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Interestingly, they don't discuss the possibility that someone just has a radically better UI for acting on market gossip. "“It would be impossible for me to d

Interestingly, they don't discuss the possibility that someone just has a radically better UI for acting on market gossip. "“It would be impossible for me to do. By the time you could read the news, process it, and press the ‘buy everything’ button, it would take too long." I'm picturing the context switch between reading a tweet or news article and some rocket ship of a program which gives you enormous power but takes some time to place a (possibly complex) order. What if it's just turking with a hotkey? Watch feed, see headline, Ctrl-u. This feels a lot more plausible to me than the idea that someone made sentiment analysis not suck.

facepalm 12y ago
Interesting idea, just show the gossip, extract the involved companies, and provide buy/see buttons for the companies involved. Is it possible to also bet directly on whether some piece of gossip is true or not?
ChuckMcM 12y ago
Given the description I would probably have the program queue up what it would buy based on the story and push the 'go' button. Except I believe the reason the options trader doesn't believe that is happening is that to do this you would just be sitting there watching all the possible 'go' buttons go by and clicking only the "right" one.
- xyzzy123 12y ago
  Makes sense -- kind of a market "upvote". I could actually see that UI working. The great thing about reacting to rumours is that you can profit off everyone else who skim reads and clicks "buy". So often the initial impression is good enough.
- topynate 12y ago
  Have a fast NLP engine looking at the queue, and when it spits out a >80% certainty for a buy or sell action flash the news item up on the screen with a green or red background accordingly. Double-click to confirm, order only goes out if the reaction is quick enough to make it worthwhile. You could even flash it up on several traders' screens and do it by majority vote.
cperciva 12y ago
This feels a lot more plausible to me than the idea that someone made sentiment analysis not suck. If you can respond faster than everybody else, you don't need sentiment analysis. Just bet on volatility increasing (aka. buy options on both sides) whenever a news story appears about a company.
- xyzzy123 12y ago
  I agree with you (that's a great idea), but if you're going to bet 100k+ you could afford humans in the loop. I guess you could tell the difference by looking at what options get bought.
  - cperciva 12y ago
    Being able to afford the money which humans cost is easy. Being able to afford the time which humans cost is not so easy. The optimal strategy might be to trade within a few microseconds based on "something happened to this company, so something is likely to happen to its stock price", then trade a bit more a few milliseconds later based on "a computer thinks that this sounds like good news", and then make a third trade a few seconds later based on "a human pushed the (green|red) button when they saw the headline".
- hueving 12y ago
  There are many times a news story appears about a company that have absolutely no impact on the stock. In fact, the anticipation of a news story that turns out to be nothing note worthy will lead to a drop in volatility and make your trade a losing one. See every time a company announces earnings in line with expectations for example. "x company made 1 billion in profit" could fail to move the stock at all. Betting that news is market moving requires a decent amount of analysis of the news and the credibility of its source.
  - cperciva 12y ago
    Betting that news is market moving requires a decent amount of analysis of the news and the credibility of its source. You don't need to be right every time in order to make a profit in the long run.
jackgavigan 12y ago
What's probably happening is they have a "bot" that does the sentiment analysis, readies the trade, then pops a big message up in front of the trader: New WSJ Headline: Intel in Talks to Buy Altera ALTR Stock: Trading within 30-day range {ALTR 30-day stock graph} March 2015 Call Options available ..and a live-updating, clickable GUI displaying, in a linear manner (i.e. low risk, small bet at one end; high risk, large bet at the other), the call option market depth at each strike price, annotated with the implied volatility and the % delta to the current stock price. The trader reads the info, decides how much he wants to bet, then clicks the appropriate spot on the GUI to execute the trade.
- novaleaf 12y ago
  or, an insider, who waits for the first public news to avoid detection.
- nostrademons 12y ago
  There's no way that there's a human in the loop. You're talking one second from the newswire hitting the Internet to a trade being executed on the exchange. More likely, the human prepares a list of scenarios of the form of "If a news story with these keywords appears, it will affect the valuation of this company in this way, perhaps plugging these numbers from the article into some model." News story hits the wire, the program reads it and applies some simple text mining, it compares the current market prices with the expected valuation, and it sends an order to the exchange to execute the trade. Way back in 2006, I worked at a financial software startup where one of our products (the only one that made money, actually) did exactly this. The company is defunct now - it had a bit too little focus for a small shop of a dozen or so people, and its other products weren't all that succesful - but that was one of the things that actually worked. If you're trading manually on time-sensitive information these days, you are an idiot. Back in 2006 it was something like 80% of trades on the market are automated bots; the only people who still put a human in the loop are the rubes.
  - jackgavigan 12y ago
    > You're talking one second from the newswire hitting the Internet... I expect they'd be getting the newswire in real time via Bloomberg or Reuters, instead of off the Internet.

facepalm 12y ago

Interesting idea, just show the gossip, extract the involved companies, and provide buy/see buttons for the companies involved. Is it possible to also bet directly on whether some piece of gossip is true or not?

ChuckMcM 12y ago

Given the description I would probably have the program queue up what it would buy based on the story and push the 'go' button. Except I believe the reason the options trader doesn't believe that is happening is that to do this you would just be sitting there watching all the possible 'go' buttons go by and clicking only the "right" one.

xyzzy123 12y ago
Makes sense -- kind of a market "upvote". I could actually see that UI working. The great thing about reacting to rumours is that you can profit off everyone else who skim reads and clicks "buy". So often the initial impression is good enough.
topynate 12y ago
Have a fast NLP engine looking at the queue, and when it spits out a >80% certainty for a buy or sell action flash the news item up on the screen with a green or red background accordingly. Double-click to confirm, order only goes out if the reaction is quick enough to make it worthwhile. You could even flash it up on several traders' screens and do it by majority vote.

cperciva 12y ago

This feels a lot more plausible to me than the idea that someone made sentiment analysis not suck. If you can respond faster than everybody else, you don't need sentiment analysis. Just bet on volatility increasing (aka. buy options on both sides) whenever a news story appears about a company.

xyzzy123 12y ago
I agree with you (that's a great idea), but if you're going to bet 100k+ you could afford humans in the loop. I guess you could tell the difference by looking at what options get bought.
- cperciva 12y ago
  Being able to afford the money which humans cost is easy. Being able to afford the time which humans cost is not so easy. The optimal strategy might be to trade within a few microseconds based on "something happened to this company, so something is likely to happen to its stock price", then trade a bit more a few milliseconds later based on "a computer thinks that this sounds like good news", and then make a third trade a few seconds later based on "a human pushed the (green|red) button when they saw the headline".
hueving 12y ago
There are many times a news story appears about a company that have absolutely no impact on the stock. In fact, the anticipation of a news story that turns out to be nothing note worthy will lead to a drop in volatility and make your trade a losing one. See every time a company announces earnings in line with expectations for example. "x company made 1 billion in profit" could fail to move the stock at all. Betting that news is market moving requires a decent amount of analysis of the news and the credibility of its source.
- cperciva 12y ago
  Betting that news is market moving requires a decent amount of analysis of the news and the credibility of its source. You don't need to be right every time in order to make a profit in the long run.

jackgavigan 12y ago

What's probably happening is they have a "bot" that does the sentiment analysis, readies the trade, then pops a big message up in front of the trader: New WSJ Headline: Intel in Talks to Buy Altera ALTR Stock: Trading within 30-day range {ALTR 30-day stock graph} March 2015 Call Options available ..and a live-updating, clickable GUI displaying, in a linear manner (i.e. low risk, small bet at one end; high risk, large bet at the other), the call option market depth at each strike price, annotated with the implied volatility and the % delta to the current stock price. The trader reads the info, decides how much he wants to bet, then clicks the appropriate spot on the GUI to execute the trade.

novaleaf 12y ago
or, an insider, who waits for the first public news to avoid detection.
nostrademons 12y ago
There's no way that there's a human in the loop. You're talking one second from the newswire hitting the Internet to a trade being executed on the exchange. More likely, the human prepares a list of scenarios of the form of "If a news story with these keywords appears, it will affect the valuation of this company in this way, perhaps plugging these numbers from the article into some model." News story hits the wire, the program reads it and applies some simple text mining, it compares the current market prices with the expected valuation, and it sends an order to the exchange to execute the trade. Way back in 2006, I worked at a financial software startup where one of our products (the only one that made money, actually) did exactly this. The company is defunct now - it had a bit too little focus for a small shop of a dozen or so people, and its other products weren't all that succesful - but that was one of the things that actually worked. If you're trading manually on time-sensitive information these days, you are an idiot. Back in 2006 it was something like 80% of trades on the market are automated bots; the only people who still put a human in the loop are the rubes.
- jackgavigan 12y ago
  > You're talking one second from the newswire hitting the Internet... I expect they'd be getting the newswire in real time via Bloomberg or Reuters, instead of off the Internet.