A Detailed Illustration Using the "QB" 

During the Coronavirus Panic

 

Below is an illustration (with explanatory notes) to show the potential theoretical impact on a $10 Million hedge fund using The Quant Box signals and its own discretion during the Coronavirus panic.  As the reader can see in the table below, two days before the real panic struck, The Quant Box had been “long” (e.g. see “1)” in the table below) due to a purchase of 460 of the S&P 500 Future’s contracts, held at the discretion of the trader.  Due to The Quant Box “STOP LEVELS” being triggered on February 21 (e.g. “2)” below) when the S&P 500 Futures triggered an "EXIT" alert at 3352.43, amid increasing volatility, the theoretical profit on the long position was protected and theoretically liquidated at 3352.43.  The profit on the long position would have been approximately $383,460 (“3)” below, not accounting for commissions, fees, market slippage, or variance in execution price, etc.). 

 

Then, just two days later on February 25, The Quant Box issued a sell signal to “Go Short” at 3132.50 (“4)” below).  The reader will note the number of contracts The Quant Box recommended was fewer than the previous long position. The new number was 360 (“5)” below---10 x 9 x 4) contracts because volatility had risen in the markets.  This is an example of The Quant Box dynamically recommending a reduced number of contracts to reduce capital risk exposure when volatility increases in the marketplace.  Note:  The Quant Box service as offered on this website does not recommend numbers of contracts for any position, or even when a position is bought, or sold---that is left up to the subscriber, as this website, and any person or entity affiliated with it, does not offer personal financial advice.  Please see the risk disclosures in the "blue" highlight section at the top of this page.

 

Finally, for purposes of showing how one might use The Quant Box near the height of a panic, the 360 S&P 500 futures contract short position was closed at 2954.12, just prior to 5pm on February 27---near the height of that day’s panic and near the lows for the day (“6)” below).  The actual low for February 27 was “2953.62” (“7)” below).  The actual “close” for the futures on February 27 was slightly different from “2954.12” because The Quant Box was updated at approximately 4:56 pm…minutes before the futures’ markets closed for the day.  This provided just enough time to accommodate and enter a theoretical closing transaction to cover the short---and protect massive theoretical profits going into the next trading day.  In this case, the official "EXIT" signal did not come until two days later, but often in a furious sell-off, or melt-up, trader discretion and risk tolerance becomes a personal decision. 

 

The theoretical profit on this theoretical 360 contract short position was $3,210,840 (“8)” below, not accounting for commissions, fees, market slippage, or variance in execution price, etc.). 

 

Each S&P 500 futures contract controls $50 multiplied by the quoted point value (i.e.  Going “Short” 360 contracts at a price of 3132.50 approximately equates to controlling $56,385,000 in underlying securities).  Selling short 360 contracts would have required, at that time, a margin of approximately $2,376,000 per maintenance requirements at the Chicago Mercantile Exchange, or $6,600 per contract---and margin requirements can vary dramatically, at the whim of the exchange.  The required margin requirement on the 440 contract long position would have been $2,904,000 and the respective amount of underlying securities of the S&P under control would have been approximately $73,753,460 at the theoretical stop-loss exit price of 3352.43.  The total theoretical profit (not counting fees, commissions, etc. and assuming the prices The Quant Box issued) for both the long and short positions was $3,594,300. 

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As an FYI (not part of this illustration): The Quant Box the following week again shorted the market on March 9, 2020 with a "Sell Short" signal at 2747.75, with a subsequent "EXIT" signal on March 17 when The Quant Box generated an "EXIT" signal at 2480.83.  The system did quite well in this scenario when the market was under stress, but it does not always work that way!

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Many people want to know how The Quant Box did during "Covid."  This illustration above shows you how The Quant Box generated signals, and the theoretical positions which might have been taken by a small hedge fund under such conditions. 

 

IMPORTANT:  "The Quant Box Theoretical Performance" tables presented on this website, and in the downloadable .pdf file above, adhered to the rule that markets must be entered when "Go Long" or "Sell Short" signals are generated, and when The Quant Box issues an initial "EXIT" price signal---that position must exit and close out the trade cycle.  No discretion is allowed in calculating theoretical gains and losses in The Quant Box Theoretical Performance tables.