Jun 9, 2016

Travelling

I am travelling to Ukraine to visit family. If you are a Kyiv-based volatility trader and would like to chat, send me an email.

Speaking of, Ukraine has a tiny options market (here's front month options on the UX index futures) Open interest at the time of writing is 15K contracts.

Jun 6, 2016

Making Money In Volatility Is Difficult

Well - making money in anything is difficult, but volatility is both difficult and complex. I received an interesting performance table for a number of  volatility and options funds (Nelson Report from Soc Gen, cannot post here for legal reasons) .

Total of 48 funds across 38 managers with average fund being about 6 years old. Out of 48 42 have positive average returns, 18 have sharpe over 1, and only 5 have sharpe over 2. These 5 are

  • Structured Alpha 1000 from Allianz 
  • Bond VOL from Global Sigma, as well as their 
  • Global Sigma Plus program
  • Mint Tower
  • Twin Tree

I am not familiar with the last two names, if you have any interesting information please get in touch.

P.S. A reader emailed me: "In your latest post your mention a report from Soc Gen.  I have access to their markets portal, but can't find any recent report authored by or related to a Nelson or anything volatility.  I'm very curious to look closer though.  Can you help with any other identifiers of said report?"   My reply: "I don't have access to the research portal and received it from a colleague. Maybe this will help - it was not a pdf report, but a spreadsheet called SG Nelson Report (May 2016) . Inside the spreadsheet it is called "Newedge Nelson Report".

Jun 2, 2016

SEC Charges Karen "The Supertrader" Bruton With Fraud

The filing is available here, but the summary is as follows:
Ms Bruton is a self-taught options trader who allegedly earned millions in profit with fraud. She gave a number of interviews that are available on youtube, and apparently is a known name for retain options traders.

SEC alleges that she would realize gains and roll over losses, but charge fees on realized gains. What I don't understand is how is this possible using listed options (she was in the business since 2008, why didn't she go bust? was it  incoming funds that kept her afloat?) and mark to market accounting? Didn't any of the clients ask to see actual account statements from their broker?

May 16, 2016

Global Sigma Interview

Short interview with Hanming Rao, founder of Global Sigma Group, one of the more successful volatility programs.

Since its inception in 2009, Global Sigma Plus Program realized 14% annual returns, with shape of 2.5+. More recently they started AGSF program in 2013, with similar returns, with sharpe of 1.6, and BondVOL program that started just a year ago.

Dr Rao highlights risks and opportunities in short-term options, and his approach to trading, where he tries to predict both short-term movement and volatility. I want to add that in my opinion systematic trading of weekly options is not for amateurs. Gamma risks are very significant, and even highly experienced trader like Dr Rao stumbled last year on volatility spikes.