Has anyone created a strategy that uses a statistic measuring the difference of bid and ask? I want to develop a mean reverting strategy that would use this. I believe when the bid ask spread expands the market is experiencing and increase in volatility. The strategy I am thinking of would use a option straddle or strangle to protect against large moves up and down and then implement at strategy in BookTrader to buy lower lows and sell higher highs in a tight range. In trend less time periods this works quite well. For example, after hours ES is mostly trend less, and one can make some money buying lower lows and selling higher highs. High volume trend less days are also quite profitable. On potentially high volatility time periods, earnings and Fed announcements, use option straddles/straggles no need for an ATS, on trend less days use and ATS for mean reversion trading about 100 buy sell cycles a day. Has anyone considered this? Your thoughts?
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