Pairs trade

A pairs trade is a type of stock market trade. It is a spread trade where one asset is shorted and another asset is bought. If the spread between the two assets changes, the trade is profitable or at a loss. This depends on the direction of the change. Pair trading was started by Gerry Bamberger and later led by Nunzio Tartaglia's quantitative group at Morgan Stanley in the 1980s.

Examples

• A Debit/Credit Spread, short-selling a put/call, whilst buying an option of the same type.
• A stock pairs trade that short sells Mastercard shares while buying Visa shares.