Optiver Challenge - The Hedgetrimmers (Team-01)

Inspiration

Optiver provided the environment to explore spread trading and maintaining delta-neutral positions for automated trading algorithms. We set out to send our gains to the moon, and provide liquidity to an illiquid market, without getting rinsed in the process.

What it does

Our algorithm finds the spread between the traded value of a basket of stocks, and the value of the underlying stocks. When the spread is larger there is an opportunity for profit by trading based on this difference. Our algorithm exploits the spread by buying the basket when it is underpriced, and hedging this trade by shorting the underlying stocks (remaining delta-neutral). When the basket is overpriced, we make the inverse trades. As the spread reduces to zero our agent captures the profit of the spread.

How we built it

We started out by exploring the Optibook API and understanding how the orders were implemented, and how we could situate ourselves within the market.

The majority of our time developing was spent as a group coding session, essentially quad programming on the same file. We built out functionality to analyse the current market spread and price our positions accordingly.

Challenges we ran into

The main challenges faced in this challenge were unanticipated effects of algorithmic order placing. When moving to place orders, we don't want to fulfil orders that are irrationally far from the standard selling price. To mitigate this we placed limits on our order functions to only place algorithmic orders when the spread is below a reasonable amount.

Accomplishments that we're proud of

We're proudest of recovering from being 1 million down by scamming the scammers. In all reality, we were happiest with achieving consistent profitability through market making and spread trading.

What we learned

We've learned a lot about financial strategies, market hedging, and the potential pitfalls of algorithmic trading (mainly losing money).

What's next for The Hedgetrimmers

We hope to continue to develop our skills, and participate in future challenges.

Built With

• optibook
• python