Quant Cofounder for Options Arbitrage

[Aquarians]

I know the chance of finding someone is slim, plus I'm gonna be getting the usual hate from this forum's trolls.

If you search on Indeed UK for "Quant Cofounder", I've placed an ad there.

I'm willing to pay some modest amount (thinking of $500 / month for starters) since I've discovered that noone's interested if they aren't getting payed. But there is what I call the catch 22 problem: I would gladly be paying if someone would give me a profitable, risk-controlled and reproductible options trading strategy, since I'd just plug it into my Interactive Brokers account and pay them out of the profits made. But someone who really has such a strategy can do that themselves, so such a guy does not exist. But then if they don't have a strategy, there's absolutely no guarantee that they CAN find such a strategy and they're just one of the hordes of wanna-bes who are trying to get a job in finance. And there's no shortage of super-impressive CVs, problem is I'm not the guy to pay them in this case: if they're good they surely would get a job at Goldman Sachs or some world-leading investment bank.

The only way I see to break out of the catch 22 loop is association / cofounding. Tell me if I'm missing something or you see it different.

 

[newwurldmn]

I know the chance of finding someone is slim, plus I'm gonna be getting the usual hate from this forum's trolls.

If you search on Indeed UK for "Quant Cofounder", I've placed an ad there.

I'm willing to pay some modest amount (thinking of $500 / month for starters) since I've discovered that noone's interested if they aren't getting payed. But there is what I call the catch 22 problem: I would gladly be paying if someone would give me a profitable, risk-controlled and reproductible options trading strategy, since I'd just plug it into my Interactive Brokers account and pay them out of the profits made. But someone who really has such a strategy can do that themselves, so such a guy does not exist. But then if they don't have a strategy, there's absolutely no guarantee that they CAN find such a strategy and they're just one of the hordes of wanna-bes who are trying to get a job in finance. And there's no shortage of super-impressive CVs, problem is I'm not the guy to pay them in this case: if they're good they surely would get a job at Goldman Sachs or some world-leading investment bank.

The only way I see to break out of the catch 22 loop is association / cofounding. Tell me if I'm missing something or you see it different.

That’s what makes entrepreneurship so hard.

500/month is nothing. Come up with a credible business plan that earns them seven to eight figures if things work out. You may find someone then.

 

[Lee-]

Sounds like you've finally learned the first part of what this forum has been trying to tell you all along. Now you need to learn the 2nd part. Why is someone going to want to share the profits from their strategies with you? You must bring something to the table. That's how you break the catch-22. You both bring something that is mutually beneficial.

It's just like any other business. Someone can come to me (I've had this happen a number of times by the way) with a business idea and they want me to implement this business idea for them, do all of the meaningful work, and in exchange I get like 5% ownership of the company. What are they providing? An idea, no cash, no other people, no other resources, no connections, no nothing. Why would I do that? I could just do it myself and keep 100% ownership. What they're effectively saying is their idea is worth 95% and honestly it's often not some revolutionary idea.

Now lets take a look at your scenario. What are you bringing to the table for this business partnership and how much ownership are you keeping vs offering? Last I recall was you were offering some paltry percent. If you want even a 50/50 partnership, then you need to be bringing something equally valuable and this is the bit I think you still haven't realized. My guess is you're still looking for a > 50% ownership for yourself while still providing little of value. Meaning you want an unfair agreement for the person you're bringing on and anyone actually qualified isn't going to take you up on it.

As I've said before, you need to look at this from the point of view of all parties involved. Does everyone bring something valuable to the table? Does the value they bring make sense for their % ownership? If the answer is "no", then smart people aren't going to join.

 

[Quiet1]

Did you get anything from this Reddit thread?

https://www.reddit.com/r/path%3D%252Fr%252Foptions%252Fcomments%252F8n0e2w%252F

 

[Sig]

I know the chance of finding someone is slim, plus I'm gonna be getting the usual hate from this forum's trolls.

There's a massive difference between experienced entrepreneurs and traders pointing out deficiencies in your ideas and thought process, and trolls/hate. People pay good money to have experienced folks shoot holes in their ideas, in fact I'd say I owe my success in my first startup to the fact that I had the opportunity to run it buy a bunch of very experienced folks who in my perspective provided valuable insight by questioning many of my assumptions that upon closer examination deserved questioning. I could have called that hate and trolling, at times it was quite brutal and painful to experience. If I had I'd probably be a punter crying on a bulletin board about why I couldn't get my idea off the ground and complaining about trolls. I actually swallowed my pride and took most of it to heart; either changed my plan or came up with a defensible explanation for why I wasn't, and have enjoyed significant success because of it. Wasn't easy, wasn't painless, and I ended up with a vastly different product than I originally envisions, but it did work.

 

[Aquarians]

There's a massive difference between experienced entrepreneurs and traders pointing out deficiencies in your ideas and thought process, and trolls/hate. People pay good money to have experienced folks shoot holes in their ideas, in fact I'd say I owe my success in my first startup to the fact that I had the opportunity to run it buy a bunch of very experienced folks who in my perspective provided valuable insight by questioning many of my assumptions that upon closer examination deserved questioning. I could have called that hate and trolling, at times it was quite brutal and painful to experience. If I had I'd probably be a punter crying on a bulletin board about why I couldn't get my idea off the ground and complaining about trolls. I actually swallowed my pride and took most of it to heart; either changed my plan or came up with a defensible explanation for why I wasn't, and have enjoyed significant success because of it. Wasn't easy, wasn't painless, and I ended up with a vastly different product than I originally envisions, but it did work.

I agree. When someone calls me a thief and a fraud though (like I've had some guys here), that's a classic troll's ad-homimen attack and definitely not helpful input.

 

[Aquarians]

500/month is nothing. Come up with a credible business plan that earns them seven to eight figures if things work out. You may find someone then.

I know that $500/month is nothing when someone receives them but I noticed an abrupt change of perspective when the same person would have to pay them instead.

The business plan is:

Phase 1: develop profitable trading strategy.
Phase 2: ???
Phase 3: Profit!!!

OK, phase 2 was a joke (inspired from South Park), actually it's the phase where I'm investing my own capital for starters while at the same time start gathering more capital - I've had plenty of interested parties but noone is willing to invest in the critical phase 1 (even those measly nothings).

 

[Aquarians]

You must bring something to the table. That's how you break the catch-22. You both bring something that is mutually beneficial.

Definitely, that's the whole idea of co-founding / associating.

how much ownership are you keeping vs offering?

Two people means 50%-50% split. Four would be a 25%-25% (and don't think I wanna go higher than four founders, even two is a crowd).

What are you bringing to the table for this business partnership

A subscription to end of day option and stock quotes + code to clean the data, otherwise it'll give enough fake positives in backtests as to be unreliable.

Some 30,000 lines of Java source code for an options strategies backtester: can define custom pricing models (just as examples: implied Black-Scholes, Heston, Merton etc) and custom strategies with or without dynamic hedging.

An autotrader connected to Interactive Brokers for the strategies that pass validation and backtests.

Knowledge of quantitative finance, which is a MUST HAVE for the presumptive partener: stochastic calculus, arbitrage pricing, delta-hedging and the greeks. I'm defining my own pricing models since I think success comes from a combination of quality data + accurate pricing model + the right strategy and the main challange is finding a pricing model better than the market.

Does everyone bring something valuable to the table? Does the value they bring make sense for their % ownership? If the answer is "no", then smart people aren't going to join.

I'm expecting the other guy(s) to bring something similar to what I described above. Main value they'd bring for me is reviewing and debating pricing models (a highly mathematical subject), and I'd be sharing with them the results of 10+ years of study and effort. Plus I don't have an "expiration" date, like I worked on this thing for 12 years, I'll try another one and abandon everything if it still doesn't work. I'll work on this thing (as a side project to my job) until it succeeds, asymptotically I must succeed. May take more research, learning further fundamentals but eventually I'll break through. Which means again that there's a lot to lose on my side if I'm associating with the wrong person so I'd rather error on the side of overcautios and carry on just by myself, I've a lot of experience with that

 

[guru]

Your post title may be a bit misleading in terms of arbitrage, because that’s what I was doing but arbitrage opportunities are rare (therefore I’m not doing much of it now) and require some infrastructure to continually scan option chains across all optionable instruments. Lots of continual, manual work and hand holding is also needed.
While non-riskless types of semi-arbitrage or basically finding consistently profitable strategies seems doable. I believe I know where to look, but I’m running into variety of issues that no guy at $500 will solve or even think about, from margin calculation, handling stock splits (not as easy with equity options as it seems due to lack of data on renamed option symbols), to getting accurate historical data, smoothing out option chains and calculating attainable fill prices if looking for semi-arbitrage. Such issues leave you with just basic strategies that everyone’s using and testing, like iron condors. There are some guys and companies that performed millions of such backtests, including Options Alpha and this guy:

I believe that last strategy comes from, or is used by some decent traders. So here you go, those guys already did the same work that a $500/month guy would need to do first just to get through basics (get historical data and build a back testing system).

Now going back to your $500/mo offer, that’s not enough but also too much.
That’s because there are lots of guys out there selling variety of strategies, which means they believe they’ve came up with successful strategies. If you hire anyone else, they may, or may not, arrive at similar results and basically sell you something you can already buy online from other guys without spending $500/month or $5000/month if that was your budget. Basically, you’d be just spending money on an option to use a strategy that potentially may be better than other strategies currently available. Doesn’t sound very reasonable when your goal is option arbitrage (minimum or no risk).
I haven’t subscribed to Options Alpha but I believe they offer wealth of resources, including results of millions of backtests of variety of strategies (not just iron condors), a backtesting system, and soon an auto-trading system based on backtested, consistently profitable results. This could be a good resourced just for research purposes, while I’m not sure if you can get much farther spending any money on anyone else.
Some other guys who seem to believe they have consistently profitable strategies may be found on Collective2. Whether they’re real/reliable or not, is the same issue you’d be facing when hiring anyone else - at best you may get a guy who thinks he found a profitable strategy and gets more money from you than from selling his strategy online. And obviously anyone paid any type of salary won’t have more motivation than those guys.

Lastly, you may be able to find a partner if there is anything you can offer besides money. Researching option strategies is so work intensive that many people trying to crack it may need help and may be looking for partners more than light financial support.

 

[guru]

I see you’ve cross-posted about your work/experience and what you’d have to offer. This clarifies your initial post and should be included in it. Otherwise you’re looking like a guy who doesn’t know much and just wants to buy a strategy.
The only thing missing there seems to be your subscription to end-of-day historical option pricing, which to me seems worthless, especially for what you’re trying to do. Unless testing basic strategies.
While your various option pricing models may not be worth much either, as it’s extremely difficult to match up any local vol model to actual/attainable option prices. If that’s tested only with your eod data then it brings your potential down to basic strategies where you can swallow $0.20 slippage, for example.