Can I keep my Sharpe ratio higher then 4 for the rest of the year?

[heech]

You're getting a lack of helpful responses (and a healthy dose of skepticism) because of the substance of your own posts... or more accurately, due to the LACK of substance in your posts.

I think this has been mentioned repeatedly before. Sophisticated investors / managers understand a Sharpe ratio is meaningless in isolation. You refuse to talk about your strategy, the instruments you trade, or detailed quant metrics (like skew/kurtosis as previously mentioned).

On the other hand, basic metrics like Sharpe (or god forbid, just plain annualized return) are OFTEN used to trick naive investors into strategies destined to failure.

So, on the off chance you're naive... then this is another reminder that talking about just these metrics is meaningless. You could claim a Sharpe of 1000 and annualized returns of 100000%, and you're not going to gain much more credibility or interest from the sophisticated people in the room.

 

[njrookie1]

To answer sle's comments,

1. first calculate std dev using stdev() function in excel on your daily return;
2. divide your max dd by std dev.

In mac's defense, I understand some successful traders have found a niche and do not want to disclose it since other traders can potentially crowd out their trade. Not disclosing one's trade secret should not be taken as a sign of fraud.

njrookie

 

[mickson]

Quote from njrookie1:

In mac's defense, I understand some successful traders have found a niche and do not want to disclose it since other traders can potentially crowd out their trade. Not disclosing one's trade secret should not be taken as a sign of fraud.

njrookie [/B]

Ok don't reveal your trade secret because I actually don't care about it. If it was truly that great then you wouldn't be bothering asking for advice. The markets aren't perfectly efficient but they sure are helluva close. At least to the power of a 4 Sharpe that is.

I reiterate my previous question. If you truly want advice put something on the table to establish some reference point. What do you do for a living? What is your training? What is your particular skill set? How can anyone take this thread seriously otherwise.

 

[heech]

Quote from njrookie1:


In mac's defense, I understand some successful traders have found a niche and do not want to disclose it since other traders can potentially crowd out their trade. Not disclosing one's trade secret should not be taken as a sign of fraud.

njrookie

I don't think any sophisticated investor will ever give a manager any money on the basis of a "secret" niche advantage. That's just my two cents as both an investor and a manager.

You can say a LOT about your strategy without giving up "trade secrets".

 

[sle]

Quote from macintash:
What would be the formula to calculate STD on the DD? I have run some numbers on skew and kurtosis, would that help?
P.S Your assumption that I am selling premium is without basis. Anyone that was selling premium (especially unhedged) would probably have a sizable DD this year in April, May, June months. Also my question was not if it makes sense for accredited investors to invest, it was rather if it makes sense for me to look for them and start managing based on the performance.

For someone who supposedly came up with a super-safe zero-volatility strategy, you know surprisingly little about how to measure risk. What I am trying to do is to relate the tails of the distribution (draw-down) to the daily level of noise. Are you measuring your Sharpe ratio based on daily changes in your book value?

I am not making any assumptions about the instrument you are trading - it could be anything risk-premium related, e.g. you could be trading VIX futures or shorting VXX, you could be selling far OTM options or you could be taking on credit risk by shorting the TED spread. There is nothing horrible about being short , except for the fact that sooner or later it will hurt a little. Investors, on average, do not like it, hence my pessimism.

The last bit is the whole secrecy thing. Everyone in this business is doing more or less the same thing, as King Solomon said "Nothing is new under the sun". The devil is in the details.

 

[macintash]

Quote from heech:

You're getting a lack of helpful responses (and a healthy dose of skepticism) because of the substance of your own posts... or more accurately, due to the LACK of substance in your posts.

I think this has been mentioned repeatedly before. Sophisticated investors / managers understand a Sharpe ratio is meaningless in isolation. You refuse to talk about your strategy, the instruments you trade, or detailed quant metrics (like skew/kurtosis as previously mentioned).

On the other hand, basic metrics like Sharpe (or god forbid, just plain annualized return) are OFTEN used to trick naive investors into strategies destined to failure.

So, on the off chance you're naive... then this is another reminder that talking about just these metrics is meaningless. You could claim a Sharpe of 1000 and annualized returns of 100000%, and you're not going to gain much more credibility or interest from the sophisticated people in the room.

You are right that I am not giving a lot of info. But if I had to choose between getting advice and protecting my strategy my choice is protecting my strategy. I like to think that there is some advice I can get even if I am not disclosing anything about my strategy.

I hope to post my skew and kurtosis soon. Would that help determine if the strategy has a good risk-reward?

 

[macintash]

Quote from mickson:

Ok don't reveal your trade secret because I actually don't care about it. If it was truly that great then you wouldn't be bothering asking for advice. The markets aren't perfectly efficient but they sure are helluva close. At least to the power of a 4 Sharpe that is.

I reiterate my previous question. If you truly want advice put something on the table to establish some reference point. What do you do for a living? What is your training? What is your particular skill set? How can anyone take this thread seriously otherwise.

What do you do for a living? Retirement planning. In addition recently I am managing money for a couple of partners for a fee (fee is around 10k a month)

What is your training? No training.. but I am very good in math (little knowledge in statistical language)

What is your particular skill set? Identifying strategies that should perform well over long run and I stick to it. Hedge it to keep it market neutral. Keep my DD low. If I lose 10% at any point I am liquidating (stop loss)

 

[macintash]

Quote from sle:

For someone who supposedly came up with a super-safe zero-volatility strategy, you know surprisingly little about how to measure risk. What I am trying to do is to relate the tails of the distribution (draw-down) to the daily level of noise. Are you measuring your Sharpe ratio based on daily changes in your book value?

I am measuring Sharpe based on Daily changes in MTM value.
BTW, I have little knowledge in statistical language, is there a good book to teach it? And is it useful/necessary for trading?

 

[mickson]

Quote from macintash:

What do you do for a living? Retirement planning. In addition recently I am managing money for a couple of partners for a fee (fee is around 10k a month)

What is your training? No training.. but I am very good in math (little knowledge in statistical language)

What is your particular skill set? Identifying strategies that should perform well over long run and I stick to it. Hedge it to keep it market neutral. Keep my DD low. If I lose 10% at any point I am liquidating (stop loss)

Thanks for sharing, I genuinely appreciate it.
Mick

 

[macintash]

Sharpe is 4.62 YTD. My goal for the year has been reached 75%. Re raising money to manage, I have decided against it for now. However I hope to be able to get 1 Mil from some wealthy friends/partners before the end of the year.