4 Comments
 

Index event - same general principles as a regular event strategy but applying it to index rebalancing, additions, etc. For example, if you knew x security might be added to an index, you might try and act as a liquidity provider and take advantage of the upward drift in price. Have also seen some strategies that use pretty advanced signaling/network engineering off of option trades.

 

Isn’t index rebalancing public knowledge? What’s the edge here? Sounds interesting.

 

Some of the shops with crazy quant firepower will try and predict what the specific rebalances/additions will be ahead of the news, especially since each index has a defined "rulebook" regarding their rebalancing methodologies. For example, I would not be surprised at all if some strategies longed GameStop in anticipation of the retail frenzy pushing it up into a midcap index (which eventually happened). 

 

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