Good for them. It is so painful taking better than average bets and being questioned by family, friends, clients, peers. You even get caught second/third/fourth guessing yourself. Great story.
A Tiny Hedge Fund Made 8,600% on a Vix Bet
111–120 of 122 posts
Re: A Tiny Hedge Fund Made 8,600% on a Vix Bet
#112Earlier quoted context omitted.
Liquidity has value. Keeping say 10-20k in a checking account seems really dumb, but if that let's you avoid bank over draft fees and credit card interest that savings can easily keep up with inflation.
> Liquidity has value. Keeping say 10-20k in a checking account seems really dumb, but if that let's you avoid bank over draft fees and credit card interest that savings can easily keep up with inflation. Or a Roth IRA for which th e contributions can be withdrawn tax-free and penalty-free at any time.
Even then it still takes time, effort, and involves risks around both system issues and market crashes etc.
Saying with more effort I can do X and get Y always has the cost of that effort.
Re: A Tiny Hedge Fund Made 8,600% on a Vix Bet
#113Earlier quoted context omitted.
> I have funds to invest but every time I look into getting into I cannot bring myself to do it because I cannot stop my brain thinking it's gambling. Without insider knowledge I don't understand how I could beat the market short term. If you have programming skill and a good understanding of statistics, do the following: 1. Identify a subset of equities in the total market which a) have fairly one dimensional revenu…
Awesome post and your meta-analysis rings true even on tiny time horizons. Years ago I traded energy futures and we hired someone away from a rival. He knew a trick for seeing crude oil price changes on CME a few milliseconds before they sent the updates in their data feed. For a brief period we were printing money across the energy complex, but eventually it stopped working well. The guy who taught us the trick jump…
> If you've done this earnings forecasting yourself, how much size can you trade before the market moves enough to make the risk/reward unfavorable? For a retail guy it's probably not an issue, but curious if major funds are doing it at scale.
From my casual observations, usually about 8 figures or so. It was not unusual for us to deliver a particularly impactful report, then have institutional capital rush into it and push up the price fairly quickly. Then they’d hold that position for a month or so before earnings. Typically “word on the street” would be that the big movements signalled smart money, but usually there was still premium left over to capture during the actual earnings announcement. Humorously, it was sometimes frustrating when institutional money would make large bets in the direction opposite to our forecast, because despite being eventually vindicated, clients would get restless about it.
> How does selling to hedge funds work when the information is valuable only insofar as few others have it? I suppose you could have an exclusivity contract but there's a strong incentive to sell to multiple buyers. Is it more of a relationship/reputation type setup? Are there brokers of some sort that help filter disreputable sellers out?
It’s not typically the set of all hedge funds purchasing the data for any given equity (that is, unless it’s groundbreaking), it’s the subset of hedge funds which already have an interest in the particular equity. That limits the competition and information diffusion somewhat. For certain exceptionally high value data we did try exclusivity contracts so that its value would last longer. For example, before I left the research firm I was working at last year I developed (to my knowledge) the only non-drone, purely web-based method for forecasting the exact number and type of all vehicles Tesla produced with a From there, it’s as you say: there is absolutely a reputation system with a strong basis in long term relationships. It was common to have to jump on calls directly with analysts at funds to talk through the forecast. And yes, there are brokers to help facilitate this entire process.
If you’d like to chat about this more, you’re welcome to email me. I can’t go into deeper detail for much of the proprietary workings, but I’m happy to talk about things that don’t have an NDA covering them.
Re: A Tiny Hedge Fund Made 8,600% on a Vix Bet
#114Earlier quoted context omitted.
Options are great, even for individuals. The main issue is that everything is in size 100 lots, so a huge number of stocks are simply "too big" for me to regularly use options on as an individual. If I were to do something like sell a put option on AAPL ($156.41 at the moment) would be $15641 into a single stock that I may have to put up. I'm closer to ~$5000 per trade as an individual, its not like I have as much mo…
Why would you sell a naked put though? Sell a put spread (e.g. short 155 put, long 150 put) and you can exert extremely fine control over your max liability. $500 per contract in the aforementioned case.
> extremely fine control over your max liability
Alternatively, I may want to own shares because I'm a buy-and-hold investor. An out-of-the-money call solves the FOMO problem.
The "risk" of a naked put is that you might be forced into buying shares. Well, that's fine. I'm a buy-and-hold, relatively conservative investor. I was planning on buying those shares anyway.
Re: A Tiny Hedge Fund Made 8,600% on a Vix Bet
#115Earlier quoted context omitted.
The real gem of that WSJ article was that 10% of daily trades on E*Trade were either pot or cryptocurrency related
I don't get why so many people pay $7 fees to E*Trade when there's no commission on Robinhood.
I think its a combination of things. One is that they were using etrade or another broker before robinhood came out. Two is that $7 on a typical trade is pretty small. Anecdotally, my trades are $1k-$5k, so $7 is maybe only a tenth of a percent, or the amount that I could lose or gain within a few minutes after the trade. Third, "if you aren't paying for it, you're the product." It is well established that your order flow is sold to larger institutions. I know it probably doesn't affect me in any meaningful way as a small fish, but I still don't like my investment decisions to be data for someone else's front running strategy.
Re: A Tiny Hedge Fund Made 8,600% on a Vix Bet
#116Earlier quoted context omitted.
> I was referring to the stock market. Also, are you claiming to be a market maker? I used to be a market maker of stock options, amongst other things. > It doesn't take 30 mins after the news breaks for stocks to move When it comes to markets, test every assumption. In reality, information diffusion is unpredictable and heterogenous [1]. This is due to, in part, the "effects of limited attention in at least part of…
Options are great, even for individuals. The main issue is that everything is in size 100 lots, so a huge number of stocks are simply "too big" for me to regularly use options on as an individual. If I were to do something like sell a put option on AAPL ($156.41 at the moment) would be $15641 into a single stock that I may have to put up. I'm closer to ~$5000 per trade as an individual, its not like I have as much mo…
I'm new to options.
Looking at the AAPL options on yahoo finance, I can't find any puts that cost $156.41, even those in the money 2020 options.
How did you get selling a put cost same as the underlying share price?
I thought one of point of options pricing is you don't need to put up the same amount as owing the shares.
Re: A Tiny Hedge Fund Made 8,600% on a Vix Bet
#117This isn't news. It happens all the time. During earnings season, whenever there is a news break about pharma,tech,commodity, etc, whenever there is a big political/environment/etc news, and when the market moves. And 8600% isn't that impressive ( depending on the size of the bet ). Leveraged bets can turn $1K into $1M or $10M overnight. If you want impressive, go look into the returns in currency trading when the sw…
Sounds like they were not leveraged. Any idiot can make super high leveraged bets that will wipe them out if they don't pay off. Your comment suggests a lack of understanding of risk. Max risk of 200k for 17m payoff is VERY impressive.
It depends on the odds of it working, of course. 200k/17m is 1.2%, so any idiot can arrange a bet which pays of 17m with 1.2% probability with at most 200k at risk.
Re: A Tiny Hedge Fund Made 8,600% on a Vix Bet
#118Earlier quoted context omitted.
The real gem of that WSJ article was that 10% of daily trades on E*Trade were either pot or cryptocurrency related
I don't get why so many people pay $7 fees to E*Trade when there's no commission on Robinhood.
The amount of money saved with Robinhood is often lost in the less than desirable order routing that Robinhood internally provides. This is how they can provide "free trades."
Often they are executing lousier order prices than are available on other exchanges (the actual market.)
Other brokers, that make you pay for trades, send your order out to all exchanges.
Example: save $7 to end up paying 10 cents extra per share on 1000 shares. Looks like you actually got Robbedinhood for $93...
Other brokers take a fixed $7. Robinhood takes a percentage of your orders. Even for an order as small as $300, you can expect to get Robbedinhood for $7 or more (a couple percent.)
https://startupsventurecapital.com/robinhoods-exceptionally-...
Re: A Tiny Hedge Fund Made 8,600% on a Vix Bet
#119Earlier quoted context omitted.
Options are great, even for individuals. The main issue is that everything is in size 100 lots, so a huge number of stocks are simply "too big" for me to regularly use options on as an individual. If I were to do something like sell a put option on AAPL ($156.41 at the moment) would be $15641 into a single stock that I may have to put up. I'm closer to ~$5000 per trade as an individual, its not like I have as much mo…
I'm new to options. Looking at the AAPL options on yahoo finance, I can't find any puts that cost $156.41, even those in the money 2020 options. How did you get selling a put cost same as the underlying share price? I thought one of point of options pricing is you don't need to put up the same amount as owing the shares.
> Looking at the AAPL options on yahoo finance, I can't find any puts that cost $156.41, even those in the money 2020 options.
> How did you get selling a put cost same as the underlying share price?
1. Selling put options means you are PAID the price of the option.
2. You might be forced into buying those shares at that price at any time. Therefore, it would behoove you to have that much money in your account, "just in case". By selling an option, you've implicitly signed your name on a very powerful contract and your brokerage will do everything in its power to meet the terms of the options contract (including selling everything else in your account if necessary).
2.5 A Call option is the same thing, except slightly more dangerous in many cases. You are forced to sell those shares to someone else. So in the case of "selling naked calls", your brokerage will sell everything, then buy the stock (no matter what price that stock is at). Naked calls have infinite risk. In contrast, a naked put has a similar risk to buying 100 shares, so naked-puts are a good entry-point for learning the options market IMO.
3. Various options strategies can negate this possibility, but that's a bit more complicated. These more advanced strategies (ie: bear spreads, bull spreads, iron condors...) are a bit safer to play with, but are highly-levered.
> I thought one of point of options pricing is you don't need to put up the same amount as owing the shares.
That's called "leverage". I mean, play with it if you want, but if you really want excitement, there are lotto tickets and casinos. Casinos are great cause you pretty much get free drinks while you gamble.
Re: A Tiny Hedge Fund Made 8,600% on a Vix Bet
#120Earlier quoted context omitted.
I'm new to options. Looking at the AAPL options on yahoo finance, I can't find any puts that cost $156.41, even those in the money 2020 options. How did you get selling a put cost same as the underlying share price? I thought one of point of options pricing is you don't need to put up the same amount as owing the shares.
> Looking at the AAPL options on yahoo finance, I can't find any puts that cost $156.41, even those in the money 2020 options. > How did you get selling a put cost same as the underlying share price? 1. Selling put options means you are PAID the price of the option. 2. You might be forced into buying those shares at that price at any time. Therefore, it would behoove you to have that much money in your account, "just…
Ok, I think I get it now.
I never touch naked options, From what you described
1. You get paid the price/premium for selling options (call/put).
2. Selling naked put
3. Selling naked call
Is that right?
I was thinking about debit/credit spreads options, so broker won't lock up $156.41 * 100 * X amount for the options period (e.g $15641 in your previous comment)