For profitable traders only...how much is your strategy worth?

[vincentnyc]

Ha! I have 5 kids, three of which are toddlers so yes I know the feeling!

u sound like larry william. he taught his daughter how to trade...and she made more than a million/year...but she knew trading is not for her and now she is a famous actress.

i too seriously contemplating about teaching my kids how to trade one day. but i'm not going to force it upon them. i will see how they will take it. trading is stressful and i will know if my kids can handle it once they get older.

 

[abnormal]

I sell my quantitative strategies for 4/5billion.

 

[vincentnyc]

I sell my quantitative strategies for 4/5billion.

what is your track record? how much you made last year? and with what amount?

 

[vincentnyc]

Even an automated strategy is more or less worthless without the person who developed it. To give you a sense, HFT firms are usually valued at 2-4x their annual revenue (a friend of mine tried to sell his small-scale MM firm and the best he was offered was 2x the annual PnL, for example).

that sound about right. trading is a business. let say you want to go buy a restaurant, laudromat, dry cleaning business from an owner. how much are you will to pay for those business if you can verify that yearly income?

 

[sle]

that sound about right. trading is a business. let say you want to go buy a restaurant, laudromat, dry cleaning business from an owner. how much are you will to pay for those business if you can verify that yearly income?

I would certainly pay more than a 2x multiple if I like the business model and the intrinsic attributes of the business. Management and employees are far less critical in a physical business (location, for example, is the key to all of the above), while for a trading business the moment your employees march out the door you're shit out of luck. Another example of a business where employees are very important is anything software-related, since getting up to speed is very costly.

PS. @newwurldmn has a better sense of the numbers that go into buying a physical business. I recall that usually the smaller the business the smaller the multiple, simply because without an economy of scale the institutional players (that have access to leverage and capital) stay away.

 

[DepthTrade]

What is the value? Priceless, when you have spent irreplaceable time developing a system. But for a lone developer that has lost everything multiple times over, then finally has 1 in a million system, mid to upper single digit millions at least.
As for discretionary or automated. You'd want to buy the manual system, because the entrances and exits would be staggered from anyone else trading the same system. If multiple traders are using the same auto system based off numerical triggers, it's more likely you'd be fighting for the same volume. Manually, if minutes passed between traders, that could be millions of dollars, the strategy would just fade away into the background. Less chance of it failing as quickly or at all.

 

[vincentnyc]

I would certainly pay more than a 2x multiple if I like the business model and the intrinsic attributes of the business. Management and employees are far less critical in a physical business (location, for example, is the key to all of the above), while for a trading business the moment your employees march out the door you're shit out of luck. Another example of a business where employees are very important is anything software-related, since getting up to speed is very costly.

PS. @newwurldmn has a better sense of the numbers that go into buying a physical business. I recall that usually the smaller the business the smaller the multiple, simply because without an economy of scale the institutional players (that have access to leverage and capital) stay away.

well i have experience trying to buy a laundromat and a car wash business a long time ago. and 2x the revenue is the going rate when buying a business. all the previous posters who said their strategy is worth million or billion. i doubt they are making at least $500k/year from their trading after taxes.

 

[qlai]

if their precious system gets out into the wild and everyone starts using it, that would cause the system to fail...Is that even a thing? Does that actually happen?

Can that be proven to have happened?

I believe it does happen all the time. Many peoples describe strategies which used to work, then either someone publishes a paper or it just gets out and too many people start running it until people start fading it. Look up "Turtle Soup" strategy for example.

I have another example from Linda Rashcke. I'm retelling from memory so may not be accurate, but the point is same. She noticed/discovered that at some particular time of day there was some momentary spike in buying of an ES or some other commodity. She started digging around and found out that some big firm (Goldman I think) had it programmed to buy predetermined quantity on a specific day of the week at specific time. She milked it until they changed the method. These kind of edges are very real (not statistical/hypothetical) but obviously very fragile.

But if all you have is your chart and gut feel (experience), yeah you can sell that all day long.

 

[sle]

well i have experience trying to buy a laundromat and a car wash business a long time ago. and 2x the revenue is the going rate when buying a business.

As I said, the bigger the scale, the higher is the multiple. A 100k/annum laundromat is selling at 2x the annual revenue, but almost every company in S&P 500 trades at 10+ times EPS and then some. So the right answer is somewhere in between depending on the scale.

ll the previous posters who said their strategy is worth million or billion. i doubt they are making at least $500k/year from their trading after taxes.

Well, that's probably because nobody ever offered them money for it and that makes it priceless. However, selling your strategy is not that different from going to work for a fund or a prop firm - you have alpha that you are willing to share or give up for a fee. I suspect the number that would make them all eager to sell is much lower than the numbers they sounded.

PS. if you can afford it, you can have my all my strategies for 2x of my average PnL (let's say for the last 3 years)

 

[vincentnyc]

As I said, the bigger the scale, the higher is the multiple. A 100k/annum laundromat is selling at 2x the annual revenue, but almost every company in S&P 500 trades at 10+ times EPS and then some. So the right answer is somewhere in between depending on the scale.


Well, that's probably because nobody ever offered them money for it and that makes it priceless. However, selling your strategy is not that different from going to work for a fund or a prop firm - you have alpha that you are willing to share or give up for a fee. I suspect the number that would make them all eager to sell is much lower than the numbers they sounded.

PS. if you can afford it, you can have my all my strategies for 2x of my average PnL (let's say for the last 3 years)

oh? how much is that? what do you trade?