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Most of the market making occurs within a single asset and is based on the state of the various order books across multiple exchanges. Conceptually, it is fairly simple - you show bids and offers, trying to retain priority as much as you can and hoping to have trades bounce between bid and ask...

Similar to a driving or flight simulator, you get to use the real life information to make decisions and execute them. So in a trading simulator, you'd get real time data, news and other inputs. Then you'd execute trades at actual market prices (that's where it gets tricky if you assume...

True that. I'd think for someone with that little capital the progression should truly be paper trading (or backtesting) and then micro-trading (with real money, but targeting "painless" volatility levels). Only then they should start scaling up. PS. My rule of thumb on scaling strategies is...

In my mind, trading 1-lots is the same as paper trading. I have several new strategies where I am targeting pnl volatility of 5-10k a day - practical purposes that's paper trading (for me, given the scale of other things I do) but I do get to participate in the order book so there are no...

Even overnight in low liquidity times?

In general, if you have access to a good simulator you want to spend as much time on it as you can (or a good backtesting system, but that requires care for various reasons). I recall @Sig mentioning that military pilots spend 5 hours in a simulator for every hour of actual flying. Equally...

It's at 12 bps right now (give or take depending on what you use as 10s yield, CMT or OTR).

While off topic, I think that's not really true, to be honest. There are multiple layers of selection for a school like Hogwarts even before you apply, while anyone can open an account at Interactive Brokers and try their luck.

I literally spent 10 min on it did it because I could not fall asleep until 3 AM. Gonna take some ambien tonight once Asia closes. Just a thought on market correlation and isolating this alpha. Given that it's a global phenomenon, I think the "right" theoretical strategy would be to do c2o...

Here, for those who care to play with the numbers

My quick and dirty study assumes perfect MOC and MOO execution, with zero transaction costs. I can even attach a spreadsheet if someone would teach me how to do it here.

Actually, volatility is lower in the close-to-open vs open-to-close periods, while the drift is higher (for SPY since inception, for example): 'c2o' : { 'sd': 0.00620, 'mean': 0.00032 } 'o2c' : { 'sd' : 0.00972, 'mean': -0.00003 } So it is kinda a real alpha, but it's so thin that it's not...

How do YOU measure interbank lending?

To be honest, I don't know where the 600% from the first post comes from I just spilled my drink! On a serious note, can they even send MOO or MOC orders?

Sharpe 0.5, so this thing is somewhat better. It's correlated to buy and hold, so that would make it less exciting, even if PnL/trade was OK.

Sorry, what are these numbers? Ratio of vols or something? For what strikes? Are they normalized? Cause that's not the dynamics that exist in real life. You should read an options book first, maybe start with Natenberg :D

It's less about Sharpe and more about PnL/trade, IMHO. I'd gladly add a 0.5 Sharpe strategy that has a t-stat of like 6.5, but it pisses away most of the theoretical alpha to execute

Mkay, I am bored stiff (stuck at home with a sprained ankle) so I just ran it on SPYs: Sharpe 0.82 Daily Vol 0.62% Median 0.05% Mean 0.03% Min -8.69% Max 5.89% % Up 54.55% Total 210.37% Worst DD -42.71% if you only run it over the weekend, there is some improvement in PnL/trade but your...

Run it on SPYs and tell me what you see as an average PnL per day. It's gonna be like 3-5 bps, I'd venture. As I said, a couple ways of juicing it up is moving to longer non-trading periods (weekends), switching to more volatile assets and scaling the strategy up during volatile periods.