Chicago Quantum: Investing Questions & Answers (FAQs)
Topics: Free Market Data, Stock Market Questions, Bond Questions, Stock Options Questions, Chicago Quantum Net Score (CQNS) Questions
US equity index returns in the US over the past year:
* Actual riskfree rate = 0.07%
* Actual S&P 500 return = 34.46%
* Actual Russell 2000 return = 53.27%
* Actual NASDAQ Composite return = 40.69%
Note: excluding dividends
0. FINRA (good corporate bond data here)
http://finra-markets.morningstar.com/BondCenter/Default.jsp
1. Fintel.io
https://fintel.io/
2. Yahoo Finance
https://finance.yahoo.com/
3. Seeking Alpha
https://seekingalpha.com/
4. Finviz
https://finviz.com/
5. Koyfin
https://www.koyfin.com/
6. CBOE Top of the book viewer
http://markets.cboe.com/us/equities/market_statistics/book/SMLP/
7. Your broker (ours is very helpful with data, quotes and educational materials)
8. Stocktwits (funny sometimes, but a great community. I find 'friends' and pumpers here.)
https://stocktwits.com/symbol/smlp
9. Google Finance
https://www.google.com/finance
10. Securities and Exchange Commission (EDGAR)
https://www.sec.gov/
11. MarketWatch
https://www.marketwatch.com/
12. NASDAQ
https://www.nasdaq.com/
14. The Options Clearing Corp
https://www.theocc.com/
15. CBOE Options Quotes (delayed)
https://www.cboe.com/delayed_quotes/smlp/quote_table
16. CBOE Options Historical Information
https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Daily-Volume
17. How many shares can somebody borrow and sell short?
IBorrowDesk: https://iborrowdesk.com/report/SMLP
Shortable Stocks: https://www.shortablestocks.com/?smlp
18. Black Scholes Options Pricing Calculator
https://www.mystockoptions.com/black-scholes.cfm (options price calculator based on actual volatility)
http://www.option-price.com/implied-volatility.php (implied volatility calculator, based on option price)
19. National Stock Exchange of India (NSE) and the NIFTY 50
For stock information, start at their homepage. We had trouble creating a 2 month daily chart.
20. Stock Market MBA (cool site, lots of facts):
https://stockmarketmba.com/index.php
21. US Government Bond Yields (from 1 month to 30 years)
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield
22. How do I find the short interest in a stock. Go to Short Squeeze . com:
https://shortsqueeze.com//shortinterest/stock/term2.php?s=SMLP
1. Zero Hedge (Tyler Durden writes all the articles!) Insightful at times, and when not...sometimes clever
https://www.zerohedge.com/
2. Yahoo Finance World Indices (how all the markets are doing)
https://finance.yahoo.com/world-indices
3. SEC Company Lookup (corporate filing = news, without the spin)
https://sec.report/CIK/
4. Koyfin News
https://app.koyfin.com/news/top
5. Finviz News & BLOGS
https://finviz.com/news.ashx
6. Seeking Alpha News
https://seekingalpha.com/market-news
Stock Market Questions
Total market capitalization = equity cap + debt cap. 1. The equity capitalization is the total number of shares of stock multiplied by the market price. So, 1 billion shares that trade at $10, is worth $10 billion. 2. The debt capitalization is the market value of all debt (I use current and non-current debt). We say market value, because some firms' debt trades at a discount to the face value owed.
What is the Debt to Equity Ratio?
This is the market value of debt divided by the market value of equity. A company with equal parts is said to have a 1 D/E ratio. It is not healthy to have too much debt compared to equity, and we have seen this ratio balloon up just prior to distress or bankruptcy.
How do I find the institutional holders of a company?
The Securities and Exchange Commission maintains a system called EDGAR. There are different filings that institutional holders have to make, such as Schedule 13D and 13G/A. It can be challenging to find these SEC filings, because they are based on the owner of the stock, not the company that issued the stock.
What is short-term volatility for a stock?
Say we expect a US liquid stock's intraday price to change within 2% most days, and within 4% almost all days. It is a stock that moves > 4% in the next week.
What is a Gamma Squeeze?
A closed-loop, or virtuous circle where buyers (say a whale, or many small fish) buy short-dated call options. The call option sellers like to hedge, so they buy the underlying stock, like 1:1, like clockwork, no choice really. If this happens enough, the stock price goes up really fast. What happens when the call options expire? Good question...probably have to start over, and the call options become much more expensive to account for hedging risk.
Gamma squeeze can also happen with puts. Buyer(s) buy puts, seller hedges by selling (or shorting) the underlying stock. Price drops, buyer(s) feel more confident, and buy more puts. Rinse and repeat until the short-dated puts expire.
I thought a Gamma Squeeze could start with lots of buyers for a stock. It is not enough...you need buyers of new call options (more than put options).
Where do I find stock quotes?
Yahoo Finance has current (slightly delayed) and historical stock prices, valuations, charting, and other valuable data, here.
Finviz also has delayed stock quotes (free) and charts. Found here.
Stocktwits is a fun site. Occasionally entertaining, but good. Pulse of individual traders. Found here.
What does the adjusted close price mean and how is it calculated in Yahoo Finance?
The adjusted close price takes into account corporate actions that impact the value of the stock. It incorporates stock splits, dividends paid with stock, and dividends paid in cash. It backward adjusts the historical closing price by those actions to smooth out price changes. See Yahoo's definition and math here.
What is Drawdown?
This is when your investment loses value, regardless of if you realize the loss. This is a percentage from where you invested (from 0 to 100% if you lose your entire investment).
What is an ETF? What is an Exchange Traded Fund?
This is a fund that trades just like a stock. It can be bought and sold during the trading day. This is different than a 'real' mutual fund that can only be bought or sold at the closing price that day through the mutual fund company. To show the difference, I can buy and sell the $SPY (S&P 500 ETF) often during the day as the then-current price. However, I have an S&P 500 mutual fund with Vanguard that if I buy or sell it, it 'marks to market' at the 4pm ET close price (Net Asset Value) for that day.
An ETF does not only hold stocks, but may hold a collection of stocks, bonds, options, currencies, and other financial assets. I think of this as a synthetic stock, or a bet on stocks, without holding the underlying stocks.
Where do I find stock news?
Stocktwits is a fun, community based site with one page per stock they cover. Found here.
Hacker News is another good site (yCombinator). Found here.
Zero Hedge is another very good site, more curated news. Found here.
What is the top of the book?
This is the top, or best, 5 bids (to buy) and asks (to sell), with stock prices and number of shares. You can also see the last 5 or 10 trades made (number of shares, and prices). These are bona-fide orders to trade (meaning they can be executed immediately). It shows liquidity, or a sense of the money ready to trade in the ticker.
You can find the free CBOE top of the book, or book viewer, here. Just change the ticker in the URL.
You can find the free IEX top of the book, or book viewer, here. This one you type in the ticker on the page.
NASDAQ has a book viewer for their book, but it requires a paid subscription.
What is a short squeeze?
A short 'squeeze' happens when when investors that borrowed stocks to sell ('shorts') have to buy them back under pressure. The rising price and unavailability of shares to borrow means shorts have to buy back the shares now. A recent example is $GME (Gamestop).
What is an Efficient Portfolio?
An efficient portfolio is based on historical price data (e.g., 1 year) and had the most expected return (profit) for a level of price variability (risk). This trend may continue into the future. Risks are often diversified.
What is a portfolio's Expected Return?
A portfolio's Expected Return in our model is the average BETA value of the portfolio's stocks multiplied by the annual Market Return.
What is BETA for a stock?
BETA is the movement of a stock relative to moves of a market index. We use SPY or QQQ, S&P 500 and NASDAQ 100 index tracking ETFs. BETA of 1.0 means stock moves 1:1 with market ups & downs: 2.0 moves 2:1, 0.5 moves 1:2, -1 moves opposite.
BETA in our model is the movement of a stock relative to a market index. We offer two choices, either $SPY, an ETF that tracks the S&P 500 or $QQQ, an ETF that tracks the NASDAQ 100.
What is BETA Exposure?
BETA exposure is the BETA values of stocks that you own, in a weighted average. This is a measure of portfolio momentum & risk. If you expect a 20% market return, 1% risk-free in 2021, a portfolio BETA of 2.0 expects ~ 39% return.
What is Swing Trading?
The term is based on the average time an investor holds a position in a stock. A stock market investor who trades in terms of days or weeks. Slow than a day-trader (in & out during one day). Faster than a buy & hold investor (months or years)
What is Alpha (in stocks)?
Alpha is the ability of an investment manager to outperform the best results of market indexes (e.g., SPY, QQQ, & IWM) and optimal portfolio allocation between types of assets. It's the return of an investment manager. Hard to do.
Why should you put 'zig and zag' in your stock portfolio?
A) A portfolio where every stock moves in the same way with the market...just moves with the market. There is no protection when the market falls, and no upside when the market rises. Instead of holding a highly diversified portfolio with dozens of stocks that move with the market, it is often better to hold a passive mutual fund or exchange traded fund (ETF) that tracks the market.
B) However, if you can find stocks that generally move with the market, have a higher BETA (and BETA exposure) so they move more than the market (e.g., provide leverage), and some rise when others fall, then you can hold a portfolio with more potential to earn profits than the market, and reduce the risk of just holding the passive market (with leverage). The zigs and zags, or ups and downs of stocks against each other lower the overall price volatility you hold.
How many US stock market trading days in the past year?
It depends on the day asked. In a year, there are ~253 days when the US stock markets will open for trading. So, if we download 1-year of data, we get 252 or 253 daily data points.
What are the three NASDAQ stock markets (exchanges)?
- Nasdaq Global Select Market (SM)
- Nasdaq Global Market (SM)
- Nasdaq Capital Market (SM)
Each have different listing requirements.
What is an equally weighted stock portfolio?
A portfolio where each stock starts with the same amount invested. So, a portfolio with 2 stocks has half invested in each. Another is capitalization weighted, which set the investment equal to the % of market value of each stock. So, a $1.00 portfolio with 2 stocks would have $0.50 invested in each.
What is a stock portfolio's variance?
The variance of a portfolio is the amount of variability of the price change of that portfolio's stock price over the measurement period. People usually think of a 'bell shaped curve' in a random sample, with the highest point being the typical return, and the variance is how wide the bell is. Most investors prefer higher returns with lower variance (so they don't have many 'bad days'). The amount of spread or width of the daily price change of a portfolio's value that we interpret to mean the potential changes we expect on typical, future days.
When is a stock really a bond?
When it is a bond listed on the NYSE (as a stock): $TVC and $TVE are Tennessee Valley Authority PARRS bonds, $25 putable bonds yielding ~2.2% per annum. These are listed and traded on the NYSE.
Why list $25 bonds like stocks? To make it easier for individual investors to buy a bond, and to try and profit from interest rate changes. https://tva.q4ir.com/investment-opportunities/putable-automatic-rate-reset-securities/default.aspx
What does it mean with BETA < 0 (a negative number)?
It means that a stock has moved in the opposite direction to a market index. So, when the stock market goes up, these stocks go down. We don't like negative BETA stocks, because the market almost always goes up, and this is investing to lose money (most of the time). In other cases, there has been a significant and sustained rise or fall in stock price that is uncorrelated to the market index (and indicates a 'story stock'). BTW, we use the ETFs $QQQ or $SPY, and before used the indices themselves to calculate BETA.
What is an adjusted option?
Every option has a few immutables, like call/put, American/European option, but the rest can change. If a corporate event occurs, the strike price, date, and even number of shares can change. You need the information notice from the OCC to be sure you know how the 'adjustment' works.
The Options Clearing Corporation (The OCC) has information on every adjusted option, delivered in information notices, found here. Fidelity has a nice writeup on the topic here.
What do S&P Bond Rating mean?
The Standard and Poor Credit Rating group rates company's ability to pay their debts. Here is a link to definitions.
For example, one stock was upgraded from SD to CCC, which means they went from Selective Default to being Vulnerable.
Front running a trade?
We can all see the trades that are waiting to be made when they hit a certain price, if that price is far from the market price. There is a book viewer for this. If you see someone trying to buy 1000 or 10000 shares at a price, you put your order in front of them (front run them) for say $0.01 or $0.02 below their price. You get executed first, and can turn around and sell it to them...or they have to raise their price due to increased 'buy demand.' I did this today in a slow stock, $SMLP, where I put my 300 share order in $0.02 more expensive than the person waiting at the best price. I got executed first. However, the market dropped about an hour later, and if they waited, they could have bought $0.10 cheaper. Oh well, trading is about buying, selling or watching at that moment.
Long-dated OTM call options
This is a call option (an option to buy shares at a certain price in the future, at a certain date). It is long dated, so you have a few months to execute. It is out of the money (OTM), so you cannot make money if it expired at this price. We are still not sure how to trade these effectively, except to turbo-charge a winning position in a stock that you believe will rise.
Float (for a stock):
The float of a stock are the number of shares freely available to be traded at any one time, times the price of the shares. It does not count restricted or treasury stock (stocks that are legally held back, say for executive compensation or from a buy-back). It does not include closely held stocks, and we do not count stocks held by passive investors (e.g., mutual funds or ETFs) that must hold the stock to maintain an index weighting. For example, say a stock has 10M shares, and trades at $10. The float starts at $100M, with 10M, but then we subtract insiders holding 1M, and passive mutual funds holding 5M shares, and 1M in restricted and treasury stock (bought from the market and 'retired' or 'held' to pay out in bonuses.' This leaves $3M shares. For a stock selling at $10 / share * 3M shares, this leaves a float of $30M.
What is the Average True Range (ATR):
This is a technical indicator of market volatility for a stock, taken over a number of days (say 14 days). Higher number means more volatility in the stock. Investopedia discusses it here. $SMLP has an ATR of 0.97 (14 days), as an example.
What is a hedge fund?
A group of investors they buy stocks that zig while others zag. Imagine a fund with N independent strategies, each 'hopefully' uncorrelated, and all a high IQ team. Imagine 50% long, 50% short. Visualize a trading hypothesis that motivates a team to invest in multiple asset classes to uncover hidden financial value. That is a hedge fund.
What is margin?
A trade that allows you to borrow a percentage of a stock's value from a broker to purchase that stock. If the stock's value drops substantially, you must deposit more cash in the account or sell a portion of the stock.
What is a stock's skewness?
A simple idea is that the skewness is the recent acceleration or momentum in a stock's daily returns. A positive skew probably went up recently. It could have fallen before, and now is recovering. A bigger than normal recent gain (one or over a few days) could make the stock's skew positive. Positive skew feels good, because the stock goes up frequently, but does not mean you make more money than a negatively skewed stock...just that it feels differently.
This is the third movement of a stock's price. It represents whether the probability distribution of a stock's daily returns are balanced. A balanced probability distribution, and a normal distribution, have this property: mean (average) = median (middle in a stack rank) = mode (most common value). A positive skew, when graphed, looks like the bell curve is stretched to the positive (or higher returns) side of the chart. This could be that the price of the stock is artificially propped up (say for a bond with a built-in minimum sell price, like $TVC at $25). A negative skew stretches the bell curve to the negative side, or the loss side.
What is a stock's kurtosis?
The kurtosis is the 4th movement of a stock's price. One way to think of it is the jerkiness or sudden fits and starts that come in the daily stock % price moves. If it normally moves $0.10 in a day...has it moved $1.00 or $5.00 in a day in the past year, either up or down? The kurtosis of a stock is the weight of the tails of the probability distribution of daily returns. Kurtosis is probability of tail events, outliers, or extreme moves. So, a lepto (or fat) kurtic stock had big moves in the past year, up and/or down. Options buyers & YOLO want price action from a high-kurtosis, or leptokurtic stock!
A platykurtic stock has little weight in the tails, so there are fewer outliers or large, unexpected moves than we would see in a normal distribution. This is a safe stock. Mesokurtic is more or less normally distributed. We get what we expect, all things being normally distributed and random.
What is the Annual Market Return?
This is the average of three US stock market indices, subject to floor and ceiling values to remove anomalies. We set a floor because investors do have a minimum expectation of stock market returns. We set a ceiling because investors do not expect a great year to repeat in exactly the same way the next year.
What is the NSE? What is the NSE NIFTY 50?
The National Stock Exchange of India is the NSE, and the NIFTY 50, NIFTY NEXT 50, NIFTY MIDCAP 50, NIFTY BANKS, etc. are a set of indices of companies listed on the Indian market. For more information, click here. They have a seemingly evangelical mission: "We aim to catalyze India's growth story by creating investment opportunities, enabling access and empowering our stakeholders. We work harder, smarter and faster to deliver impact across the investment ecosystem. In a world that changes shape by the second, we constantly reinvent ourselves to redefine the future."
What is the Over the Counter Market? What is the OTC market?
This is where stocks that are not listed on a formal exchange are traded (unlisted stocks). Like a sales counter, two parties trade stocks or other financial instruments directly without brokers. Dealers, and dealer networks in financial instruments act as market makers and quote bid and ask prices. Think of this as a big discord channel, or squawk box, or phone tree where you ask people to buy or sell your stock. This is all happening electronically. There is no price reporting transparency, trades happen between two parties without strict reporting requirements.
A few challenges with OTC include:
- potential lack of liquidity in the shares you are buying and selling can make it challenging to execute a trade at a good price.
- counterparty risk. Who are you trusting to hold up their end of the trade (since there is not a broker). Will there be anybody there to provide bid-ask liquidity when you really need it.
- equity securities traded there may have failed to meet the minimum requirements to list on stock market exchanges like NYSE, NYSE American and NASDAQ Global Select, NASDAQ Global and NASDAQ Capital markets. BTW, all exchange names are trademarks are properties of their owners.
What is DXY?
This is the "U.S. Dollar Index (TM)" the ICE, Intercontinental Exchange, Inc., futures index for the U.S. Dollar currency value. It has many names: USDX, DXY, DX, or the "Dixie." The currencies it measures are our primary US trading partners, including Euro, Japanese Yen, UK Pound Sterling, Canadian Dollar, Swedish Krona and Swiss Franc. It was started (as USDX) in March 1973.
How many shares of stock does a company have?
This is something that a company has to publish. However, it may not be easy to find. For SMLP, which is a limited partnership (or an LP for short), we found stock shares, or common units, that were provided by the company. We also have shares that were provided directly to debt holders that may or may not sell them. Finally, we have warrants which can be bought and sold and converted to shares. There are also preferred shares, which often pay a dividend and can be converted into common shares. So, do your homework and know how many shares your company has. In the case of SMLP, there are 6.1M common units (3.8M issues by the company, and 2.3M owned by prior debt holders), 0.7M shares inside warrants which are 'in the money', and about 20,000 preferred shares which are not convertible into common. This number typically excludes hidden or restricted or treasury shares, which are shares that have not been released to the market and may be held for a specific purpose (e.g., stock compensation, stock options exercise, or to grant restricted stock to executives). Treasury stocks can be shares that were bought back from the market and 'disposed of' or taken out of the share count.
What is the difference between a US Treasury Bond and a US Treasury Bill?
The difference is the duration. To be a bond, you need a maturity of 1 year. Treasury Bills are sold with maturities of less than 1 year.
What is a 'long bond'?
It is not a 2-hour James Bond movie. A long bond is a bond with a maturity of 5 years or more. So, the US Treasury Department often releases a 30 year maturity bond, then will re-open it to issue more debt, with the same maturity date. So, a 30 year bond can be sold with 25 years left, 20 years left, etc. In any case, a 5 year or longer bond (until maturity) is a long bond.
What is non-recourse debt?
This is when a loan is backed by a specific collateral, and not by other assets of the borrower. When SMLP borrowed $175M to help complete the Double E pipeline, it is non-recourse to SMLP. That means the lenders can seize the pipeline if the debt is not paid, but not go after SMLP in any other way. See example here.
What is an interest rate Yield Curve?
The yield curve is when you chart a line of bond yields from 1 month to 30 years. It looks like a curve that normally slopes up and becomes more steep the longer the bond. The steepness of the yield curve is the difference in interest rates we receive when we lend the US Gov money for a short time vs. a longer time. A common pair: 2-10 year. That 'spread' Feb 25 is 1.37% vs. 0.98% Feb 1. It steepened 39 basis points. Yields for 2-30 year bonds rose.
What is an inverted yield curve?
An inverted yield curve is when investors are paid more interest rate yield to lend the government money for a short time than they receive when the lend for a longer time. This is common before a recession, as people would like to 'park' their capital with a no-risk yield instead of investing it into their business or the financial markets.
Where do I find summary statistics on the options market (for a given day)?
You go to the CBOE and they publish this data, for free, daily.
https://markets.cboe.com/us/options/market_statistics/daily/
What is an option (stock option)?
A contract that gives you the right or obligation to buy or sell an underlying security (say a stock) at an agreed-upon price on or before a specific date. For example, SMLP options expire either in March 2021, or in June 2021 (in 3 month intervals).
What is a front month option?
The front month option, or the front option, is the next option soonest option that expires.
How does option pricing work? and What would 'break-even' look like for puts and calls?
Short answer: I checked the options pricing on my currently favorite stock, $SMLP, during market close when it was ~$15/share. It was lower, went higher, and came back down in the past few weeks.
The options that expire in 2 months, if you look at last traded options puts and calls prices on Yahoo Finance, here, give a break even range of $36.50 for the calls (up ~$20 or 133%), and $10 for the puts (down$5, or 33%). The prices of the options would not tell you that. Calls were $0.05 apiece, and Puts were $1.78. These are adjusted calls, so I had to go to the OCC for an information notice on SMLP's reverse 15:1 stock split just to do the math, and had to read it a few times.
So, if you buy the call or buy the put, you are betting that the stock will go up 133% or down 33% in the next 2 months.
You know what? I am trying to place that bet (that the stock will rise 133%, over the next 5 months, by bidding $0.05 for the 5 month calls). In this case, $1000 option cost + $100 commission would control 1,400 shares, which would have otherwise cost me $21,000, except then I make money even if the stock goes 0.01% above where I bought it, and I can hold it for my entire life.
This is the short discussion. It could be much longer, cover The Greeks, etc., but this is what most people need to know. You are betting that the stock will jump, alot, in a certain time frame. You can bet up or down by buying calls (up) or puts (down). If the stock moves alot, you will get a wider spread until you make a profit.
What is the difference between a US Treasury Bond and a US Treasury Bill?
The difference is the duration. To be a bond, you need a maturity of 1 year. Treasury Bills are sold with maturities of less than 1 year.
What is a 'long bond'?
It is not a 2-hour James Bond movie. A long bond is a bond with a maturity of 5 years or more. So, the US Treasury Department often releases a 30 year maturity bond, then will re-open it to issue more debt, with the same maturity date. So, a 30 year bond can be sold with 25 years left, 20 years left, etc. In any case, a 5 year or longer bond (until maturity) is a long bond.
Commodities questions
U.S. Energy Information Administration produced data and information on this commodity, here.
What is Dry Production of Natural Gas?
Marketed production (gross) minus losses during production. In February, 102 Bcf/d produced 90, for a production loss of 11%.
Chicago Quantum Net Score (CQNS) Questions
The Chicago Quantum Net Score is a proprietary quantum algorithm that scores each equally weighted portfolio. It has 2 parts that are subtracted from each other:
- expected return of the portfolio (based on the BETA of the stocks and the average market return for the measurement period, usually ~ 252 trading days)
- expected risk (or variance) of the portfolio (based on the variance of that portfolio for the measurement period)
To make the model work correctly, we set the CQNS value for no stocks and all the stocks at approximately zero. We search for the lowest CQNS value. Based on the stocks you provide, the balance between risk and reward is set and the model seeks the most return with the least risk. This is also called an efficient portfolio, because you cannot get more expected return for the same amount of risk.
What is your platform of classical solvers that you will use?
The following classical solvers are included in this service:
- Quantum Annealer
- Monte Carlo
- Simulated Annealing
- Genetic Algorithm
- Simulated Bifurcator
- Particle Swarm Optimization
- TABU (Multi-Start)
- Greedy (steepest gradient descent)
How do you validate stock data?
We validate your data by checking the adjusted close prices (as provided by Yahoo Finance) are available for every day, the prices are in an acceptable range, the volume is positive (above a very low daily floor). We check for stocks with a positive BETA (because who wants a stock that goes down when the market goes up)? We omit stocks with BETA > 4.0, as that usually indicates an anomaly. We can also check for things like whether it paid a dividend, or volume and price spikes. If you can think of a data validation filter, we can code it (and probably have) to ensure we have complete data.
Why is CQNS a quantum algorithm?
The traditional way of finding efficient portfolios, or those portfolios that are expected to deliver a maximum return for a given level of risk, is to use the Sharpe Ratio. This divides expected return (%) by the standard deviation of the returns (%). This ratio is simple, as we divide two percentages to get a real number (say 5.10). A quantum annealing computer cannot perform multiplication or division, so we need to reformulate the Sharpe Ratio into something that works similarly. Our formulation works on quantum annealing computers, and therefore is a quantum algorithm.
Please describe the solver types that you use?
The best way is to point you to Wikipedia, after we give you a few 'plain English' words of explanation of each.
Quantum Annealer - Uses quantum energy level (think of atoms jumping around trying to find their 'groove'). When we start, atoms are still and are loaded with data. As the atoms heat up, they jump around and seek out the lowest energy level where they can settle in, which equates to the lowest CQNS score. As the system cools, the atoms become more still and only look in their immediate area. Finally, we stop and read the qubits, calculate the CQNS scores and whether the portfolio found was valid, and we keep the valid portfolios.
Monte Carlo - roll the dice, purely random chance
Simulated Annealing - based on temperature. When it is hot, we search more widely. As it gets colder we focus our search.
Genetic Algorithm - based on taking the best parts of each portfolio and creating new portfolios. Should always move us to better solutions. Add in mutations to capture 'nearby' portfolios.
Simulated Bifurcator - we simulate a pressure chamber. We form portfolios by having individual stocks migrate to be either in or out of the portfolios. We push the stocks in, and pull them out, and the pressure is the amount of impact applied from the matrix of data we created. We are looking for convergence as the pressure increases.
Particle Swarm Optimization - we have a set of particles that are each starting out in different parts of the portfolio search space (the 2^64 search space). Each one finds the best answer per turn, and the group of particles has momentum attracting all particles towards the center of gravity of the best answers. Over time, the particles settle into their best local solutions, and the center of gravity also moves to the best local solution found.
TABU (Multi-Start) - This one seems to operate mostly randomly with the best answers found collected and stored in memory for the next iteration. We generally do not find better answers than we find in a Monte Carlo run.
Greedy (steepest gradient descent) - imagine you are atop a mountain and want to find the deepest valley. You can step around you...so you feel around with your toe, and pick the way that goes down the most. Step that direction, then repeat with your toe. At some point, you stop going down in any direction, and then you stop.
Disclosures
We think investors must do their own due diligence on companies and ensure they understand the risks associated with investing. Our model does not look at the fundamental value of companies. It looks at the adjusted closing prices and the patterns between stocks in that data.
Note: The algorithm and methods used are in a state of research and development. They are subject to frequent change and development. For example, we now have a low, medium and high risk calculation. Our models and methods are subject to modification, tuning and testing. Do not rely on this service for your investment decisions. This is not investment advice. We are not investment advisors.
Thank you Chicago Quantum...what services do you sell to help investors?
One-time stock analysis of your list of up to 100 stocks (long or efficient portfolios)
You enter up to 100 stock tickers + 10 backup tickers. We run our analysis, select the best portfolio(s) based on our CQNS algorithm, and email you a .PDF report.
Once you place your order, please provide this information during checkout (or email us):
- Your name
- Your email address(es)
- Your phone (and whether we may call with question on this order)
- Your US stock tickers (up to 100 and up to 10 backup tickers.
- Any special requests
Please email these to research@quantum-usaci.com. Jeffrey will be running your analysis.
What we do:
We run our analysis, select the best portfolio(s) based on our CQNS algorithm, and return you a .PDF report via email (or another way if you prefer). We return it within 24 hours...possibly much faster.
The report will list the stocks you provided, results of data validation, and the best portfolio(s) we find. If our solvers do not converge on one 'best' portfolio, we will provide you the top 3 portfolios they find. We provide you any insights from the run (e.g., was it easy to find a 'best' portfolio).
We wait until the trading day is over, but can use today's intraday price data.
At this time, we only analyze stocks listed on US stock exchanges (no OTC or foreign listings).
What you should expect from the results:
This algorithm gives you the portfolio with the desired characteristics (lower risk & higher return) in the past year.
We view this as a buy and hold strategy for up to 25 days, but have seen the effects last as long as 35 days. We have also 'swing traded' these results to capture short-term volatility.
We have seen offsetting stocks in these portfolios where some rise while the others fall, but overall the portfolio rises. In a few cases, one 'high flyer' carries the portfolio. Why does this happen? If the BETA values selected are higher than market average, then the stocks may move more than the market. If the risk is lower for those stocks, and the BETA is higher, then we may see investors attracted to those stocks in the short-term.
The value proposition:
You can most likely re-create this logic and build the data analytics capability to do a similar exercise (e.g., using the Sharpe Ratio). However, it would take significant time and effort. We run this analysis every week, and have been performing this service consistently for over a year. We purchased new servers and computers, and built a set of algorithms, code, logic and proprietary solvers to find your CQNS portfolio. We also use D-Wave Systems Inc. technology and code, including sometimes their quantum annealing computers. With our pre-packaged service and expertise, we help you better understand the stocks in your list and achieve an actionable list quickly.
Explanations:
Please see our webpage "Stock Market Links & FAQs" for details.
Disclosure
We think investors need to do their own due diligence on the companies and ensure they understand the risks associated with investing. Our model looks at the adjusted closing prices and the patterns between stocks held in that data.
Note: The algorithm and methods used are subject to frequent change and development. Do not rely on this service for your investment decisions, and do your due diligence. This is not investment advice. We are not investment advisors.
Thank you for your order and your business.
One-time stock analysis of complete stock exchanges (long or efficient portfolios)
Are you looking to find common stocks portfolios that will outperform the market (according to the Chicago Quantum Net Score)? Want to find stocks expected to outperform the US equity market?
You select up to five US stock exchanges for us to analyze all of their common stocks. You can choose from NYSE, NYSE American, NASDAQ Global, Nasdaq Capital Markets, and NASDAQ Global Select exchanges.
We analyze all common stocks from the exchanges you select, usually after the markets close today, and we report our findings to you. The cost is $750, and it takes us up to 10 hours to run the analysis and write the report. We run the analysis using our new Dell server, our new iMacPro, we leverage our proprietary code and solvers (the platform), and possibly use the D-Wave Systems Quantum Annealer. Most of our clients pay for their analysis with their first trade.
If you pick all 5 exchanges, we analyze ~4,600 stocks before data validation and ~3,600 after. We select an interim portfolio of ~100 stocks (selected to create the least efficient portfolio we can find of ~100 stocks). Finally, we analyze those ~100 stocks to find the best, most efficient 'long' portfolios we can.
Recently we picked multiple 4-stock portfolios, plus a 13 and a 17 stock portfolio which when held together in an equally weighted portfolio, are expected to outperform the benchmarks (SPY & QQQ). Sometimes we pick smaller portfolios, depending on how the market is doing (the model picks them...we just report them). The holding of stocks together is what creates the value, as these stocks offset each other's risk, while maintaining the expected returns.
Once you place your order, please enter this information during checkout or email us:
- Your name, email address and phone number
- Your special requests, instructions, or actionable objectives
- How to deliver your electronic report (we typically email a .PDF file). We can send your report via the US Mail if you prefer.
Please email these to research@quantum-usaci.com. Jeffrey will handle your order.
We start work once we receive your email (or your provide this information through checkout), and our payment processor confirms payment (usually within minutes).
We draft each report individually based on output from the multiple runs we perform, and our insights and experience from doing this. The programs themselves take between 4 and 10 hours to complete if you select the maximum number of exchanges (all 5).
What we do:
We run our analysis by selecting the most efficient (or best) portfolio(s) based on our Chicago Quantum Net Score (CQNS), based on the prior 1-year of adjusted close prices of all the common stocks that pass data validation. We then return you a .PDF report via email (or another way if you prefer) and return it within 24 hours, and possibly much faster. So far, we have 100% success in delivering our reports before markets open the next day.
We are putting together a sample report. In the meantime: your report will include the five 'best' stock portfolios that we found, along with the interim portfolio of what we affectionately call 'allstars' (opposite of 'dogstars). This gives you ~100 stocks to research and take action on, after you do your due diligence of course.
What usually happens? These stocks are a mix of high and low risk stocks that work well together. Their prices individually may move erratically, but that is compensated by a higher expected return. These stocks tend to risk over the next few days after we run our report, as these are the stocks that provide higher expected returns relative to risk. Please do your due diligence and understand the story behind these stocks. Why are the stock prices so stable?
When we first started running this analysis for clients, the market in oil and gas stocks was flat because commodity prices were low. We selected a large number of stocks in that sector before they started to rise. With each run, we see both sector rotation, and stocks that have made their move start to be scored differently. Recently, MARA has been in our allstar portfolio. It is a crypto-currency based miner which ran up fiercely in the past, but lately has been very flat. The model says to hold this stock with others that move differently.
We do provide some other screens on the stocks, depending on your level of interest. We can report out the highest paying dividend stocks in the market, or the stocks with the highest, lowest or negative BETA. We can let you know which stocks have HUGE volume spikes for one or a few days, then settled down again. We can also track stock splits and large one-day price moves. Each of these screens picks a few stocks that can be analyzed for action.
We also provide a short analysis of the skewness, kurtosis and variance of the stocks that passed data validation. This is helpful for options traders.
Typically, we wait to pull the data until the trading day is over, which ensures you have a clean set of price data. However, we can use today's intraday price data upon request.
We only review US-listed stocks in this service. Foreign stocks will be a custom request, so please email us.
What you should expect from the results:
This algorithm gives you the portfolio with the highest amount of desired characteristics (lower risk relative to higher expected returns) in the past year. We expect those patterns to continue into the near future (average of 25 days).
In our client runs, which have been going on for about a year, we generally see upward movement in the stocks selected, but the system is not perfect. Stocks can and do fall, even when picked by the Chicago Quantum Net Score. However, a trading model to use in upward markets is to 'swing trade' these results to capture short-term volatility and upward movements.
The value proposition:
We created pre-packaged solutions that allow us to continue investing (heavily) into a set of methods, tools, algorithms and our platform, so that we can better serve our clients in a repeatable manner. It is likely we are running this type of analysis often, so you get the benefit of our experience and growing expertise.
The alternative is to pay on an hourly basis for a custom analysis, including the time for costing, testing and operations. This makes sense for clients that want to 'own' the analysis and have a very specific idea in mind of how they want to select stock portfolios. We welcome this business, and have a service on our website for weekly consulting work (for a fixed weekly fee).
This algorithm is free from emotion, and provides a fact-base around the stock market and stocks that you may find valuable to trade to a plan.
Finally, this is a proprietary algorithm (we published early versions of the algorithm to select efficient portfolios). We have also spent ~$10,000 on technology infrastructure and almost 18 months into the codebase. With our service, and expertise, we can help you achieve these results quickly and cost effectively.
Explanations:
Please see our webpage "Stock Market Links & FAQs" for details.
Disclosure
We think investors need to do their own due diligence on the companies and ensure they understand the risks associated with investing. Our model looks at the adjusted closing prices and the patterns between stocks held in that data.
Note: The algorithm and methods used are subject to frequent change and development. Do not rely on this service for your investment decisions and do your own due diligence and research into companies. This is not investment advice. We are not investment advisors. Investments can and do lose money.
Finally, if you prefer, please reach out to us at research@quantum-usaci and we can arrange a bulk order and typical business invoicing. This way nobody pays the 3% fee, and we can arrange runs on a fixed weekly schedule.
Thank you for your order and your business. We expect you will learn a great deal in the process.
Thank you for your order and your business.
Consultation: Discussion of your stock analysis - deeper dive into CQNS & selections (30 minutes)
You and I will have a discussion of the stocks that were picked in your run, a deeper dive into the Chicago Quantum Net Score algorithm, methodology, and results. We will also help you understand the valuations of the firms selected and special (if any) considerations with how the stocks traded over the past year.
You may arrange this for after their stock market analysis to better understand the results and discuss implications and actions.
Time permitting, I will build you a spreadsheet valuation of your chosen stock based on public filings (including debt). This will help you get a feel for 'the multiples' your stock, or stocks, are valued at by the market.
Discussion to be scheduled and conducted as soon as practical, and can be within 1 hour if necessary.
A typical, repeat client spend 3-4 hours a week on the phone with me, Jeffrey Cohen, President, Chicago Quantum, over a period of time to build rapport and common understanding of key stocks under analysis, and action.
After payment, please text Jeffrey Cohen at +1.312.515.7333 or email him at jeffrey@quantum-usaci.com to schedule your consultation.
One-time stock analysis of your list of up to 100 stocks (short or inefficient portfolios)
Do you want to find the 'worst' or most inefficient stocks in your list? You enter up to 100 stock tickers and up to 10 backup tickers. We run our analysis, select the worst portfolio(s) based on our CQNS algorithm, and email you a .PDF report. You may have other options and comment boxes to complete during checkout, and you may request report delivery in other ways.
Once you place your order, please email us your information:
- Your name
- Your email address(es)
- Your phone (optional, in case we need to reach you)
- Your US stock tickers (up to 100) and up to 10 backup tickers.
- Any special requests
Please email these to jeffrey@quantum-usaci.com and research@quantum-usaci.com
Your payment confirmation comes from the payment processor.
What we do:
We run our analysis, select the worst portfolio(s) based on our CQNS algorithm, and return you a .PDF report via email (or another way if you prefer). We return it within 24 hours...possibly much faster.
The report will list the stocks you provided, results of data validation, and the worst portfolio(s) we find. If our solvers do not converge on one 'worst' portfolio, we will provide you the bottom 3 portfolios they find. We provide you any insights from the run (e.g., was it easy to find a 'worst' portfolio).
We wait until the trading day is over, but can use today's intraday price data if you ask.
If you provide non-US listed stocks, we will include if the data is available via Yahoo Finance.
What you should expect from the results:
This algorithm gives you the portfolio with the least amount of desired characteristics (lower risk & higher return) in the past year. In fact, it gives the highest risk and lowest expected return combination.
We view this as a short or put option strategy for up to 25 days. This is a new capability, and it seems to work for the first week of the call. We are not sure how long the effects will last, since stocks tend to take the stairs when they rise, but take the elevator when they fall. In our first client case, the three stocks picked reacted significantly in the first 3 days. This could be a 'swing traded' to capture short-term volatility.
The model, as designed now, tends to pick one or two stocks. There is no benefit to diversification, this analysis picks the 'dogstars' and the worst performers we can find using a revision of the Chicago Quantum Net Score. The larger portfolios do not score as badly, as diversification helps with high risk, low expected return positions.
If the BETA values selected are higher than market average, then the stocks may move more quickly than the market. If the risk is higher for those stocks, and the BETA is higher, then we may see investors selling those stocks in the short-term.
The value proposition:
You can ask us to provide you a service that is based on extensive model building, market research, computational intensity and creativity, and now, trading experience. It is independent of feelings and emotions and is based on market data and a unique quantum algorithm.
This is a proprietary algorithm adjustment (we published the algorithm to select allstar, efficient portfolios). However, you can experiment to re-create this logic and build the data analytics capability to do a similar exercise (e.g., using the Sharpe Ratio). However, it would take significant time to learn and master. Mistakes are hard to discover and the data can be tricky to download and validate. Also, this is computationally difficult. With our service, and expertise, we can help you achieve these results quickly and cost effectively.
Explanations:
Please see our webpage "Stock Market Links & FAQs" for details on the financial markets and the computational solvers we use.
Disclosure
We think investors need to do their own due diligence on the companies and ensure they understand the risks associated with investing. Our model looks at the adjusted closing prices and the patterns between stocks held in that data.
Note: The algorithm and methods used are subject to frequent change and development. Do not rely on this service for your investment decisions, and do your due diligence. This is not investment advice. We are not investment advisors.
Thank you for your order and your business.
One-time stock analysis of complete stock exchanges (long or efficient portfolios)
Are you looking to find the worst stocks and portfolios (according to the Chicago Quantum Net Score)? Want to find stocks expected to underperform the US equity market?
You select up to five US stock exchanges for us to analyze all of their common stocks. You can choose from NYSE, NYSE American, NASDAQ Global, Nasdaq Capital Markets, and NASDAQ Global Select exchanges.
This service analyzes all common stocks from the exchanges you select, usually after the markets close today, and we report our findings to you. The cost is $750, and it takes us up to 10 hours to run the analysis and write the report! You get the benefit of our new Dell server, possibly the D-Wave Systems Quantum Annealer, and our proprietary code and solver platform, and D-Wave Systems classical solvers. It is a bargain price as we grow our business.
If you pick all 5 exchanges, we analyze ~4,600 stocks before data validation and ~3,600 after. We select an interim portfolio of ~100 stocks (selected to create the least efficient portfolio we can find of ~100 stocks). Finally, we analyze those ~100 stocks to find the worst portfolios. Usually, there are 1 to 3 stocks selected, and a list of individual stocks to avoid, or bet against. Why, because diversification makes bad stocks better...so these are very small portfolios.
Once you place your order, please enter this information during checkout or email us:
- Your name, email address and phone number
- Your special requests, instructions, or actionable objectives
- How to deliver your electronic report (we typically email a .PDF file). We can send your report via the US Mail if you prefer.
Please email these to research@quantum-usaci.com. Jeffrey will handle your order.
We start work once we receive your email (or your provide this information through checkout), and our payment processor confirms payment (usually within minutes).
We draft each report individually based on output from the multiple runs we perform, and our insights and experience from doing this. The programs themselves take between 4 and 10 hours to complete if you select the maximum number of exchanges (all 5). Fewer exchanges go faster, but it is up to you.
What we do:
We run our analysis by selecting the most inefficient (or worst) portfolio(s) based on our Chicago Quantum Net Score (CQNS), based on the prior 1-year of adjusted close prices of all the common stocks that pass data validation. We then return you a .PDF report via email (or another way if you prefer) and return it within 24 hours...possibly much faster. So far, we have 100% success in delivering our reports before markets open the next day.
We are putting together a sample report. In the meantime: your report will include the five 'worst' stock portfolios that we found, along with the interim portfolio of what we affectionately call 'dogstars' (opposite of 'allstars). This gives you ~100 stocks to research and take action on, after you do your due diligence of course.
What usually happens? These stocks are very risky. Their prices move erratically compared to their expected returns. So, we find that these stocks fall, and can fall fast when markets are weak. These stocks, however, can run up when markets are strong. So, do your due diligence and understand the story behind these stocks.
When we first started running this analysis for clients, we selected a stock that was 3 months away from a bankruptcy filing. They did file for BK. Other stocks are MEME stocks that have been run up and down. Finally, others are in the healthcare space and have seem dramatic rises and falls based on news, or anomalous trading activity. Finally, some make no sense at all why they are trading at current levels (seem too high), and are just fun to watch or ride down.
list the stocks that passed data validation and were analyzed, along with the most inefficient (or worst) portfolio(s) we found according to our Chicago Quantum Net Score. If our solvers do not converge on one 'worst' portfolio, we will provide you the bottom 3 portfolios found. We provide you any additional insights from the run.
We also provide a short analysis of the skewness, kurtosis and variance of the stocks that passed data validation.
We wait to pull the data until the trading day is over, which ensures you have a clean set of price data. However, we can use today's intraday price data upon request.
If you provide non-US listed stocks, we will include if the data is available.
What you should expect from the results:
This algorithm gives you the portfolio with the lowest amount of desired characteristics (higher risk & lower expected return) in the past year. We expect those patterns to continue into the near future (average of 25 days).
In our first client run, the declines have been significant (in a declining market) in the first few days. You can likely 'swing trade' these results to capture short-term volatility.
We see a smaller number of stocks picked (one or two) in a portfolio, because diversification helps these 'dogstar' stocks. We will provide the interim portfolio of 100 stocks, and the final portfolios selected by the top solvers / methods. It is likely you may find a few 'dogstar' stocks from this analysis to take action on.
Why does this happen? If we can find stocks with low BETA values and high variance, then these stocks do not move up with the market as much as others...and the higher variance means you likely will carry more risk for that expected return.
The value proposition:
We created pre-packaged solutions that allow us to continue investing (heavily) into a set of methods, tools, algorithms and our platform, so that we can better serve our clients in a repeatable manner. It is likely we are running this type of analysis often, so you get the benefit of our experience and growing expertise.
The alternative is to pay on an hourly basis for a custom analysis, including the time for costing, testing and operations. This makes sense for clients that want to 'own' the analysis and have a very specific idea in mind of how they want to select stock portfolios. We welcome this business, and have a service on our website for weekly consulting work (for a fixed weekly fee).
This algorithm is free from emotion, and provides a fact-base around the stock market and stocks that you may find valuable to trade to a plan.
Finally, this is a proprietary algorithm (we published early versions of the algorithm to select efficient portfolios). We have also spent ~$10,000 on technology infrastructure and almost 18 months into the codebase. With our service, and expertise, we can help you achieve these results quickly and cost effectively.
Explanations:
Please see our webpage "Stock Market Links & FAQs" for details.
Disclosure
We think investors need to do their own due diligence on the companies and ensure they understand the risks associated with investing. Our model looks at the adjusted closing prices and the patterns between stocks held in that data.
Note: The algorithm and methods used are subject to frequent change and development. Do not rely on this service for your investment decisions and do your own due diligence and research into companies. This is not investment advice. We are not investment advisors. Investments can and do lose money.
Finally, if you prefer, please reach out to us at research@quantum-usaci and we can arrange a bulk order and typical business invoicing. This way nobody pays the 3% fee, and we can arrange runs on a fixed weekly schedule.
Thank you for your order and your business. We expect you will learn a great deal in the process.