8 ms·

Steven A. Cohen’s Newest Bet: Do-It-Yourself Computer Traders

89 points by redcastle 10y ago

chollida1 10y ago
> The investment of as much as $250 million will go to a hedge fund launched by Boston investment firm Quantopian. That fund provides money to do-it-yourself traders who come up with the best computerized investing methods, giving a share of any profits to the creators. This seems like a pretty good idea. A billionaire who runs his own money and just spent a pile to build out his own quantitative team invests a "small amount" to see if there is something to the wisdom of the crowds there. The only point to note is that quantopian has 85,000 people trying 400,000 algos, something about monkeys and Shakespeare seems applicable. If my experience is any indications the funnel of ideas to profitable strategies gets very narrow very quickly. Something like for every 100 ideas, 40 get tested, 10 look profitable 5 make it into production and 2 actually work out. And then you have to factor in that the average life span for each algo can be measured in months. Actually that sounds some what depressing:( If you are an algo trader, then you are always running. Congratulations to the Quantopian team!! This is a big milestone and something you should be proud of!
- throwaway1134 10y ago
  > Actually that sounds some what depressing:( If you are an algo trader, then you are always running. This is so true and what eventually made me exit this line of work. In most other forms of human endeavor, time works in your favor. If you're a dentist or plumber for example, as time passes, you gain more experience, build a customer base, can charge more for your accumulated skills, etc. Not so in algorithmic trading. The things that work well today slowly stop working, and you have no recourse. Always on the treadmill. I eventually decided that I didn't want the sustained worry of "what new thing must I invent today so that I can pay rent next year?"
  - runako 10y ago
    >> The things that work well today slowly stop working Isn't that more or less a property of the technology industry as well? You have to continually reinvent yourself to remain employable, etc. Perhaps it's more acute in trading, but then again so (often) are the spoils larger.
  - vegabook 10y ago
    I buy like 5 books a month just to try to keep up. I've got math-overload not to mention latency-depression and algo-stress. I have cuda-mares at night. Trying to keep up is so personally costly that I sometimes wonder if I shouldn't just become a carpenter. Or a gardener. Bring on the Universal Basic Income! Free me from this accelerating treadmill to oblivion!
    - fapjacks 10y ago
      So it's one job you wouldn't mind the robots come for?
- spitfire 10y ago
  Monkeys on typewriters is right. Quantopian always had some major red flags with it. I always figured they were just a play to develop algorithms for someone else. They only focus on the trading algorithms with no support whatsoever for portfolio allocation, risk management, money management, etc. This appeals to random-joe gamblers, and is the ideal approach if you're a hedge fund looking to copy ideas. People develop algorithms for you, but are blind to all the missing pieces (risk, money mgmt, etc).
  - mikkom 10y ago
    > They only focus on the trading algorithms with no support whatsoever for portfolio allocation, risk management, money management, etc. Sorry what? The algos are coded with python. How can you not include proper risk management, portfolio allocation etc with python?
    - spitfire 10y ago
      Because algorithms and risk/portfolio management are totally different spheres. You don't want to complect your trading algorithm with your risk management, portfolio allocation or order/execution management systems. And that is my point. Quantopian is aimed at inexperienced individuals who have never heard of Black-Litterman and won't notice what they're missing.
      - mikkom 10y ago
        > You don't want to complect Some people want full control of the pipeline. I'm one of them so this doesn't bother me personally. However I kind of agree with you as it's PITA sometimes that quantopian does not allow importing external or personal libraries so everything that is not included at the libraries they allow to import must be copy/pasted to each algorithm. I hope/think this will improve at some point though.. ps. https://www.quantopian.com/posts/black-litterman https://www.quantopian.com/posts/black-litterman
        spitfire 10y ago
1024core 10y ago
General question: if I had an algorithm that could perform well, why would I hand it over to Quantopian? Isn't a lot of the value derived from the secrecy?
- artifaxx 10y ago
  It depends if you have enough capital to trade on that algorithm at scale. The more capital you personally have the more potential value you get from keeping it secret.
- jackmott 10y ago
  There is rather a lot of cost in being able to hook your algorithm up to the markets with fast enough access.
- supster 10y ago
  From Quantopian website: "You own your algorithms. Your algorithms are kept secret. Ideas are some of the most valuable assets anyone has. We are committed to protecting your intellectual property and keeping it safe." More importantly, a lot goes into developing an algorithm including clean data, back testing, infrastructure. Quantopian handles all that for you, so you can focus on developing a stellar algorithm. Of course YMMV.
- jihoon796 10y ago
  Quantopian provides data, a community, and capital. All of these are expensive costs for any individual trader. In addition, a lot of strategies don't really work that well unless you have a 'critical mass' of capital with which to capture any meaningful profit. Execution is also important. It's one thing to have an algorithm that works in theory and is back-tested. Execution is a different ball-game because you have to deal with factors like trading costs/brokerage fees, accounting, etc.
- emptybits 10y ago
  You can use their data and (fast?) order fulfilment to test your algo to the point where you know it performs well, and then go off and do whatever wherever you want with it. You wouldn't "hand it over". From Quantopian's FAQ: [1] Q: Who owns my algorithms? A: You own your algorithms. Everything you write is yours. Quantopian does not own your algorithms; you do. Q: Are my algorithms secret? A: Your algorithms are kept secret. We are committed to protecting your intellectual property and keeping it safe. Ideas are some of the most valuable assets anyone has. We take this responsibility to our members extremely seriously Caveat: In their detailed terms: "If in the course of providing technical support or other maintenance of the Services it becomes necessary for Quantopian to view your private Content, such viewing will be restricted to the very specific technical purpose." [2] [1] https://www.quantopian.com/faq https://www.quantopian.com/faq [2] https://www.quantopian.com/policies#terms https://www.quantopian.com/policies#terms
akg_67 10y ago
Where we have seen this before? Visium might be a case study in what can go wrong with such strategy. Of course some might consider Dan Loeb (Mr Pink on silicon investor site) as successful product of such strategy too. http://www.businessinsider.com/visium-asset-management-closure-rocks-wall-street-2016-6 http://www.businessinsider.com/visium-asset-management-closu...
swalsh 10y ago
Sounds like he watched what the Draft Kings guys were doing, and said... jeez I want to do that on the stock market.
blobbers 10y ago
This seems like a really exciting development. I spent a significant chunk of time doing a contest algo but was a bit hesitant to continue developing on their platform if it was unclear if it had a future. This investment asserts that Quantopian is viable going forward and a very worthwhile investment (of time) for developers.

89 points by redcastle 10y ago

> The investment of as much as $250 million will go to a hedge fund launched by Boston investment firm Quantopian. That fund provides money to do-it-yourself traders who come up with the best computerized investing methods, giving a share of any profits to the creators. This seems like a pretty good idea. A billionaire who runs his own money and just spent a pile to build out his own quantitative team invests a "small amount" to see if there is something to the wisdom of the crowds there. The only point to note is that quantopian has 85,000 people trying 400,000 algos, something about monkeys and Shakespeare seems applicable. If my experience is any indications the funnel of ideas to profitable strategies gets very narrow very quickly. Something like for every 100 ideas, 40 get tested, 10 look profitable 5 make it into production and 2 actually work out. And then you have to factor in that the average life span for each algo can be measured in months. Actually that sounds some what depressing:( If you are an algo trader, then you are always running. Congratulations to the Quantopian team!! This is a big milestone and something you should be proud of!

throwaway1134 10y ago
> Actually that sounds some what depressing:( If you are an algo trader, then you are always running. This is so true and what eventually made me exit this line of work. In most other forms of human endeavor, time works in your favor. If you're a dentist or plumber for example, as time passes, you gain more experience, build a customer base, can charge more for your accumulated skills, etc. Not so in algorithmic trading. The things that work well today slowly stop working, and you have no recourse. Always on the treadmill. I eventually decided that I didn't want the sustained worry of "what new thing must I invent today so that I can pay rent next year?"
- runako 10y ago
  >> The things that work well today slowly stop working Isn't that more or less a property of the technology industry as well? You have to continually reinvent yourself to remain employable, etc. Perhaps it's more acute in trading, but then again so (often) are the spoils larger.
- vegabook 10y ago
  I buy like 5 books a month just to try to keep up. I've got math-overload not to mention latency-depression and algo-stress. I have cuda-mares at night. Trying to keep up is so personally costly that I sometimes wonder if I shouldn't just become a carpenter. Or a gardener. Bring on the Universal Basic Income! Free me from this accelerating treadmill to oblivion!
  - fapjacks 10y ago
    So it's one job you wouldn't mind the robots come for?
spitfire 10y ago
Monkeys on typewriters is right. Quantopian always had some major red flags with it. I always figured they were just a play to develop algorithms for someone else. They only focus on the trading algorithms with no support whatsoever for portfolio allocation, risk management, money management, etc. This appeals to random-joe gamblers, and is the ideal approach if you're a hedge fund looking to copy ideas. People develop algorithms for you, but are blind to all the missing pieces (risk, money mgmt, etc).
- mikkom 10y ago
  > They only focus on the trading algorithms with no support whatsoever for portfolio allocation, risk management, money management, etc. Sorry what? The algos are coded with python. How can you not include proper risk management, portfolio allocation etc with python?
  - spitfire 10y ago
    Because algorithms and risk/portfolio management are totally different spheres. You don't want to complect your trading algorithm with your risk management, portfolio allocation or order/execution management systems. And that is my point. Quantopian is aimed at inexperienced individuals who have never heard of Black-Litterman and won't notice what they're missing.
    - mikkom 10y ago
      > You don't want to complect Some people want full control of the pipeline. I'm one of them so this doesn't bother me personally. However I kind of agree with you as it's PITA sometimes that quantopian does not allow importing external or personal libraries so everything that is not included at the libraries they allow to import must be copy/pasted to each algorithm. I hope/think this will improve at some point though.. ps. https://www.quantopian.com/posts/black-litterman https://www.quantopian.com/posts/black-litterman
      - spitfire 10y ago

1024core 10y ago

General question: if I had an algorithm that could perform well, why would I hand it over to Quantopian? Isn't a lot of the value derived from the secrecy?

artifaxx 10y ago
It depends if you have enough capital to trade on that algorithm at scale. The more capital you personally have the more potential value you get from keeping it secret.
jackmott 10y ago
There is rather a lot of cost in being able to hook your algorithm up to the markets with fast enough access.
supster 10y ago
From Quantopian website: "You own your algorithms. Your algorithms are kept secret. Ideas are some of the most valuable assets anyone has. We are committed to protecting your intellectual property and keeping it safe." More importantly, a lot goes into developing an algorithm including clean data, back testing, infrastructure. Quantopian handles all that for you, so you can focus on developing a stellar algorithm. Of course YMMV.
jihoon796 10y ago
Quantopian provides data, a community, and capital. All of these are expensive costs for any individual trader. In addition, a lot of strategies don't really work that well unless you have a 'critical mass' of capital with which to capture any meaningful profit. Execution is also important. It's one thing to have an algorithm that works in theory and is back-tested. Execution is a different ball-game because you have to deal with factors like trading costs/brokerage fees, accounting, etc.
emptybits 10y ago
You can use their data and (fast?) order fulfilment to test your algo to the point where you know it performs well, and then go off and do whatever wherever you want with it. You wouldn't "hand it over". From Quantopian's FAQ: [1] Q: Who owns my algorithms? A: You own your algorithms. Everything you write is yours. Quantopian does not own your algorithms; you do. Q: Are my algorithms secret? A: Your algorithms are kept secret. We are committed to protecting your intellectual property and keeping it safe. Ideas are some of the most valuable assets anyone has. We take this responsibility to our members extremely seriously Caveat: In their detailed terms: "If in the course of providing technical support or other maintenance of the Services it becomes necessary for Quantopian to view your private Content, such viewing will be restricted to the very specific technical purpose." [2] [1] https://www.quantopian.com/faq https://www.quantopian.com/faq [2] https://www.quantopian.com/policies#terms https://www.quantopian.com/policies#terms

akg_67 10y ago

Where we have seen this before? Visium might be a case study in what can go wrong with such strategy. Of course some might consider Dan Loeb (Mr Pink on silicon investor site) as successful product of such strategy too. http://www.businessinsider.com/visium-asset-management-closure-rocks-wall-street-2016-6 http://www.businessinsider.com/visium-asset-management-closu...

swalsh 10y ago

Sounds like he watched what the Draft Kings guys were doing, and said... jeez I want to do that on the stock market.

blobbers 10y ago

This seems like a really exciting development. I spent a significant chunk of time doing a contest algo but was a bit hesitant to continue developing on their platform if it was unclear if it had a future. This investment asserts that Quantopian is viable going forward and a very worthwhile investment (of time) for developers.