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It's a little less black and white. Suppose I put a guy with a physics PhD in a dark room for a while and he tells me 'with 99% probability, a stock with a price-to-earnings ratio of under 10 will beat the S&P 500 the next year". So whenever a stock's ratio gets below 10, I buy the stock and short the S&P 500 and wait for the bags of money to arrive. In that case, I'm not really relying on noticing the actions of others who have discovered a good deal. Yet, I am keenly interested in beating anyone to the stock when the ratio gets to 9.99. In reality, the market signals are more complicated statistical relationships, they could just as easily arise from someone being very dumb, instead of very smart. Or just the result of random variation that day.

Obviously in this kind of pure arbitrage situation, the world would be a better place If seller A and buyer B are matched up directly. But rarely would this kind of situation come up. There was this nytimes article a while back that describe something similar to the above scenario in context of a 'flash order', and I think everyone thinks this is what HFT is. For a normal retail order this should not happen. But for the flash order described in the nytimes article, the truth is a little more complicated. The buyers and sellers were not immediately matched up in that case. Why? The buyer was trying to hide the fact that they were trying to buy, by using a flash order. The gamble is they could find another pocket of liquidity before sending it to the open market. But in this case the gamble failed-- they would've been better off sending it directly. There are many controversies about flash trading and how it skirts Reg NMS. If you read the flash trading page in wikipedia there's some good info by the BATS people in the Forbes link.

Certainly he does have a vested interest. Not the end all-be-all, but he does cite the board of governors and hendershott-riodan as evidence it reduces volatility, some indirect evidence in the short selling ban, the history of QQQ as evidence of lowering cost, tightening spreads.

The 'fair value' he's talking about us just the supply-meets-demand of that stock for that particular moment-- that moment could definitely take place in a larger bubble of that security. The mini-bubble within high freq trading he refutes by reasoning only ("another hft would detect this"), so I think a more concrete example would've been more convincing. As with all bubbles the question is how far out of line can the price get, and how quickly will the price be brought back to reality

You're right; let my comment be stricken from the record...

"In Houston, the exact opposite of San Francisco, I assume you'd get shot"

switch that to 'small town texas' and I would agree. Houston proper tends to vote to the left, not to mention we have our own budget problems now.

How much do you know about trading now? If you know little, I would recommend the textbook Trading & Exchanges by Larry Harris. It's somewhat out of date but still very good. I work at a high-frequency trading shop and that is the first book they shove at you when you walk in the door.

Other than that, I'd like to second what several other people have already said: getting a job at a firm is a good way to learn, you're outgunned in terms of brains and money, and 10k is probably too little. Now, you can do a lot of learning for 0k while you save money, and every startup is outgunned by goog, msft, but that doesn't mean there isn't room in the ecosystem. Like a startup against an established player, you could find a niche that is going unexploited. What makes trading harder is the established players don't tell you much about what they're doing, so you don't know if you are doing something new or walking into a trading strategy perfected 10 years ago by DE Shaw. With a software startup, you have more information about what your competitors are selling, what their products are, how you might differentiate yourself, what's missing from the internet, etc. Software companies promote their products and try to get public attention; trading shops try to keep as many secrets as possible.

Agreed. MikeCapone, I'd also recommend that you start with the essay at the very end of the book; serves as a good intro/overview.

Cuban makes a lot of good points in this series, but fundamentals do exist. Compare his philosophy to Warren Buffet. Sure, Buffett does often get better deals not available to retail investors, such as the recent Goldman deal, but Buffett also buys plenty of common stock as well. (There is plenty of overlap in the philosophies as well...looking over his 2008 letter, seems like he favors dividend paying stocks, but don't hold me to that).

Houston, TX, US

This is more general than what you want but if you haven't read pg's 'why smart people have bad ideas' it's well worth it. http://paulgraham.com/bronze.html

I left a startup for a regular hedgefund first; I think having a lot of outside interest in finance helped. Then the HFT firm hired me because now I had some finance experience, and I knew C++. Another approach would be to look at the career pages of getco, citadel,etc, and diff your resume against what they want.

Edit: but really, why are you dying to get in? I would guess startups are a better bet for most readers of HN, anyway.

I just recently read an article that discussed this phenomenon. Took me forever to dig it up:

http://www.bloomberg.com/apps/news?pid=20601057&sid=anOM...

in summary, many stocks go up after declaring bankruptcy, and it's probably due to short-covering.

Edit: but then the next question is, why cover your short-sell at all if we know it is going to 0 eventually? It may be that they are trying to release their money tied up in 'margin' http://www.investopedia.com/ask/answers/05/shortmarginrequir...

If you're short on time: http://joelonsoftware.com/uibook/chapters/fog0000000057.html

Spolsky's work is light and easy to read. This work is geared towards "progammers", although that is not mutually exclusive with the word "CEO". It'll help you avoid more obvious mistakes. Nielson and About Face are more thorough. I haven't read Don't Make Me Think but I've heard good things (and lots of comments here, so obviously I should read that one...)

The best I could do was an "authoritarian index", using the (GDP / Population) / Gold Medals and Total Medals. If you rank them by that, you see some pretty nasty countries near the top, and nice countries near the bottom.

Zimbabwe, North Korea and China round out the top three... Ethiopia is ok but does lack freedom of the press, etc.

Then look at the bottom of the list: all free market, liberal democracies. Finland, Belgium,etc, Bahrain, arguably the most democratic country in the Gulf, Slovenia, etc, on the way up.

There are statistical blips of course. Jamaica is near the top because they are just that aweseome. Also, I just made this up so it's probably completely wrong.

To put forth the very rough and completely unscientific theory: A more authoritarian country is willing to put in more effort, per dollar of GDP and amount of population, to get gold medals. They've got more to prove.

I was reminded of this quote:

"If at first you don't succeed, try, try again. Then quit. There's no use being a damn fool about it." --W.C. Fields

Short answer: No, don't do it.

Long answer: For anyone interested in this stuff I highly recommend the book Trading & Exchanges by Larry Harris. The book is about market microstructure, and the knowledge applies to any market whether it's equities or options or online gambling like intrade.com. It's a textbook, so not riveting reading, but great information.

As other posters have pointed out, it depends on how you define zero-sum. Trading is zero-sum, when you compare it against market returns. However, as a trader you are providing services such as immediacy and liquidity. My AAPL stock is more valuable to me as an investor, since there is an active market, and people are willing to sell it to me and buy it from me on short notice, even though I am losing some money to them through the bid-ask spread and execution costs. The other comments about options being useful for spreading out risk are true as well.

As far as the rationality goes, it's rational if you're an expert, you have better information than the market, if reading the above textbook kept you up late at night, etc. Your intuition about the odds are correct, though, so keep your pessimism handy.

So why is my short answer 'no'? Well if you don't have the patience to read the whole post then you definitely shouldn't do it, since learning all the math behind it is going to be way more boring. You've read Taleb which is a good sign. Now that you're at the end the answer is 'maybe', but your wording concerns me: what do you mean by "getting into" options trading? If you're going to get some intensive training and learn from professionals working at reputable investment firms, then great. If you're going to read a few articles off the internet and then dive in, then that is definitely not a good idea. Trading is all about having an edge against the person you're trading with, so a few articles don't improve your odds much.

I want to post something, since I seem to be more optimistic about facebook plugins than anyone else posting here so far, but the only things I came up with was lame stuff like "too soon to tell" or "just wait and see"

so here goes: just wait and see