Fintech: Best Time to Buy and Sell Stock with Transaction Fee

• Find the best time to buy and sell stock with transaction fee using Dynamic Programming, implementation in Python.

Algorithm

• Use Dynamic Programming to compute to optimal action sequence along a give price vector.
• DP records the following at each time t:
  • optimal value of money, and
  • optimal value of stock, and
  • the previous action that lead to this optimal value
• DP initialization:
  • money = original capital, and
  • stock = buy stock with original capital
• DP recursion:
  • calculate optimal money:
    • money = hold yesterday's money, or
    • money = sell all your stocks today
  • calculate optimal stock:
    • stock = hold yesterday's stock, or
    • stock = buy stock today with all your money
• DP trace back:
  • You must sell on the last day to maximize profit
  • trace the previous action that lead to this optimal value
• Action smoothing:
  • if previous action is the same as the current action, then the action choosen is "hold".

Result

• Testing on the SPY dataset, return rate is: 212.88675299365727

Usage:

• Use default:

python3 optimal_stock_action.py

• Run with customized dataset and transaction fee value:

python3 optimal_stock_action.py ./data.csv 0.01