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A web-reading bot made millions on the options market

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Re: A web-reading bot made millions on the options market

#71

Post by barrkel »

82xx wrote: post #64
downandout wrote: post #32

Earlier quoted context omitted.

The headline of that news was "Intel in Talks to Buy Altera". You are acting like it would be difficult to write software that would be able to figure out what that means. It's not. These headlines also seem to follow a very specific pattern [1]. So if WSJ has a headline that X is in talks to buy Y, that's pretty much that. Also you could eliminate most of your risk by placing a limit order based upon the last trade…

It would be easy to write software to parse that particular phrasing of that particular relationship ("Company X in Talks to Buy Company Y"), but to catch any arbitrary relationship between two entities in a given domain? That's no longer an easy problem. Not to mention that you'll need to represent that world knowledge coherently in ontologies / knowledge bases and write complex logic around it to make the data acti…

All you need is a positive correlation between an action taken on a weighted evaluation of a headline containing key words, and profit. You're overestimating the difficulty of the problem. It's model training; there's lots of historical data to tune on.

Re: A web-reading bot made millions on the options market

#72

Post by romanixromanix »

>>*Correction, April 21, 2015: This article originally >>misstated that a purchase of options on March 27 >>immediately followed a tweet by journalist Dana Mattioli. >>It occurred 19 seconds before the tweet and followed a >>newswire post by one second.

So the title of the whole article is totally misleading. It has nothing to do with Tweets & Twitter.

Maybe the same bot (script) has done dozens other trades (false positives) at a loss before.

Re: A web-reading bot made millions on the options market

#74

Post by gregschlom »

golergka wrote: post #65
onewaystreet wrote: post #37

Earlier quoted context omitted.

It's no longer insider trading if the information has been made public. There would be no advantage to doing this either. There are thousands of firms and individuals running keyword based trading bots. You would be competing with all of them.

It is insider trading, if you use the insider information to write a very simple tweet parsing rule instead of having to write a complicated AI algorithm to parse this information before any prior knowledge. Also, if I understood the article correctly, this trade involved to transactions: first, purchasing the options, and then, purchasing actual stock using those options. And (once again, correct me if I'm wrong), t…

> And (once again, correct me if I'm wrong), the options themselves were purchased before the information was made public

No, according to the article, the options were purchased one second after the information first became public in some news wire headline. The fact that it was also 19 second before a journalist's tweet was apparently irrelevant, since there was that headline before the tweet.

Re: A web-reading bot made millions on the options market

#75

Post by golergka »

gregschlom wrote: post #74
golergka wrote: post #65

Earlier quoted context omitted.

It is insider trading, if you use the insider information to write a very simple tweet parsing rule instead of having to write a complicated AI algorithm to parse this information before any prior knowledge. Also, if I understood the article correctly, this trade involved to transactions: first, purchasing the options, and then, purchasing actual stock using those options. And (once again, correct me if I'm wrong), t…

> And (once again, correct me if I'm wrong), the options themselves were purchased before the information was made public No, according to the article, the options were purchased one second after the information first became public in some news wire headline. The fact that it was also 19 second before a journalist's tweet was apparently irrelevant, since there was that headline before the tweet.

I must have misunderstood. Thanks for correction!

Re: A web-reading bot made millions on the options market

#76

Post by liquidcool »

onewaystreet wrote: post #37
Turbo_hedgehog wrote: post #9

My bet is insider trading with someone writing a simple bot to make the trade once they see the trigger words made public.

It's no longer insider trading if the information has been made public. There would be no advantage to doing this either. There are thousands of firms and individuals running keyword based trading bots. You would be competing with all of them.

You may be much better educated than I on insider trading, but as I understand it courts have ruled that insiders have to wait a reasonable amount of time for the public to absorb that information. "Reasonable amount" seems to have changed over the years (first read about it in Business Adventures, Buffet and Gates' favorite biz book), but I note that most trading firms today state you must wait until the 3rd business day to act on that information.

Another issue is whether you know this is fact, but the public only knows it as rumor.

Of course, you'll want to consult a lawyer about all this.

Re: A web-reading bot made millions on the options market

#77

Post by IkmoIkmo »

ddeck wrote: post #16
downandout wrote: post #12

"The trade occurred 19 seconds before the tweet, and one second after a headline appeared on the Dow Jones Newswire." I don't understand the mystery here. It would be trivial to write a bot that could interpret a headline and make a trade on it in under a second, and that's without any special high-speed links. With API documentation for a brokerage house, I could write such a bot in probably half a day. Given the as…

Agreed. I don't really understand the surprise in article and wince at the "My friend reckons....." style. This is indeed occurring on a daily basis. A number of funds trade automatically based on fully automated analysis of the news wire and other sources. I believe most use in house analytics but there are 3rd party solutions: http://www.ravenpack.com/ I think people outside the industry don't appreciate the depth…

Yeah you remember a few weeks ago the Tesla stock moved $2 when Tesla announced its april fools new product? That was completely automated.

It may not even have had to discern a new product announcement or launch. It may have just looked at twitter volume mentioning Tesla which doubled that day, and did sentiment analysis (much easier, which showed the communication that day was very positive), and purchased a bit of stock based on that. Who knows.

Re: A web-reading bot made millions on the options market

#78

Post by philjohn »

82xx wrote: post #64
downandout wrote: post #32

Earlier quoted context omitted.

The headline of that news was "Intel in Talks to Buy Altera". You are acting like it would be difficult to write software that would be able to figure out what that means. It's not. These headlines also seem to follow a very specific pattern [1]. So if WSJ has a headline that X is in talks to buy Y, that's pretty much that. Also you could eliminate most of your risk by placing a limit order based upon the last trade…

It would be easy to write software to parse that particular phrasing of that particular relationship ("Company X in Talks to Buy Company Y"), but to catch any arbitrary relationship between two entities in a given domain? That's no longer an easy problem. Not to mention that you'll need to represent that world knowledge coherently in ontologies / knowledge bases and write complex logic around it to make the data acti…

Sentiment analysis has plenty of research around it, and once you've got a big enough training and validation set, it can give very good results. My old boss works for a company that runs sentiment analysis on comments made about companies to automatically highlight positive/negative messages - it's not a massive leap from there to repurpose that to analyse positive or negative news reports about a company.

Re: A web-reading bot made millions on the options market

#79

Post by IkmoIkmo »

x0054 wrote: post #41
downandout wrote: post #12

"The trade occurred 19 seconds before the tweet, and one second after a headline appeared on the Dow Jones Newswire." I don't understand the mystery here. It would be trivial to write a bot that could interpret a headline and make a trade on it in under a second, and that's without any special high-speed links. With API documentation for a brokerage house, I could write such a bot in probably half a day. Given the as…

Automatic trading is an automatic occurrence in deed, and many bots are design to respond to news, tweets, and all kinds of things. That said, if you really think you can write a bot that can do really good in the market, why not just make one. For the sake of argument, just assume that you can confirm a trade in 1-5 seconds, make a bot that just does fake trades, give it $10k in fake currency, and let it play. Come…

These APIs exist, and many of them allow two cool things:

1) Virtual money. So you can try out your bot and see how it'd do without risking money. (with $10k on say the Forex market which trades about 5 trillion per day, it doesn't matter if your trades are virtual)

2) Backlogging. So you can write a bot that'll analyse prices, volume, the orderbook etc of any moment in the past 6 months, which allows you to immediately simulate your bot's success in that market over a long period of time. (of course this is if you want to write a bot that analyses the exchange data, as opposed to things like news, for which you'll need to find your own database going back 6 months which isn't too hard btw, but a lot of data to process quickly).

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