Suppose you fall on some strategy with controlled risk and high Sharpe (>3 .. 5), which you devised based on a combination of fundamentals, market observation and experimentation.
But it needs more money than you have .. say you would invest some $5k-$10k in it but to trade the required instruments it needs more.
Would you split the risk by associating with other guys? The individual risk needs to be low enough so you can afford to lose some of those money (very probably only a fraction of them before you conclude it doesn't work no more). But also the reward needs to be high enough to be worth associating.
Like if the strategy continues to work and is now market-proved live, well... you can look for real funding.
There's of course the issue of confidentiality and although such an association would already involve a legal agreement, it's extremely important that information doesn't leak.
I mean to beat the market you need to:
1) Be better at HFT than the existing players (you can forget it).
2) Have some sort of inside info ahead of the other players (can't rule out that it happens but I certainly don't)
3) Notice some fundamentals that likely are not obvious otherwise everyone would trade them. Since we're in options, it's common knowledge today that stock returns are approximately normally distributed but 120 years ago when Louis Bachelier published Théorie de la spéculation, this was far from obvious.
I think finding some edge can realistically only be based on #3 but it's obvious that should you fall upon such an edge, you need to keep it confidential if you're gonna profit.
But it needs more money than you have .. say you would invest some $5k-$10k in it but to trade the required instruments it needs more.
Would you split the risk by associating with other guys? The individual risk needs to be low enough so you can afford to lose some of those money (very probably only a fraction of them before you conclude it doesn't work no more). But also the reward needs to be high enough to be worth associating.
Like if the strategy continues to work and is now market-proved live, well... you can look for real funding.
There's of course the issue of confidentiality and although such an association would already involve a legal agreement, it's extremely important that information doesn't leak.
I mean to beat the market you need to:
1) Be better at HFT than the existing players (you can forget it).
2) Have some sort of inside info ahead of the other players (can't rule out that it happens but I certainly don't)
3) Notice some fundamentals that likely are not obvious otherwise everyone would trade them. Since we're in options, it's common knowledge today that stock returns are approximately normally distributed but 120 years ago when Louis Bachelier published Théorie de la spéculation, this was far from obvious.
I think finding some edge can realistically only be based on #3 but it's obvious that should you fall upon such an edge, you need to keep it confidential if you're gonna profit.
Like I've my share of drunken posts that I'm not proud of. The problem with internet forums is that shit that normally flies and gets forgotten now gets archived and used against you.