After 13 years of trading my own accounts, I am now at a point where I generate consistent annual returns in excess of 30% with only a 4.4% drawdown by trading options on the Nasdaq 100 index (QQQQ). My equity curve is gentle, upwardly sloping, with very little volatility. According to my calculations, my system is scalable to $300 MM. I have eight months of unaudited but verifiable records to substantiate this claim using this system and a degree in finance. I recently decided to forsake my present unrelated career to pursue a career as a professional trader. It seems that my two options (no pun intended) are to start a hedge fund or to go and trade for a firm. I thought, this shouldn't be too hard considering that I can prove I can make money, I have been doing this for awhile, and I am even willing to relocate. So I started by calling my cousin who is a bonds trader in NYC and asked him how I should pursue it. He told me that I would have to take an entry level job at a firm, work ungodly hours, trade the way they want me to trade and hope that maybe someday, they will give me the opportunity to trade. That didn't sound very appealing so I continued my search. I called some financial recruiters and trading firms and they all told me the same thing: Call them when I have a pedigree and/or at least $5 MM under management. Some even said that at age 37, I am too old. Despite this response, I am continuing to send out my resumes and applications, but as of yet, have had no interest. apparently it is not enough to be able to consistently make money. Also, it would seem that you must sacrifice your method of trading for the firm's. What gives? Are there other options besides starting a hedge fund or trading for a firm that I might be missing? Something else I should be looking into? Any input or job offers are welcome! Thanks and I wish you all continued success! Daryl
Why work for someone else? You can open up a mini hedge fund and trade friends and family's money. If you really can generate great returns, in a couple of years you should have enough of a capital base to market yourself for retail money.
Thanks for your reply lwlee. My plans are to begin setting up an incubation hedge fund in a few months. However, in the meantime, I am trying to get into a position now (rather than 3-4 years down the road) that would let me do what I love. I feel like I am missing an opportunity to refine my skills and/or gain exposure to other financial areas by not trading professionally. Most importantly, I can see the need to develop contacts within the industry, which at this point, I have almost none. Clearly I need to understand the professional investment world better, because I am missing some fundamental concepts of how it REALLY works. Sincerely, Daryl
people will want to ask your record on the other 12 years 4 months. why only 8 months of records? how are you going to back up your claims of steady 30% annual returns with an 8 month paper trail? bear in mind also the past 8 months include a huge bull market run. how does your system perform in a bear market?
Excellent point Bandit77. Unfortunately, I did not keep trading records before 2002 and I have only been trading this particular system for the past eight months. However, the problem is I trade the Nasdaq 100, and it hasn't had a major bear market since mid 2002. It might be a long wait until I can show my system's performance in all markets. However, I add 1,000 basis points to the performance of the index which leads me to believe that even if the market falls, I can contribute a significant alpha. My system depends more on volatility levels than price. We are presently in one of the lowest volatility markets in the history of the VIX and as an options seller, that is the toughest market for me. Despite low premiums, my system has thrived. If prices fall in a bear market, but volatility increases, my performance will increase. I do not see how it is possible for volatility levels to decrease much further so I am optimistic that I can maintain my performance. As you have pointed out, time will tell. There are a lot of funds out there that accumulate capital and have never been traded with real money, only back-tested. I have risked real money (my own) and achieved real results. Doesn't that count for something? So I am lead back to my original question: How do I get into trading professionally without having to wait the 2, 4 or 10 years to experience another bear market? And what is it that professional trading firms really want? Sincerely, Daryl
Not to sound rude but a 30% annual return on options is not that great considering how much risk you are taking and what the derivative positon $ amounts to if you were to exercise it. Why don't you try applying your same strategy to nasdaq emini futures and see if it works.
volente_00, thanks for your reply. I do not take your comment as being rude and I appreciate the suggestion. I will further investigate the nasdaq eminis. But I am curious why you assume there is a high level of risk in my trading just because I use options? My drawdown is only 4.4%. My level of risk is extremely low because I don't make any uncovered trades and I trade to preserve my capital first, before worrying about making a profit. If you could see my equity curve, you would see a gently, upward moving curve with very little occillation, very much resembling the performance of a bond. My trading is actually very conservative, which is what I think makes the return so unique. Thanks and have a great day! Daryl
Bingo. The reality of this business is that your own results, no matter how impressive, count for very little in the institutional world. Further, these don't help: - the short time frame; - your age (37); - being an outsider. Yeah, I know exactly how you feel. Remember... perception is reality. I'll tell you what I've done. Get one client. Just one. A relative (preferably not an immediate family member), friend, acquaintance, present or former coworker / boss, classmate, golf / tennis partner, a small business owner / entrepreneur you've dealt with, your doctor / dentist / CPA / attorney... you get the point, use your imagination. The more arm's length, the better, but don't get hung up on that. (Mine is a fellow b-school alum.) Write up a professional agreement -- risk parameters, fees, contingency plans, notifications, withdrawals, termination, etc. To get going, start managing the account in your client's name, under a LPOA. Later the structure can be changed, if need be. Keep obsessive, spotless, verifiable records. It's no magic bullet, but if you keep delivering strong, steady results on OPM (not yours!), you might be taken a lot more seriously sooner than you might think. Search ET -- there's been some good advice posted on this subject recently. Also, read closely ch. 9 (among others) "Trading for a Living" of Alexander Elder's "Come Into My Trading Room." It's directly relevant to your quest. Good luck.
Hey WC, You're one of the few retail traders to have cracked the trading nut, more power to you. But firms request formal credentials because they can (and that pretty much is what the educationals system is designed for), and they want traders who are going to implement their systems because that's what they are comfortable with and to some degree that may be the way their organization is designed and setup to run. The way I see it, you can knock yourself out trying to get into somebody else's party, or you can just start your own ... most talented traders who have a good system in place eventually realize that they are better of doing the later. Good trading, Jimmy Jam
Wow, Apex, that is a lot of good info. A few questions... By keeping the funds in the investors account, does that bypass regulatory/compliance issues? Is your main goal here to perform so well that your investor tells other investors and the same procedure is repeated, or does it then progress into a hedge fund? And in comparing this method to hedge funds, is what you are suggesting equivalent to starting an incubation hedge fund with your own funds and having your audited results tracked on public databases? (In other words, do investors make a distinction between the fund manager's funds and outside investment funds?) It is my understanding that an incubation hedge fund permits no outside funds to be invested, leaving only a full blown hedge fund for which costs would make having only a few investors impractical. Thanks again. Excellent ideas and leads! Perception is reality! Continued success, Daryl