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Trading one ETF - contest rules question

I am just starting off writing an algorithm. I have a question with respect to contest rules. If I trade just one ETF SPY and my strategy is to get in and out of that ETF will my algorithm be filtered out for not meeting contest rules?

I read in the rules that we need to be hedged (have both long and short positions at all times), If I just go long on SPY at some point (one position in the portfolio) then would I be breaking that hedging rule?

Are there any rules about number of symbols you need to trade? On the one hand I could draw up a list of 20-30 securities from S&P 500 and trade those securities instead of SPY but isn't trading SPY ETF similar to trading a basket of 500 stocks that it represents, so I would be more diversified in theory trading ETF SPY than a bunch of securities that comprise S&P500. Could someone with knowledge of the contest rules please explain whether my algo will get filtered for not meeting some contest rule.

1 response

Hello Leo,

If you're only trading in one name, you definitely won't be hedged, and you won't be able to win the contest. More importantly, you also won't get an allocation, and that's where the rewards get more significant.

I wrote a longer answer to a very similar question last week. I hope that helps explain what we're looking for in the contest and in allocations.



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