Selling trading strategies

A

Aquarians

Logically, producing a trading strategy (that makes money reliably) is a necessary condition to selling them. Now I'm starting to realize that there's "necessary" and then there's "sufficient".

Like it took me =~ 15 years to complete the "production" step and come up with competitive trading strategies and now this:
realization.jpg


ET forum is fragmented, so I'm linking to a discussion started on a different section.
https://www.elitetrader.com/et/thre...-selling-licensing-trading-strategies.354477/
 
Aquarians said:
Logically, producing a trading strategy (that makes money reliably) is a necessary condition to selling them. Now I'm starting to realize that there's "necessary" and then there's "sufficient".

Like it took me =~ 15 years to complete the "production" step and come up with competitive trading strategies and now this:
View attachment 248526

ET forum is fragmented, so I'm linking to a discussion started on a different section.
https://www.elitetrader.com/et/thre...-selling-licensing-trading-strategies.354477/
More...
what is the sharpe ratio of your strategy?
 
trend2009 said:
what is the sharpe ratio of your strategy?
More...

It's statistical trading not HFT so it's correlated to the underlier. But I've designed it precisely with respect to a long position in the unnderlier such that:
- makes more when underlier goes up
- loses less or even stays profitable when underlier goes down

This is because the target for selling it is not retail traders but "long only" or "long mostly" hedge and pension funds. I once knew a guy who eventually secured some $5MM in investment for a strategy that did this, selling it to Canadian pension funds. Hmm, maybe I should contact him, he's in my city and haven't spoken to him in years.
 
@Aquarians I have an idea for you. Could you build a model that specifically hedges against the S&P 500 by using far out of the money puts. The hedging strategy is described here:

https://www.elitetrader.com/et/threads/fully-automated-trading-journal-50k-per-month-goal.354365/

The problem I am trying to solve is I have a portfolio of long only ES strategies and the leverage is very moderate to avoid a catastrophic hit. If I could some how over lay a hedging strategy, specifically one that I could backtest and run live, I could potentially increase my leverage and thus profits. In practice, this could work where I backtest the hedging strategy, output the trades and then my backtester would read in the raw trades and update position size accordingly. My platform does not support options so this is not something I can easily spin up on my own.

How far back does your option data go?

Also, this is something I would pay money for.
 
fan27 said:
I have an idea for you. Could you build a model that specifically hedges against the S&P 500 by using far out of the money puts. The hedging strategy is described here: [...]
More...

Allright, I'll code the strategy and run it in the backtester. May need some tweaking, we'll see.

fan27 said:
The problem I am trying to solve [...] If I could some how over lay a hedging strategy [...] My platform does not support options so this is not something I can easily spin up on my own.
More...

Hedging is paramount, I agree.

fan27 said:
How far back does your option data go?
More...

From 2002 up until today.

fan27 said:
Also, this is something I would pay money for.
More...

I do this sort of stuff for free or not at all, in your case the former :) Will be back with test results later.
 
Ok, there is some ambiguity in the described strategy. "if a profit target/stop loss has been hit." What target / stop? And "In addition, the trade will always exit at 2:30 Central time the day after its entered if the other 2 conditions have not yet been met." What conditions?

But the thing I find most sensitive is buying options for protection, and a lot of them. "I end up paying about 10% of my account value each year to maintain this hedge."

Well 10% per year is a ton of money, if you were purely long stock and not do other tricks, 10% would pretty much wipe out all your gains on average. If you sell ATM options, on average you make some 10% per year so again buying other options to protect (rather than delta-hedging and finger crossed), would again nullify your edge.
 
You must log in or register to reply here.
Back
Top