Plutus & Enyalius Systems Architecture (“PESA”) is the firm dedicated to perpetually driving and creating the ever-evolving engine that is the core of what Aegis Bastion International Holdings aims to deliver across all pillars of its ecosystem operations and functions. PESA’s specific duty to ABIH is the engineering of systems and models that are implemented and executed across operational lines in financial markets. PESA is a quantitative investment management firm operating in global financial markets, dedicated to producing exceptional returns for its internal engine of operation by strictly adhering to mathematical and statistical methods.
PESA’s unique success is the direct result of a unique way of being. By having the deepest possible understanding of the global economy and financial markets and translating that understanding into excellent portfolios and strategic tools at which to execute. Relentlessly inquisitive and innovative by nature, our executive team brings together over a decade of industry experience, providing expert mobility for ABIH, and long-term value for the ecosystem as a whole. PESA employs engineering systems to understand the world. With a philosophy that the world can be understood. PESA strives to build a fundamental, cause-and-effect understanding of markets and management. Technology is crucial to advancing ABIH’s mission. PESA technologists collaborate with ABIH researchers and managers to design, engineer, and run platforms that enable systemization and scale in omnipotent operations. The goal being to hedge risks associated with other aspects of the business that are more speculative in their nature.
PESA specifically builds and operates systems with properties that increase the capability to thrive as a result of stressors, shocks, volatility, noise, mistakes, faults, attacks, or failures. PESA insists that building antifragile models is superior way of system design rather than resiliency (ability to recover from failure, and robustness (ability to resist failure). PESA applies the concept of antifragility to risk analysis and operational endeavors as well as the general framework of the balance sheet.
SYSTEM DESIGN GUIDELINES
PESA adheres to a strict stet of principles and guidelines in which all systems are designed from such as:
- Have an idea – PESA systems are based on sound premises based on experience or observation of price movements.
- State your idea simply – PESA maintains that the most obvious and easiest understood idea usually will be the easiest to solve, simpler almost always beats complex in systems design.
- Make no assumptions – PESA thoroughly tests and verifies every example in the portfolio.
- Tackle key elements first – PESA develops key rules for system optimization first, and then make sure they are understood as to how they contribute to the ecosystem as a whole.
- Watch for errors of omission – Quality control a highly important step to make sure huge amounts of time and resources are not wasted on forgetting things like slippage and commissions.
- Question too good to be true – PESA weeds out exceptions from random results as just that and will more than likely fail in rigorous testing.
- Take nothing for granted – PESA does not use anything that it cannot verify. A check everything, leave no stone unturned attitude runs through the entire operation.
- Keep it simple – Strip everything away until you are left only with the essential parts. This guideline alone saves PESA hours of unnecessary effort.
PESA understands that designing a system can be incredibly complex, with many moving parts. The primary focus of design lies in the following aspects:
TESTING & MORE TESTING
Back-testing is of paramount importance to PESA automated systems design. The purpose of any testing is to provide a level of confidence in your strategy as it is applied to a wide range of initial and future conditions. PESA determines just how robust strategies are by testing across a diverse range of situations.
PESA maintains that risk management is complex and needs to be considered from multiple different aspects of a system. The market being traded with determine by itself the specific nature of the strategy that is employed.
RISK & VOLITILITY
The standard with which all risk is reassured by is with the standard deviation of returns, also known as volatility.
RETURNS & RATE OF RETURN
Volatility has a direct correlation to returns and will ultimately determine the expectations that PESA has with each system design.
PESA understands that every system has drawdowns, no matter how smooth and optimized each equity curve looks. PESA attempts to understand and minimize the frequency and dept of drawdowns which can lead to the reduction of capital after a series of losing trades.
Probability can only be measured not predicted, it is the measure in terms of a percentage, that something will happen or occur. PESA utilizes two laws of probability that are utilized in analysis and design of automated systems.
- Law of addition – The probability of selecting something, is the sum of individual probabilities that could occur.
- Law of multiplication – The probability of two occurrences happening in succession is the multiplication of the two individual probabilities.
STEP 1: Development
STEP 2: Curation
- Low correlation
- Balanced risk
- Fixed dollar
- Fixed risk
- Volatility based
- Proportional to capital
STEP 3: Live Campaign
- Capital Allocation
- Start Date
- End Date
Option 1 - Return to curation
Option 2 - Decommission
STEP 4: Scale
- Goal Omnipresence
SYSTEM DEVELOPMENT LIFECYCLE
STEP 1: Develop Hypothesis
STEP 2: Model & Test Your Hypothesis
STEP 3: Evaluate/Pivot
STEP 4: Develop Rules
STEP 5: Robustness Check Back-test Against Multiple Markets/Assets
STEP 6: Test (Simulated) Against Live Market Data
STEP 7: Evaluate Go/NoGo
STEP 8: Sample with Real Money
STEP 9: Trade Full-sized
STEP 10: Evaluate
STEP 11: Reconfigure
STEP 12: Test Against Historic Data (relate back to STEP 6)
STEP 12: Modify/Scrap?
According to Kaizen philosophy change is the one constant that we can count on, so in PESA’s development process our trading accounts for that change, expect it and even embrace it. This is the continuous improvement process that PESA utilizes when developing systems.
PESA starts with an inital idea, something we believe has a good chance of exploiting some edge. The ideas, hypothesis, are found through extensive reserch, personal experiences, and even through other proven ideas.
WHERE ARE THE IDEAS?
PESA aims to look for pattersn in the markets, these can be fundamental data of individual companies, dynamics of certain markets, price action, bond currency relationships, economic reports and more. Once an idea is found PESA then must see if this is an exploitable pattern by building models and testing hypothesis.
BUILDING A MODEL
The purpose of any model is to explain and forcase how price changes and market status affect the hypothesis. PESA attempts to develop an intimate knowledge of the domains being traded in. PESA uses models that specify the relationship and set factors in advance then test the model over reams of data to verify the premise. PESA avoids adjusting the data to fit the primise by using regression analysis or curve fitting because those models are rareley effective on new data on a constant basis.
EVALUATE & PIVOT
Throughout the process it is often that the idea you end up with is not the original idea that you started with. PESA is not glued to any original premise if something happens to take a different direction. Falsifiability is inhereint in this philosophy of hypothesis testing at PESA.
Rules are immutable once they are in place. Creating rules is a process that requires PESA to have intimate knowledge of the models and how they behave under a wide range of situations. PESA rules genreally will include limits to the strategy, risk, and money mangement. PESA utilizes many well established rules based on technical patterns always searching for the edge.
CHECK FOR ROBUSTNESS
Automated strategies may have a particular niche at PESA, but systems are designed to work across different assets and markets in a consistent manner with a wide range of high beta stocks. This also emphaiszes the importance of backtesting to the PESA implementation model.
PESA's process of running the current strategy in question against historic data, generating startiscs that can be evaluated. PESA's goal here being to see how each strategy performas against various conditions. The range of conditions will vary depending upon the strategy, different stocks, asset classes, markets, economic conditions, anything pertinent to the strategy at hand.
SIMULATION BEFORE LIVE ACTION
PESA allows periods of time for the strategy to react to real world data before risking capital. This time yields valuable information in which directs PESA to fully move forward and implement the strategy live.
PESA utilizes the numerous advantages of autonomous trading such as:
The Ability to Back-test
Back-testing applies trading rules to historic market data to determine the viability of the strategy.
Eliminate Emotional Stress
Automated trading systems run on computers so they are not subject to the frailties of humans, making rash changes to a strategy in a moment of panic. Since trade orders are executed automatically once the trade rules have been met, traders will not be able to hesitate or question the trade in addition to curb overtrading.
There is no such thing as a trading plan that wins 100% of the time, losses are part of the risk. Automated trading systems allow PESA to achieve consistency by trading the plan.
Accurate Entries & Exits
PESA technology can respond immediately to changing market conditions, automated systems are able to generate orders as soon as trade criteria are met. This allows PESA to get in and out of trades seconds earlier and that can make all the difference in outcome. As soon as PESA technology enters a position, all other orders are automatically generated, including protective stop losses and profit targets.
PESA trading systems operate multiple accounts or implement various strategies at one time. This ensures that risk is spread across various instruments while creating a hedge against losing positions. PESA technology is able to scan for trading opportunities across a range of markets, generate orders and monitor trades all in milliseconds.
When thinking of the simplest ideas in strategy design PESA starts with overbought and oversold conditons. One technical analysis indicator of that would be the Relative Strength Index (RSI) or Stochastic. Overbought and oversold are a simple supply and demand strategy. Addtional filters are needed however for PESA to confirm these condtions.
PESA asserts that the best confirming indicators are one that a not directly correlated to the data. For example if your overbought-oversold indicator is based on price action then you could look to volume or volatility studies or even the price action of the related market index.
Timeframe, time of day, range of dates all can have profound effects on the returns PESA systems can make.
- Trend Following - Directional strategy
- Trend Reversal - Identifies pivot points and cyclical nature of securities.
- Volatility Studies - Wide range of trades including selling options premium, contango, and backwardation.
- Statistical Arbitrage - Market neutral, seeks profit from divergences in relationships between securities and markets followed by regression to the mean.
- Low Volume Strength - Generally speaking if volume is low and price is high then that means there is either no demand or no supply.
Volumetric Profile Analysis - Advanced charting studies that display trading activity over a specified time period at specified price levels.
- Point of Control (POC) - The price level for the time period with the highest traded volume.
- Profile High - The highest reached price level during the specified time period.
- Profile Low - The lowest reached price level during the specified time period.
- Value Area (VA) - The range of price levels in which a specified percentage of volume was traded.
- Value Area High (VAH) - The highest price level within the value area.
- Value Are Low (VAL) - The lowest price level with the value area.
- Linear Regression
Zero Days To Expiration (DTE) - Open & close trades on the last day of weekly options on e-mini S&P futures (/ES) three times a week, Monday, Wednesday, and Friday and between 7 -21 days till expiration.
- Support trades between SPY and SPX.
- Trade options on the /ES 23 hours a day, no overnight gaps, tax favorabilty, extreme liquidy, 23 hours a day etc.
- Put or Call credit spread, potential second leg, create iron condor and hold positiion into the close collecting the maximum amount of premium.