Quant Cofounder for Options Arbitrage

[Aquarians]

I've seen 50% running for years on ~ $50mm of capital. So if you crack it you can recover years of research, therefore if it takes me another 10 years and I'll still be OK in the end. Compared to just what my salaried job brings, it's not like I'm starving or anything...

 

[Aquarians]

OK i have a strategy for you. Its written in c++ but v simple . It sells 6w 15 delta index puts (dax,dxy,spx, whatever) low strikes ,very stable high vol. We use an ITM call instead of OTM put though. It delta hedges the position to expiry by selling ITM 75 delta calls or puts (instead of forwards, same expiry, solves for hedge notional) when it hits predefined delta limits. Its very safe if the world explodes the call goes to 0 so you don't need to worry about short "vol" style drawdowns. More volatile spot paths are marginally more profitable because of the extra theta from the delta hedges. The edge in the strategy is the index vol is expensive in this region, using a call not a put so safe in size and then the improve using the short in in the money options to delta hedge which doubles the theta you earn instead of forwards. v simple to code, blacksholes everything and only requires one option chain. Do you have money though i don't?

I have to go to work soon (it's 7 AM here) but I'll think about your strategy more in depth afterwards and run it on my backtester on a few indexes and also plain stocks. Will tell you how it performs and if I think it's worth trying to get the money. It's not just a day of work ahead but also the weekend which I have to spend with my kid (it's his birthday) then Monday another day of employed work ahead... don't expect any results earlier than Tuesday. I'm skeptical but heck knows... we'll see.

 

[TommyR]

well i know how it performs.
try sell 3m call option on vxx etf every day for the last 10years instead. that will sort you

 

[TommyR]

strategies aren't really v secret everyone does the same he could've just asked. but he actually came on this site i like that he thinks there is a strategy that if only he could get a few lines of code

 

[Aquarians]

well i know how it performs.
try sell 3m call option on vxx etf every day for the last 10years instead. that will sort you

Backtest from 2010-May-28 to 2016-Nov-30 (about 6 years).

First image is naked sell, the second is delta hedged sell of daily ATM options on 3m vxx etf:

https://imgur.com/a/oxcpbxo

Naked: total profit of $250,000 with a drawdown of $100,000 for a very mild spike in the volatility.
Delta hedged: a more modest profit of $100,000 with the same 50% drawdown for the spike in the volatility.

A market crash would wipe you out and put you in debt.

strategies aren't really v secret everyone does the same he could've just asked. but he actually came on this site i like that he thinks there is a strategy that if only he could get a few lines of code

You're so ignorant that it hurts. I'm sorry for wasting my time with you, should have known better.

OK i have a strategy for you. [blah blah] Do you have money though i don't?

Good luck with those gambles you call strategies on somebody else's money.

 

[TommyR]

ur idea is hilarious. option market making set up costs in the 10's millions u need specialized fpga hardware. option arbing isnt a business u can only arb off exchange liquidity providers and they turn u off. u dont have a backtester that is capable of testing those strategies and u didnt test what i said. good work

 

[Aquarians]

ur idea is hilarious. option market making set up costs in the 10's millions u need specialized fpga hardware. option arbing isnt a business u can only arb off exchange liquidity providers and they turn u off. u dont have a backtester that is capable of testing those strategies and u didnt test what i said. good work

It's clear to me there are two types of forums for our kind: for geniuses, like Wilmott or Nuclear Phynance and for ret^H^H^H regular guys like you.

If you would have bothered to read the title of my post, it says QUANT cofounder.

>> u didnt test what i said

Do you know what a stochastic integral is? Please give me an example for pricing an option on an underlier that (thought exercise) follows an uniform distribution rather than the normal one.

I'll gladly test your stuff if you do mine first.

 

[TommyR]

chill out i'm only jerking your chain wasn't questioning ur prowess at stochastic integrals. and just to clarify a quant is a dis it means people come and shout at you when their computer doesn't work its not something you want to strive towards. not sure on that one but my guess would be its bollocks again since i don't think you can even construct a continuous process with uniform distribution over the time intervals and many other reasons.

 

[TommyR]

and i don't pretend to really understand stochastic integrals but my sense is unless you are Cedric Villani some of it is quite weird and to be applying very trivially whilst calling oneself a 'quant' is not a great strategy.

 

[TommyR]

i think its agreed advances here and in stochastic volatility processes etc are likely to come from areas of geometry to do with Ricci curvature of non-reimann manifolds not a quant in finance discussing sticky strikes and q measures.