Team Members:
This project focuses on a volatility arbitrage and hedging strategy involving Walmart (WMT) and Dollar General (DG). The team implemented a pairs trading strategy that consists of a short straddle on Dollar General to profit from expected decreased implied volatility after their December 5th earnings report, while hedging potential losses with a long call position on Walmart. Using a Random Forest Regressor model, they analyzed options premiums and set specific price boundaries ($81.11 strike price with $85.03 upper bound and $75.99 lower bound). Originally planning to hedge with Kroger, they switched to Walmart due to Kroger's ongoing merger complications with Albertsons. The team used various tools including Yahoo Finance for data collection, Matplotlib for visualization, and Google Colab for analysis, with their model showing a mean absolute error of around 0.36-0.39.