New invention for the derivatives market - How to profit of it?

thecoder said:
I've created a new & IMO revolutionary new financial instrument for the derivatives market.
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The invention is basically an improvement over the Black-Scholes-Merton (BSM) option model.
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So your invention is a mathematical model like
https://www.investopedia.com/terms/b/blackscholes.asp
What Is the Black Scholes Model?
The Black Scholes model, also known as the Black-Scholes-Merton (BSM) model, is a mathematical model for pricing an options contract.
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And this model would be considered a new financial instrument that you see exchanges creating a market for buyers and sellers of the model? Isn't that concept similar to cryptocurrencies?
 
guru said:
Options are too old to be patented, but you could find some options-related patents, and maybe VIX patent could be adapted:
https://patents.google.com/patent/US20150039532A1/en
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You can patent a financial product or a process but there is almost no recourse if someone creates an effectively identical product. For example, MIAX Spikes is a VIX clone that uses SPY options for calculation and V2X is identical to VIX but uses Stoxx50 index options.

In any case, the success of a financial product rarely depends on the innovative concept but rather on finding clients. Considering that OP comes across as a complete crank (e.g. he was arguing how "BS delta is wrong and his delta is better" without actually understanding what delta is all about), he will likely get laughed at wherever he goes with this invention.
 
Same Lazy Element said:
he was arguing how "BS delta is wrong and his delta is better"
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Kevin Schmit said:
Seriously, your "Question About Delta" thread showed you have zero understanding of options math or Black-Scholes.
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Guys, just keep in mind that Robert Mercer was mocked the same way, for not knowing and not understanding anything about how scientists analyze speech. Then he proved to all of them they they’re full of crap and that he doesn’t need to understand any of their terminology and “science”, then created speech recognition approach that beat them all, got an award from those same people that mocked him, then went on and cracked the stock market to become a billionaire. While everyone else is still staring at their silly Greeks and can’t make money :)
 
guru said:
Guys, just keep in mind that Robert Mercer was mocked the same way, for not knowing and not understanding anything about how scientists analyze speech. Then he proved to all of them they they’re full of crap and that he doesn’t need to understand any of their terminology and “science”, then created speech recognition approach that beat them all, then went on and cracked the stock market to become a billionaire. While everyone else is still looking at their silly Greeks and can’t make money :)
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Both myself and Kevin come from academic backgrounds before moving to finance. I have, over the years, worked with plenty of failing as well as successful traders/PMs (and pretty sure Kevin has too). So we have a reasonable clue on how to distinguish cranks from geniuses.
 
I was an exotics derivative structurer for 15+ years (IR, hybrids, credit). Trust me you have nothing new (by the fact you mention BSM, Prehistoric in terms on how derivative traders value financial instruments.) Banks don't give away their models and the one's in J Hull are long dated, in fact its hard as shit to pinch them when you move to another bank , and yes that’s why you get head hunted


Also you have it wrong, the USA market in terms of derivatives is nothing like Europe and Asia, it never was. Derivatives markets have been pretty much dead in the last ten years anyway. BSM is fundamentally flawed, far too simplistic but has become standard practice over the years to set some form of pricing benchmark. Similar to the way LIBOR was an international standard rate yet price meant little to an actual trader, they price of cash markets using forwards & futures using credit spreads, not libor / Euribor.


What is traded on Exchanges in term of complexity pales in comparison to the OTC market, so the point is that there are plenty of better more sophisticated approach’s available it just that exchanges haven't taken them up yet, and they have no need to. The impetus after 2008 and the credit crash was to make things simpler not more complicated, Regulations took care of that .
 
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thecoder said:
Tomorrow, after registering the trademark, I can tell more.
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There are dozens of types of options. There are unusual to very strange derivatives traded in the OTC market. Any quant in a bank can flex a bit his mental muscles and come up with a novel derivative.

The problem is not coming up with new stuff, problem is selling it. There's a ton of instruments sold and not like exchanges, banks, brokers and gambling houses aren't constantly trying to come up with something new.

Best you can do, put up $100,000 in license fees and start your own brokerage as a gambling business. Pay $2500 / month in fees to be allowed to use S&P 500 as underlier, advertise your instrument and keep your fingers crossed that enough people get interested so you get enough volume to at least break even. Oh, and you need to market make the instrument too, noone's gonna do it for you at least in the beginning, so put a couple $100ks for that too.
 
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