Tell me if this setup is stupid
- Thread starter kj5159
- Start date
you can buy directly from the U.S. Treasury in $100 increments.
do you think there is any truth in this? in my opinion the main elements of a balanced portfolio are the following. 1) by far the most important thing is your infrastructure:computer systems, network, connectivity to exchanges and liquidity providers, processing power etc. until enough money you need to manage crooked intermediaries to take free money from you and do nothing until you can afford to burn all witches. enough money is a lot the best off the shelf computer can barely handle a singel algorithm on a single underlying. it's a mess. data collection is largely a hoax since there is no data on the scales you would require and to train these algos you need to feed them data as they will get it in action. 2)collect all noise:if bid or offer moves trade it. be sure to have delta limits which you deal with by opening new trades. take profit quickly, you can always do another trade. 3)sell all noise: sell vol, probably strangles since they are expensive empirically. itm so you don't need to do forwards to manage delta and no vega problems. 4)well positioned nuclear options in areas where risk assets move in stress and work on optimising how you add and take profit to these positions, probably machine leaning helps here but as always you have to feed it packets in real time. it's as much about the hardware. note nuclear options are not to manage downside, which is not a seperate idea, nor is it a hedge, it's to make money. 5) for volatility, i like etf's since they are tighter than vix for the same Quadratic Variation which is what makes money and there are lot of them so go for those first. 6)single stocks are obviously expensive on hardware and only trade 1/3 of the day often, wait for obvious non-random movements - the 10% ones-and then be the fastest, you can either get the news first (hard, expensive) or simply wait for it to move enough so that you know or do both. be faster than anyone else and have many exchanges/liquidity providers. 7)currencies, commmodities + fixed income that are not exchange traded look like a mess to me. they move less but have the advantage of being traded mainly manually and though opaque platforms like reuters, the LME, interbank. i think use these mainly for large scale hoax's and flash crashes otherwise its a waste of money that's not going anyware. probably leave it until you have a lot of money and infrastructure because they think they only like large trades. the OTC options market is interesting since it's mainly some dude at lunch+a broker manually updating a live auction+stp . imagine they lose against the newer microsprocessors+ fibre optics.
don't understand 'high frequency trading firms' that talk about nanoseconds,taking no risk, say they do losing trades,make less than 50m a quater and seem confused about whether or not they are in fact a broker. high frequency comapared to what, if you do a lot of trade it does become quite frequent. why not take huge amounts of 'risk' but not all the same and have the best systems and just don't do losing trades? scrap them. scraaaapped. except v occasionally like if you sell a low one in equities or something but you don't notice on the stats. it's not like 55% winners or something. don't get it.
What's that old retailer's joke - "I lose a little on everything I sell, but I make it up on volume!" 
The funny thing is, that there is an entire sub-industry built out of doing this very thing, although not to the extremes the OP suggests. Fixed Indexed Annuities have a similar payment pattern: limited risk (usually guaranteed by the insurance company) combined with a CHANCE (not a guarantee) of some equity upside. The insurance company basically invests the client's money in treasury bonds, then allocates interest payments to buying call options on SPX (or whatever index is advertised to be linked to this product). In practice, it is much more sophisticated, but the basic payout profile is similar.
Historically, a typical FIA has returned a little bit better than a diversified corporate bond portfolio over time, which may be sufficient for some investors who want income + guarantee + chance of some upside.
The problems with these products include a) very high complexity, as the upside is often capped and there are a dizzying number of options; and b) very high costs. The insurance company charges a high annual fee (>1%) just to run this thing, plus the broker gets a fat up front commission (5%-8%) for selling it, plus a 0.25%-1% ongoing trail commission which comes out of the client's funds.
Historically, a typical FIA has returned a little bit better than a diversified corporate bond portfolio over time, which may be sufficient for some investors who want income + guarantee + chance of some upside.
The problems with these products include a) very high complexity, as the upside is often capped and there are a dizzying number of options; and b) very high costs. The insurance company charges a high annual fee (>1%) just to run this thing, plus the broker gets a fat up front commission (5%-8%) for selling it, plus a 0.25%-1% ongoing trail commission which comes out of the client's funds.
Unless I misunderstood, isn't it essentially same as below?
https://fourweekmba.com/barbell-strategy-taleb/
https://fourweekmba.com/barbell-strategy-taleb/
%%What's that old retailer's joke - "I lose a little on everything I sell, but I make it up on volume!"
LOL-LOL. But even that old retailers joke could work-if you get a dealer's rebate on volume+ dealer prep+ make money on finance charges ......... KJ, original poster, you say ''lotto tickets??"" A lotto is a stupid tax on people that cant do math.
%%
LOL-LOL. But even that old retailers joke could work-if you get a dealer's rebate on volume+ dealer prep+ make money on finance charges ......... KJ, original poster, you say ''lotto tickets??"" A lotto is a stupid tax on people that cant do math.
Well yeah, especially when the winning prize is only like 50% of the total ticket sales
%%Well yeah, especially when the winning prize is only like 50% of the total ticket sales
And plus time wasted on lotto- a stupid tax on people that cant do math.
I was buying gas one time, the guy in front bought a lotto ticket. I say ''you ever win anything?? He says ; ''NO but i came close ''.LOL-LOL ''Came close ''