I did not talk to them about it. You don't want to slaughter a cow that produces a lot of milk Flying under the radar was an important component of this. The last thing I want is alert them to incorrect vols. Obviously when you ask for a quote in 10-15 million usd notional on a single stock option (which is a pretty sizable position given implieds can move in some of those names by multiple vol points per day) and you get implied vols from different brokers that are at times 6-7 points apart someone is wrong. When you execute the arb you don't need to care who is wrong, you only care to close the deal on both legs at close to the same time in order to be hedged.
We traded that strategy too. But you couldn't make too much because the salesmen pretty much knew you were arbing someone (possibly them). I think they saw it as a commission rebate.
Yes, after some point any smart guy (usually the suspicion originated from their trader not sales person ;-) ) figures out what is going on. But most still showed me prices and I think one reason is as you described, our group gave them very a good commission business and so it may have been a bit of a kickback. But I also think that, given the environment we were in (I mentioned 2008/2009) there were times when vols were all over the place, especially in Tokyo on a Monday morning, so nobody held grudges even when they figured out that they were 2 or 3 vol points off on a single stock price and 1-1.5 points off in the index. But I do remember that GS several times called up our head trader HOURS after the trade was done to moan how they were "mistaken" and asked to cancel the trade. Our guy let them out a few times (to my dismay) but once forced them to stick to the agreement and ordered the rest of the group to stop trading with them for 1 or two weeks (I forgot which one). They came back, invited a few of us guys for lunch and things were good again. Ha, good old days...trading at that particular prop group I consider the pinnacle of my career. It was an awesome time all the way until September 15, 2008 (smirk) and I am still best friends with a number of the guys in that former team of prop traders.
Journal entry Previous entry Education Not exactly related to trading, but I recently got accepted into a Masters program at a top 10 university for computer science (Artificial Intelligence). I have enough money to fund myself for a couple of years to learn both trading and finish my Masters plus I have a (non-consulting) business that brings in a little something every month. Don't want to overwhelm myself though. Plus that never-ending divorce is still on my plate. Thoughts on my system I know I said I'd set up a notebook for back testing (and I did go down this path) but as an engineer, it is incredibly hard to give up control to Quantopian. I also find the interface very inefficient. It's like an uncanny valley between coding and excel. I'd like to think that I'm being cautious and avoiding over-engineering, but perhaps the readers of this journal will tell me I'm wrong. It seems though that the more successful folks have their own in-house things anyway. What do I need? A backtesting system A live trading system that can be connected to a paper trading account A standard interface for processing data from a variety of datasets Tools to analyze and look at my trade ideas The funny thing is that Quantopian have already provided 1-3 in zipline and 4 is provided with IPython/Jupyter. The only question is whether I can use the same data I get from zipline in these notebooks. So... Now I'm going to give myself a week to get backtests and research running with zipline + IPython/Jupyter. If I am unsuccessful, I will probably revert to Quantopian. Success will be determined by the following: A conversion of some mickey mouse Quantopian demo algo to zipline along with backtest and result analysis Some sort of equally mickey mouse analysis of minute bars over a 3 year period Until next time.
Journal Entry TL;DR: I now have my own offline analysis pipeline, failed somewhat with zipline, need access to good data as a result of not being able to work with zipline. Education I've been spending more time learning Pandas and other Python-based data analysis tools. I am very excited to become more proficient with them. Progress on system Success: avoided over-engineering! Success: I've created my own process for analyzing daily OHLC reaching back to 1994 using Python, Pandas and rolled my own version of Jupyter/IPython. This process is source controlled, and does not depend on any external services. Backtesting will be through Backtrader but I have not yet done anything significant with it, past the demos. Failure: I could not use zipline from Quantopian because was pretty buggy as the most basic thing copied-and-pasted from their own documentation resulted in exceptions preventing a backtest from running, period. I went to submit a bug on their github and found a graveyard of open PRs and bug reports. This is clearly not a well-run open source project, even though the code is regularly updated. No surprise there. Very few people like me will use zipline and then graduate to Quantopian. It's a good business decision IMO. However, I made the decision not to depend on it because it is too magical for me for the most part. I tried to fix the bugs I found but the code is very obtuse in places, which is difficult to accomplish in Python. The API is elegant, however. It is a loss, but I'm not going to cry about it. Thoughts on not using Quantopian/Zipline This is on the back of my mind: why are you ignoring Quantopian? Primarily: to avoid lock-in and understand every bit of software that I am using. There might be a 3-4 month period ramping up while I get my own analysis, testing, hosting and data pipelines in place. I can afford that time but man is it ever gnawing at me. The only thing that I can do to keep myself in check is have weekly milestones. Next steps SYSTEM: I've got daily OHLC data going back to 1994 that I can use to play around with. I've got a backtesting system that I can use. Time for the rubber to meet the road. DATA: Since I would like to try my hand at algorithmic day trading, I would want, at the very least, minute OHLC. I went spelunking on the Internet to look for some good data sources and found one, but they doubled their prices in the last week! I am not afraid to spend a little money on gaining access to good data, though I would want to be able to shuttle the data around my own systems and not be locked into some vendor's idea of how I can use the data. This may be a difficult problem to solve.
My friend. For algo/auto you'll need at the least, quality tick level data to swim with intraday sharks. DTN IQ feed has worked well for me trading equities. Also, get away from Quantopian ASAP if you plan to daytrade. Find, or build a good tick capable automated platform.
Yep, min data is worthless in my opinion for intraday trading, I want fills to match as close as possible to the real historical market.
Perhaps you and @digitalnomad can help explain why tick data is necessary for intra-day algo trading. For me, algo trading is not about using computers to "get in faster". It is about inventing a system and using computers to carry that system out. Slightly different than what people normally do with HFT/algo trading. There is no way I'm interested in competing with the big guys at all.
Because of fills, I may only be testing a system that trades a few times a day but I want the exact price, not an estimation based on OHLC from higher level bars.