In this segment of Futures for Rookies, Pete and Katie define pairs trading and explain the benefits of incorporate this two-product strategy into a portfolio. From there, they drill down into how each asset class uses pairs trades, how we can begin to get a sense of expected move for each pair and how to look at pairs trades based on their notional value and implied volatility.
Finally, they present a list of common pairs trades in order to prepare for the next segment, which focuses on pairs trade entry and management.
Want context around movement in common pairs trades? Check out Motion in the Markets
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