My last post on the options forum went south so lemme try another one, hopefully with different results. I've some experience with options, mathematics and programming. In reverse order as enumerated Lately I've refactored the self-made software I was using to backtest trading strategies (with options, that's why I post in the options forum) and in the process caught some bugs and got some new ideas. Damn having a reliable system is hard, when you support thousands of use cases (underliers) and "bugfixing" experience looks exactly like updates on your phone: fix a thing with one underlier and have dozen others fail, while previously they were working just fine. Therefore I'm relaxing my demands on the system from "top-notch handling of everything" to "top-notch handling of something". Especially when there's enough liquidity in "something", like maybe 100-1000x every other crappy thing. So I'm concentrating on a few high liquidity use cases and noticed the following. I'm busting my head at the moment to produce a solution for a trading problem which is probably already solved, but: 1) Googling for it doesn't yield results, neither immediate nor after lots of digging. 2) I can't just go on Wilmott or some quant forum and ask "how do you solve this crap?" because in trading 99% of the edge that you have is formulating the damn problem. Solving it afterwards it's indeed "simple". Why I'm saying it's probably already solved: because there's a liquid market for it. But on th eother hand there was a liquid market for options even at the turn of the last century. At 1900, most of the usage of the trans-Atlantic underwater cables was to send messages between London and New York stock exchanges in order to trade options. Yes, HFT. But it was only at 1900 that https://en.wikipedia.org/wiki/Louis_Bachelier laid out the foundations of the rigorous treatment of options, then came two wars, then it took a Japanese guy named https://en.wikipedia.org/wiki/Kiyosi_Itô to lay te foundations of stochastic differential equations ( https://en.wikipedia.org/wiki/Itô's_lemma ) then about another 20 years till Black, Merton and Scholes figure out with razor-sharp precision how shit works. Why is this relevant? Because even though there was a very liquid options market for 100 years, it was "inefficient". Armed with knowledge of the true way things work you would have made a fortune. It's like playing dice before the invention of probabilities: there was a liquid market for gambling dice for thousands of years, and they somehow made it work based on intuition and plain experience, but a math guy would have made a few castles worth of money of the ignorants playing them (and actually did: Chevalier de Méré https://en.wikipedia.org/wiki/Antoine_Gombaud ). So I the fact there is a liquid market for something doesn't in any way imply the thing is perfectly efficient and known. And as I said: 1) Fact I don't readily find a solution to my trading problem on a very liquid market, might be a sign the problem is not fully solved if at all. 2) Problem's I can't ask other guys for the solution to the problem because knowing there's a problem in the first place is a competitive advantage. So sorry guys, can't ask you for a solution to my problem since just formulating it means someone with more resources will solve it long before me. But I can formulate a helper problem. That was the whole idea of my previous post before I blew a gasket. How do I find a trustworthy associate willing to associate on research problems. Have I said that trust is of the uttermost importance? See (see my "Nursiki" thread on Chit-Chat).
Basically it's a win-win situation for me. If the problem I identified makes money then hell I'm gonna make money rather than publish some abstract mathematical masturbation for my PhD. If it doesn't, then I'll publish a "simple" mathematical formula along the Black-Scholes, Merton or Heston one. It's not even abstract crap but would solve a real problem and I hope, become #1 reference on Wikipedia in it's use case. Just the fact there's no reference on Wikipedia for this high-liquidity use case makes me think it's definitely not published, if internally known. Well, I'll publish it. Unless I can make money with it Other than that what's a PhD supposed to mean? I think it's supposed to show I can solve hard problems, without a "can I haz teh codez" Stackoverflow.
I am not here to offer you help because I don't have the skills to help you. I just want to philosophize a little and offer you some food for thought. Mathematics and programming are tools. For hundreds of years, commodity traders were able to price options efficiently without knowing the math or using computers. Most traders even then understood intuitively the no arbitrage principle. They didn't need fancy math to price their options so that their counter party couldn't arbitrage and get a risk free profit. The free market forced prices to behave that way naturally. Trading is a lonely profession for us retails and that is why I love it. No headaches dealing with people. I am puzzled why you keep looking for a partner if you already have the solution. Those who make a good living trading options do not want or need a partner. Good luck in your search.
Thank you for the links. I enjoyed reading them even though I don't understand the mathematics. Regards,
I'm not making a living by trading, I make a decent life from a software developer salary. Trading is just my pipe dream of an indecent life Also I realize I don't have any viable trading strategy, a systematic statistical edge, but I do gamble sometimes (as in discretionary trading), out of boredom and just for the thrills. Like the thrill of maybe making the money for a new phone while potentially losing the money for a car Last year I dodged a bullet when I closed my position (worth $10k) by pure chance and next day the stock dropped 60%. So I'd rather trade systematically and statistically but it's hard. Partnering could improve the chances of success but the main issue is trust. Thanks.
do you ever contribute anything of worth here or just the drool that pokes out of the side of your mouth when you forget to take your seroquel?