Financial Analysis - Build a ChatGPT Pairs Trading Bot - Extending the Position

The lecture discusses the concept of extending trading signals, particularly when using Bollinger Bands. It explains why signals are often zero due to the asset position being between the bands. The instructor highlights the importance of extending short and long signals to capture more profit from mean-reverting signals. The lecture also covers the coding approach to implement this extension using the pandas library, specifically using the F fill function to handle missing values.

Why does the cumulative return appear as horizontal lines most of the time?

• Because the trading signal is always negative.

• Because the market is always bullish.

• Because the trading signal is zero when the spread is between the Bollinger Bands.

• Because the asset position is always positive.

What happens when the spread is between the Bollinger Bands?

• The trading signal is negative.

• The trading signal is positive.

• The trading signal is undefined.

• The trading signal is zero.

What is the main reason for extending the short and long signals?

• To make the signals more complex.

• To capture more profit from mean-reverting signals.

• To increase the number of trades.

• To reduce the risk of trading.

Why is it important to extend the long signal?

• To make the trading strategy more complex.

• To avoid losses during price increases.

• To reduce the number of trades.

• To profit from the entire upward price movement.

What is the purpose of using the forward fill method in pandas?

• To fill missing values with zeros.

• To fill missing values with the previous number.

• To replace zeros with ones.

• To delete all missing values.

What is the first step in the technical approach to extending signals?

• Apply the forward fill directly.

• Delete all zeros.

• Replace zeros with NA values.

• Replace NA values with zeros.

What does the forward fill function do?

• It deletes all NA values.

• It fills NA values with the previous number.

• It fills NA values with the next number.

• It fills zeros with ones.