility of the underlying asset; while buyers often resort to Delta and Gamma as a way to make profits regardless of a surge or slump of the underlying price in a short period of time.
-With the LSTM network, it has been found that the model cannot present a good forecast of the BTC price volatility in the event of a highly volatile price movement; however, the prediction results and the true value of the test set are close to the overall volatility trend, which indicates LSTM can serve as a reference for options trading activities.
The report will be uploaded soon. Please stay tuned!
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Gate.io New Features:
Spot Trading on Gate.io (200+ tokens):https://www.gate.io/trade/BTC_USDT
Margin Trading on Gate.io (Long or Short):https://www.gate.io/margin_trade/BTC_USDT
Perpetual Contract Trading:https://www.gate.io/futures_trade/BTC_USD
Lending on Gate.io (secure and stable, high annual return):https://www.gate.io/margin/lend/USDT
C2C Trading on Gate.io:https://www.gate.io/c2c/usdt_cny
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Gate.io
July 26, 2020
Key Takeaways:
-Options trading risks emerge when the applied model fails to predict market movements in an appropriate manner.
-In typical hedging strategies, sellers tend to put stop loss orders as an attempt to hedge the price volatility of the underlying asset; while buyers often resort to Delta and Gamma as a way to make profits regardless of a surge or slump of the underlying price in a short period of time.
-With the LSTM network, it has been found that the model cannot present a good forecast of the BTC price volatility in the event of a highly volatile price movement; however, the prediction results and the true value of the test set are close to the overall volatility trend, which indicates LSTM can serve as a reference for options trading activities.
The report will be uploaded soon. Please stay tuned!
Gate.io is a trading platform that does not charge listing fees, only launches quality projects, and provides users with 100% guaranteed and instant deposit-withdrawal services.
Get 30% of all referees' trading fees in the affiliate program at https://www.gate.io/myaccount/myreferrals
Click to Sign up ：https://www.gate.io/m#/register
Download it now at: https://www.gate.io/mobileapp
Scan and download at:
Gate.io New Features:
Spot Trading on Gate.io (200+ tokens):https://www.gate.io/trade/BTC_USDT
Margin Trading on Gate.io (Long or Short):https://www.gate.io/margin_trade/BTC_USDT
Perpetual Contract Trading:https://www.gate.io/futures_trade/BTC_USD
Lending on Gate.io (secure and stable, high annual return):https://www.gate.io/margin/lend/USDT
C2C Trading on Gate.io:https://www.gate.io/c2c/usdt_cny
Download Gate.io APP:https://www.gate.io/mobileapp
Download Wallet.io (ALL in ONE):https://www.wallet.io/
Follow us and get updated at (Follow as to win bonus)
Facebook: https://facebook.com/gateioglobal
Twitter: https://twitter.com/gate_io
Telegram：https://t.me/gate_zh
Instagram：https://www.instagram.com/gateioglobal
Medium：https://medium.com/@gateio
Gate.io
July 26, 2020
