A Professional Quant Based Portfolio Trading Strategy
Exploding Stars is a strategy that shorts Russell 3000 stocks only during bear markets. The strategy looks for extremely over-bought stocks, and exits quickly after sharp moves down. The strategy is designed to take advantage of quick moves after bear market rallies. This strategy is uncorrelated with the S&P500 and long strategies.
Is consistently profitable during bear markets
Multiple portfolio based strategies to choose from
Trades Russell 3000 stocks only
Short trades only
Developed by professional quant based researchers
Trades take about five to ten minutes per day to enter
Results live from June 2022
In a bear market, there’s no where to hide. The market is volatile, and markets are often unpredictable and move quickly, and eventually the bear gets to every sector. Shorting stocks is one of the hardest things to do in markets. Cesar and I created a short strategy many years ago that still holds up today while the markets are under the 200 day moving average, and in bear market territory.
It’s not often we get to trade this strategy because the market must be in a bear. But, while the market is in a bear, this strategy is a money printing press. It essentially enters the most volatile stocks in to bear market rallies, and then waits for the greed to dissipate, and the bear to take over.
Roughly 80% of the trades are winners, and the winners tend to be big.
These edges are amazing and have held up for more than 20 years. I love this strategy because it’s completely uncorrelated with the S&P 500.
During Bear Markets, this is the strategy I move most of my money to.
It’s hard to know where and when to enter shorts. Cesar has found a small trick for this, that we have not seen any other trader using.
Testing period is from January 1, 2007 to September 30, 2024 and metrics are updated after the end of each quarter. You will have access to all entry & exit signals since then.
Live trading signals have been published on the site since June 2022.
Portfolio 1 – Antares
Easier to get into trades with higher returns, but fewer overall winners.
Portfolio Statistics
9.0% Compounded Annual Returns
3.9% Exposure
0.68 Sharpe Ratio
Top three drawdowns(-24.5, -15.8, -11.8)
-57.7% Worst 3 month return
-50.1% Worst 12 month return
+50% Best 3 month return
+68% Best 12 month return
-0.25 correlation with the S&P500 index
Trades Statistics
439 Trades with 74.0% winners
8.3% Average % profit on winning trades
-12.1% Average % loss on losing trades
-57.7% Worst trade
58.4% Best trade
4.3 average trading days held
Maximum of 8 positions
12.5% of portfolio per position
42% trades exit by profit target
Equity Curve since 2007
Monthly Returns
I have over a decade of quant trading experience and am the Chief Investment Officer for a quant-based advisory firm. I’ve known Cesar for 8 years and he is my first and foremost “go-to” resource for financial markets research, quantified strategy development, and coding. Unlike some theoretical “quants,” Cesar is also a trader. He understands the markets and the real-world limitations of broker order offerings, liquidity, and order placement. Rob Davenport, LCA Capital, LLC
Portfolio 2 – Betelgeuse
Lower returns but with more winning trades.
Portfolio Statistics
8.1% Compounded Annual Returns
2.9% Exposure
0.69 Sharpe Ratio
Top three drawdowns(-24.3, -10.4, -8.5)
-47.9% Worst 3 month return
-6.2% Worst 12 month return
+40% Best 3 month return
+63% Best 12 month return
-0.21 correlation with the S&P500 index
Trades Statistics
301 Trades with 79.1% winners
8.8% Average % profit on winning trades
-14.1% Average % loss on losing trades
-50.1% Worst trade
50.3% Best trade
4.6 average trading days held
Maximum of 8 positions
12.5% of portfolio per position
63% trades exit by profit target
Equity Curve since 2007
Monthly Returns
There’s no way I’d be professionally managing money today were it not for the professional advice and help of Cesar Alvarez. I’ve yet to meet a trader/researcher with such a superb understanding of the markets; as well as the dangerous trapdoors that await if you decide to develop your own quant system. Mark Angil, Architect of Midway II, 1st Place Winner of BattleFin’s Sharpe Ratio Shootout International Quant Finance Tournament 4.0 (Pro Division)
Portfolio 3 – AntaresNB
Easier to get into trades with higher returns, but fewer overall winners. This variation does not take trades in Biotechnology or Pharmaceutical stocks.
Portfolio Statistics
8.3% Compounded Annual Returns
3.5% Exposure
0.75 Sharpe Ratio
Top three drawdowns(-22.8, -10.9, -10.2)
-10.5% Worst 3 month return
-5.7% Worst 12 month return
+37% Best 3 month return
+64% Best 12 month return
-0.25 correlation with the S&P500 index
Trades Statistics
392 Trades with 75.3% winners
8.1% Average % profit on winning trades
-11.9% Average % loss on losing trades
-57.7% Worst trade
43.5% Best trade
4.3 average trading days held
Maximum of 8 positions
12.5% of portfolio per position
41% trades exit by profit target
Equity Curve since 2007
Monthly Returns
I have been corresponding with Cesar and following his work for several years. His research is first rate and his reports are clear and unambiguous. He is an expert trading system developer and programmer. Most importantly, he has discovered profitable and persistent patterns, and developed profitable and practical trading systems around them. Dr. Howard Bandy Recognized Quant Author
Portfolio 3 – BetelgeuseNB
Lower returns but with more winning trades. This variation does not take trades in Biotechnology or Pharmaceutical stocks.
Portfolio Statistics
7.3% Compounded Annual Returns
2.5% Exposure
0.68 Sharpe Ratio
Top three drawdowns(-24.0, -8.5, -7.1)
-15.2% Worst 3 month return
-9.6% Worst 12 month return
+34% Best 3 month return
+58% Best 12 month return
-0.18 correlation with the S&P500 index
Trades Statistics
265 Trades with 80.0% winners
8.6% Average % profit on winning trades
-13.9% Average % loss on losing trades
-47.9% Worst trade
43.5% Best trade
4.6 average trading days held
Maximum of 8 positions
12.5% of portfolio per position
63% trades exit by profit target
Equity Curve since 2007
Monthly Returns
Exploding Stars portfolios have almost equaled the market return with less than 10% exposure.
Start your free one week trial
During your trial you will have access to all previous trades and commentary. Cesar or Steve are available to answer your questions.
Cesar is well known in the quant community from his trading blog, Alvarez Quant Trading, where he shares his trading insights and research. He also consults with traders to test their trading ideas and help them improve their current strategies. From 2004 to 2013, Cesar was the Director of Trading Strategies at TradingMarkets.com and Connors Research. Cesar has also developed many strategies for private equity funds, is the author of multiple books on trading, and — in a former life — was a Software Engineer on the early versions of Microsoft Excel. After so many years developing well over 100 different methodologies, Cesar, like many true masters of his profession, has come back to the point of ultimate simplicity and efficiency as the best sustainable approach to active trading.
Steven Gabriel
Steven has an extensive history trading equities, options, futures, and volatility. For the past 13 years he has been a quant-based trader, working alongside Cesar on research for 100’s of different ideas, concepts, strategies, and systems. Steve is also an Emergency Room physician. But he only practices medicine half-time now, because his success in trading financial markets.
