throwaway13qf85

Meanwhile, the tailor down the road who decided to take a couple of weeks to learn how to work with red velvet, despite his personal preference for working with silk, has filled ten orders for red velvet jackets already this week, and has an order book with a couple of hundred more waiting to be filled.

It's totally reasonable to refuse to work with technology X in favour of working with technology Y, despite the lack of demand for Y. But you can't simultaneously moan about how unfair the world is when you make that choice and then can't find as much work using Y. You knew what the situation was ahead of time.

"Joe Sixpack" is a terrible name for the average US stock investor. The median number of shares owned by the adult US public is exactly zero. Most people who own (publicly traded) stocks are already wealthy. "Joe Chateau Lafite" would be a better name.

Source: some Matt Levine article.

Appropriately, "The requested article is not currently available on this site."

Front-running[0] is where a stockbroker abuses the relationship they have with a client to place their own order in front of a client's order, because they know that the client's order will move the market, and that subsequently they'll be able to close their own position at a profit.

Having a speed advantage over other market participants and using that advantage to pull your quotes on another exchange is not front-running! It's just sensible market-making, of the kind that has been doing on for hundreds of years. It's no better or worse than sending a pigeon over the English Channel in 1815[1], or using the Transatlantic Telegraph to outpace ships in 1866.

Also, shouting "straw man" is not actually an argument.

[0] http://en.wiktionary.org/wiki/front_running#English

[1] http://en.wikipedia.org/wiki/Nathan_Mayer_Rothschild#Legend

1) It's debatable whether you can call this behaviour "abuse". It's also debatable whether you can call it "front-running". The HFT has an advantage over the rest of the market, which is that they're faster. They're faster because they've paid for faster connections and they've hired expensive developers to build fast software. They then use that advantage to propagate information between exchanges more rapidly, so that they don't get picked off by informed traders on other exchanges. The basic mechanism is exactly the same as any other market making, it's just that it happens faster.

Let's say I'm a big investor in 1960 who wants to buy 100,000 shares of MSFT (yeah, they didn't exist back then, whatever). I call up a floor broker who's standing on the trading floor at NYSE and he quotes me $49-$51 (because it's 1960 and you can drive a bus through the spread) but he can only offer me 50,000 shares. No problem, I buy from him at $51 and dial another broker at BATS in Kansas (also didn't exist in 1960) to get a quote from him too. But in the time it takes me to dial the number, the news of my trade is wired from NY to Kansas and my broker there has put his prices up in response - he now quotes me $49.50-$51.50.

What the hell? I thought it was $51 to buy? Well, it was at the time I made my first trade. But when you want to make a big trade, you don't get it all at the bbo. You expect your trade to move the market.

Exactly the same thing happens today, except that it all happens in milliseconds rather than minutes, and the spread is $0.01 instead of $2. Voice traders at banks and other big institutions (at least, the ones that didn't already adapt years ago) are getting hissy about it because they want to be able to buy everything at the prices they can see on the screen, regardless of liquidity considerations, and also they'd like a pony thank you very much.

2) 'Regular people' are not putting in orders that are large enough that they need to be routed to multiple exchanges. If I send an order for 100 shares of MSFT, it won't go anywhere near an exchange. It will get filled immediately, by my broker, at essentially the national bbo.

3) Yup, it's totally valid to ask these questions. In fact I think it would be great if the HFT industry was more transparent, and I fully expect that to happen. But that's not the same as saying that the market is rigged or labeling totally standard market-making behaviour as "abuse".

You realize that they have to pay people to move that cash around, count it, double check it etc, and then they have to pay to store it and maintain it? People don't work for nothing, and storage doesn't cost nothing.

That is the entire game of market making. You are literally complaining about market makers doing their jobs.

As a market maker, I might sit out there offering to buy 1000 shares of Microsoft at $40.20 and sell 1000 shares at $40.30. Then someone comes along and buys 1000 shares from me at $40.30, so I need to put a new quote into the market. Do I put it in at $40.30 again?

Hell no! There are two main reasons why not -

1. I know that there are buyers out there, and most likely the reason there are buyers at $40.30 is because they believe the stock is worth more than that. I need to revise my prices upward to reflect that new information.

2. I'm now short 1000 shares of MSFT. If the price goes up further, I will lose out. I need to persuade someone to sell me 1000 shares to cover that short position, so I need to offer more money - therefore I need to raise my quotes.

Most likely is that I'd now put in a new offer at $40.32 and raise my bid from $40.20 to $40.22.

This is the mechanism by which market prices reflect new information. Market makers change their prices to reflect information in the order flow. This is the entire reason that liquid, efficient markets are able to exist.

Is it possible that it sometimes doesn't have anything to do with moderation at all?

Every submission has a big 'flag' button on it. I don't know exactly what that does when clicked, but I assume it tends to make submissions drop further into obscurity.

Some topics that get a lot of exposure (the NSA and bitcoin come to mind) are likely to get heavily flagged when they appear, which probably doesn't look much different to moderation.

I do research for a hedge fund, which pulls in $150k-$1m per year depending on how well the fund does. I program in my spare time.

Presumably you modify the rules to allow lateral shunts though, as per the the 1963 Davison Reformed Numberwang Rule Set (Version 3)?

When you lose money for two weeks straight, it's nice to be able to figure out if it's a statistical blip, or if there's a fundamental reason that the trade stopped working. If all you have is a statistical correlation, you can't do that, and you have to guess. If you have a causal relationship in mind, you can examine the market to see if there are reasons to believe that the causal relationship might have broken down.

Any two time series which move broadly in the same direction will be 'correlated' if you compute the correlation on price levels, whether they have any predictive power or not.

Correlation on price levels is meaningless, only correlation on price differences or returns is meaningful.

They seem to be computing the correlation of price levels (which are completely meaningless) rather than the correlation of price difference or returns.

Any two time series which broadly moved up over the same time period will look correlated if you compute the correlation of levels. But they could in fact be completely uncorrelated (and therefore have zero predictive power) when you compute the correlation on returns, which is what you should be doing.

I don't understand why anyone would feel that the "Google Chef" scenario was a problem. By joining a young company, that probably can't pay you a market rate salary and that has a significant chance of failing, you are taking risks. You are compensated for those risks with equity.

It's an out of the money call option - you expect that 90% (95%? 99%?) of the time it won't pay out, but when it does pay out, the payoff could be anywhere from "pretty good" to "life changing".

Sure, the early Google employees are way out in the tails of the distribution (just like the early Facebook employees, early Twitter employees, early LinkedIn employees etc). But someone has to be in the tails of the distribution, and the fact that you see someone there certainly doesn't mean that they don't deserve their payout.

"PonziDOGE may charge a 5% fee from the general pool for server costs and miscellaneous expenses."

In this experiment, the employers picked between two candidates, one male and one female. If you pick the male on the basis that men tend to have a higher variance of performance, you will end up with a significant underperformance as much as you end up with a significant overperformance. In any case, the task was not to achieve the highest absolute performance - it was to choose the better of two candidates.

In other words, although the variance explanation might give a rational reason for hiring men over women in the real world (although I am very skeptical) it certainly doesn't give a rational reason for hiring men over women in this experiment. Your criticism does not apply.

I Fucking Love Pictures That Are Sometimes Tangentially Related To Science.

An increase of 40% in 7 years is about 4.9% per year, which isn't so terrible when you consider (i) that this period includes the largest financial crisis for fifty years (ii) inflation.

Without any other evidence you can't conclude that this is anything other than a coincidence.

In both my examples, the options were written out of the money. That means the premium is small (because the option is unlikely to be executed - premium is always largest for at the money options). Whether or not the premium offsets the difference between strike and spot totally depends on the size of the move! If the option starts $10 out of the money with a $5 premium, and it ends up $10 in the money, you've lost $5 whichever way you look at it.

Your advice of combining options and stocks is at best a little naive, and at worst will be a disaster for anyone who's not a sophisticated options trader.

If the price moves against you (down if you have written a put, up if you have written a call) then you never get the chance to buy the options back at a profit. You might get a bit of theta decay, but equally any large moves will tend to kill you on the gamma and vega.

As I said in another comment, writing options covered or not is basically a bet against volatility.

But you don't own our favorite stock at a discount. If you've written a put on AAPL struck at $450, and it drops to $400, you are forced to buy it at $450 - you end up buying it at a premium! What's worse, even if you think the stock is too cheap at $400, you have a $50 hole to climb out of before you can start realizing any of that gain.

The volatility skew on equities is generally downward sloping as a function of strike (because investors are scared of crashes), meaning that the puts you buy to protect your capital will be more expensive than the calls you are selling to earn the premium - if you want the same amount of downside protection as you have upside risk, you'll actually bleed cash with this strategy. The only solution is to buy less downside protection that upside risk, which leaves you vulnerable to a market crash, whilst at the same time capping your upside - exactly the situation you don't want to be in!

What? If you write a put option, and it is executed, then you have to buy the stock for its strike price, which will be above its market price (that's why the put was executed in the first place). You end up buying the stock at a premium, not at a discount.

Here's a concrete example. A stock is trading at $100 and you write a put on it struck at $90, earning a premium of (say) $5. Then the stock falls to $80 and the put is executed, so you buy the stock for $90.

You now have something worth $80 and a $5 premium, but you paid $90, so you are $5 out of pocket.

Now you write a covered call on the stock struck at $100, earning a $3 premium (because it's further out of the money the the put you wrote earlier). The stock goes to $110, so you sell it to the call owner for $100. That's nice, you've earned the $3 premium and you sold the stock for $10 more than you bought it for (a total of $13 up). But if you hadn't written the call, you could have sold the stock for $110, and been $20 up instead.

If you also buy a protective put (say for $1) then that's an additional loss you bear in this scenario, since you can't execute the put.

If you're writing options, you're basically betting against market volatility. You'll do alright in the short term, but you'll get absolutely creamed if there's a stock market crash or other crisis.

I don't think it's worth taking this very seriously (I am a full-time trader at a hedge fund).

Most of it is technical analysis type stuff, with very little to nothing backing it up. The decent bits of advice that I can filter out are

> Concentrate on current investments, not past or future ones.

Good advice in general. A similar motto applies in poker - once your money is in the pot, it's no different from anyone else's money. Don't get hung up on sunk costs. However, you might occasionally give a thought to your future investments, especially if your current ones are somewhat illiquid (free cash is optionality).

> Always keep some cash for short term opportunities.

Decent advice, though it's questionable how many short-term opportunities you're going to spot if trading isn't your full-time occuptation.

> You don’t need to trade every day! You don’t need to trade every day!

In fact, if you're not a professional, the less you trade, the better.

> If a company publishes earnings and the stock doesn’t move much it might be that most people already own the stock. It could go down.

Or, more likely, the earnings figure was already priced in and it is as likely to go up as down.

> Stay away from penny stocks.

Very good advice. Stay the hell away unless you have some privileged information on the the company (and even then, stay away 90% of the time).

I recently spoke to a guy who sells swaps for a major investment bank.

The basic idea is that he comes up with some trading strategy, and writes the code that computes the profit/loss associated with that strategy if it was executed at market fixing prices (typically the market open or close each day).

The bank sells a total return swap on this strategy, which means that in return for a fee from the client, they pay the client the stream of profits (or losses) each month that would have resulted from trading this strategy. Behind the scenes, the bank trades the strategy (or something like it) in order to hedge the risk associated with the swap, so that they can earn the fee approximately risk free.

There's an obvious problem with this, which is that the client basically has to take the bank's word for what the profit/loss of the strategy is. To counter that, the guy who came up with the strategy now has to write a 100+ page document in legalese, which outlines exactly how the profit/loss on the strategy is calculated. This has to be sufficiently detailed that someone couple re-implement the code themselves to check it. The guy I spoke to said that this documentation takes up >50% of his time.

I'm sure everyone here will appreciate how incredible it is that a bank will pay someone six figures every year to spend more than half their time writing documentation that literally does nothing more than reproduce a piece of code, except about 50 times more verbosely.

Different symbols, but it doesn't mean anything.