Musings

DIY Quants

“Too much money chasing too few ideas” has been the death knell for investment fad after fad. This will never cease to be so. – Howard Marks With the recent announcement at Point72 of a $250MM investment in quantitative trading platform Quantopian and a recent FT article, there has been a surge in interest in Do-It-Yourself quant strategies. Here’s one from WSJ.   There are some significant challenges for these startups in my opinion*: Has…

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Hard Times at Hedge Fund High

Edit: I wrote a post concerning the future of hedge funds sometime ago and it languished in the Drafts Folder. In the meantime, Ben Carlson of A Wealth of Common Sense posted this which is a far better and more concise explanation. I guess you have to be quick these days! So I’ll only summarize some additional thoughts here. I came across this excellent link on twitter of a scanned Forbes article from 1970 entitled “Hard…


Factor Premium/Discount & Market Timing

Smart beta is the new new thing, I even wrote about it here. There has been some interesting writing on it recently that shares some concerns with the popularity of this approach which I will attempt to summarize: Factor investing can work but it can become relatively ‘cheap’ and ‘expensive’ due to performance chasing and affect future returns. Here is a chart of relative returns of the Value Factor: Great visual explanation of the time…


Smart “BEE-ta”

I recently attended EDHEC conference on “Smart Beta”. Although the concept isn’t new and these ideas have been in use for a few years now by market participants, it was interesting to see how pervasive these products have become and the overall interest by large asset allocators. If you’ve heard of the Fama-French 3 factor model, or the Value factor, Momentum Factor, etc. then you should be familiar with this concept. If not, a simple…


Volunteering with YearUp NYC

Monday was the last day for me tutoring personal finance for YearUp students here in NYC. YearUp is a non-profit that teaches and trains low income and minority students for jobs in the private sector. This was the first time I’ve volunteered my time to something like this and it was a great experience! The kids were extremely courteous, friendly and professional. They are off to intern at places like JP Morgan, Yelp, Facebook, BNY Mellon,…


More VOL Funds & Musings

It’s a bit of a hobby of mine to collect return data from vol funds, let’s see who is around in a few years. More can be seen here. Catalyst Hedged Futures Strategy (HFXAX) Fact Sheet Presentation It looks like a cross between term structure trade (calendar) and long OTM delta butterflies:  http://www.futuresmag.com/2012/08/31/walczak-finds-safe-harbor-options?page=1 And in entertainment news, I went on a sort of mini-rant on twitter regarding this article: http://www.investmentnews.com/article/20150623/FREE/150629974/bond-fund-alternative-is-turning-heads-with-hot-performance Marketing a put-write strategy as…


Spoofers be spoofing since spoofing been spoofing

There is good cause for the skepticism of the arrest of a UK trader in his parents basement for causing the flash crash as written here by Michael Lewis: http://www.bloombergview.com/articles/2015-04-24/michael-lewis-has-questions-about-flash-crash I started in a very active trading room, many of whom were ex-market makers where I first saw something like this in action. Spoofing has been around a very long time. In fact, one might say that Jesse Livermore used this type of strategy in…


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Whale Trade Short Gamma

The FT had an interesting article on Bruno Iksil with some excerpts from IM’s and emails in the days before the Whale Fail trade collapsed. It’s interesting to me from a trader standpoint to see how others deal with risk management problems and how large institutions actually ‘manage’ the risk. While there have been a lot of articles on the relative lax oversight, including to my surprise, using excel as the primary pricing and risk…


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Nexen Risk Arb

“At the current time a risk arb spread in Nexen is causing me some large short term pain!” – October 27, 2012 That was the last line from my last post. Since then I continued to hold or add to one of the most volatile risk arbitrage spreads I’ve ever seen. Deals have blown up and I’m grateful, or perhaps lucky, that I haven’t been involved in a deal break. I’ll spare the details as…


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It’s not all fun & games

As a follow up to the last post, I was afraid it may have come off too “optimistic”. Trading has been quite difficult for some time and though volatility trading is doing “OK”, there have been other dark spots in my book. Lately the stat arb positions have been making life difficult. What I thought was a good entry turned into a fundamental disaster. The following is TSO/VLO spread with the log ratio plotted below:…