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

Laurent Bernut is a hedge fund veteran and short-selling specialist with over 20 years of experience across global financial markets. He has worked for prestigious institutions including Fidelity Japan and two major long/short hedge funds, where he honed his expertise in quantitative trading and portfolio management systems. Laurent has built quantitative trading tools and portfolio management systems used by professionals worldwide. Passionate about education and strategy development, he brings deep insight into market dynamics, risk, and portfolio construction.