Poor Man's Hedge Fund

Discussion in 'Journals' started by riskarb, Oct 20, 2006.

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  1. I wanted to document my performance as a retail schlub before retaining prime brokerage services in the first quarter of 2007. As the title suggests, this will be my retail path to personal HF enlightenment. I have $1.4mm on account with four brokers/dealers. All are within reach of any reg T, retail player.

    The positions taken in those accounts will be posted here, in real-time whenever possible. Primary strategies have not changed for the most part, save for the inclusion of a classic dispersion strategy in the DJIA.

    Classic dispersion -- long the vol-box, long swap, short correlation. There are some path-dependent pricing assumptions which I intend to abrogate through the discrete turnover of diametric-outliers on the long gamma component basket. I intend to show that it is possible to add significant alpha to a pure replication. One caveat: I will not produce PnL or trade-structure beyond the outlier transactions. I consult with a fund and some retail traders on this strategy. I'll also be trading this professionally in the first quarter.

    The remaining positions:

    -- Vanilla options, discretion
    -- Exotic options, discretion
    -- Vanilla/exotic replication

    The exotic position will be transparent to all that wish to follow along. I will be trading through a listed vanilla broker and three exotic dealers; OANDA, ABN-AMRO and betonmarkets.com. OANDA for FX exotics and spot; ABN-AMRO for short duration Bund and DAX exotics, and BOM for longer durations in SPX, COMPQ, DAX. All pricing can be readily vetted with these dealers.

    Portfolio allocation:

    IB: $1,113,000

    OANDA: $150,000 divided equally among three accounts to skirt $20k exotic position limits.

    ABN-AMRO: $125,000 [100k EUR]

    BoM: $12,000

    The IB acocunt will be used to structure the dispersion, as well as trading in vanilla options, futures and hedging transactions. Many of my exotic positions carry listed vanilla option or futures hedges traded through IB.

    The Oanda acount offers touch/no touch barrier exotics on twelve spot fx pairs with a $20k global limit per account on the options.

    ABN-AMRO offers touch/no touch barriers on DAX, Bund and a handful of fx pairs. ABN exotics are limited to 5-days in duration.

    Barrier exotics in SPX, COMPQ and DAX will be traded at BoM. They allow durations from 9-180 days and maintain a $20k limit on accounts, $10k on payouts.

    I welcome constructive criticism, position recos, major suckups, etc.. I'll start trading on Monday.

    "It's so damn hot! Milk was a bad choice... "
  2. Risk...they do have meds for ADHD....seriously tho with 1.4... IF you work your ass off you might be able to make a living! :)
  3. good luck , B
    I suggest you do it by using two threads , PnL and QA a la P/L2006.
    Sometimes it was impossible to find your current positions on the old journals.
    Eddy L , move over , habemus papam ! lol
  4. jtnet


    reading your original post, have no idea what you are talking about lol. gammas and alphas, outliers, lol.
    what kind or % returns are u looking for?
  5. Kap


    I'll be interested to know how much they rip Vol you when u show Indications of Interest on Exoticcs with ABN.
  6. mahras2


    Good luck B. Not that you need it but hey its better to be lucky than to be good :).
  7. Can't wait for the English version.... :)
  8. rjv27


    In my previous life I worked at a top 3 Prime Broker. It's going to be tough to open an account with them. It was a 20MM min. at my old shop. You might be able to open something with a small PB. But another problem is that you are trading across different asset classes which requires dealing with separate areas of the firm. And with the regs in place they usually don't allow cross-margining.

    If you have any PB questions you can PM me. I still know a lot of people in the biz.

    Good luck!
  9. Thanks. I wouldn't consider going on my own with less than $20mm. I'm not concerned with margin treatment. I've got commitments exceeding $10mm.

  10. hahahaha.. lol

    it's all in the name, risk-arbitrage.. he's a exotics enthusiast.. gambling on steriods unless u know wot u're doing.. still, probably the best way to beat the sell-side..good luck nice to see how u get on..
    #10     Oct 20, 2006
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