Signum Strategies: Octane

Exegy’s Signum line continues to expand and provide value: Now, Signum data scientists have created a trading strategy we call Octane that outperforms the S&P 500 ETF (SPY). We now offer an Octane whitepaper that explains how it works

The strategy uses end-of-day summaries of Liquidity Lamp data to correctly predict the direction of the next day’s SPY. It offers a return that is 1.9x that of the benchmark, with 2.5x less drawdown. Our Octane whitepaper provides the data to back up those numbers.

Octane’s origin story

First Exegy offered our Liquidity Lamp signal, which accurately identifies reserve or “iceberg” orders in real time, pointing users to pools of liquidity that can assist in best execution.

Then, our data team began analyzing the end-of-day summaries of Liquidity Lamp data and applied machine learning to the dataset to develop alpha-generating strategies.

The Octane strategy trades at the daily open, taking either a 100% long or short position relative to the SPY. It only trades when the long/short position flips, which enables users to capture rising and falling momentum.

We tested the model on historical data from October 2019 to April 2021 and it held up, delivering a profit value of $1.40 vs. the S&P 500’s $1.19. The results are in our Octane whitepaper.

Achieving the perfect blend

In the whitepaper, we compare it to a previous Signum alpha cloning strategy, a more defensive approach that we now call Diesel. We also show how firms can blend the two strategies, depending on their priorities. 

For example, we show how a 59%/41% Octane/Diesel blend maintains Diesel’s defensive edge while still delivering nearly 4x the returns of the earlier strategy (and outpacing the SPY, 49% to 34%).

Intrigued? Want to see more? It’s all in our Octane whitepaper. Simply fill out this form and a member of our team will send it to you.