cephalopod
@macrocephalopod
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At Octopus Capital our passion is providing best-in-class liquidity in the marketplace of ideas
Joined December 2020
Don't wanna be here?
Send us removal request.
Very rare to see this level of tailoring nowadays, even on the wealthy.
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bro has just copied random lines out of a math textbook (incorrectly) and called it calculus and differential equations 😭
If you don’t understand calculus and differential equations , you should give up trading
This is what it takes to generate proprietary trading signals to live luxurious life
There is no substitute for hard work
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😉
We have built DeepStack, the first AI to beat humans in no-limit poker.
We are now building the next generation AI company for algorithmic trading!
We are growing our research and engineering team.
If you want to work with a world class AI team led by ex-DeepMind researchers and…
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“Multi-manager funds use sophisticated portfolio construction and hedging overlays to neutralise unwanted risks and isolate alpha factors in their portfolio”
The portfolio:
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Incredible that the most complete and internally consistent account of what happened at FTX/Alameda to date is not the NYT or WSJ or the FT but the blog “milky eggs dot com” written by user “fbi femboy”
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Tech guys love to notice completely obvious and unremarkable facts about the world (“sometimes salesmen lie to close a sale”) and repeat them as if it’s profound wisdom.
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I recently watched both and it’s amazing how much better The Big Short is compared to Margin Call.
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Going crazy upon learning that
@mattyglesias
thought basis points and percentage points were the same thing, and apparently frequently read sentences like “the yield on the 10-year treasury is up six basis points” and thought that was normal and fine?
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I am literally begging you to spend your 20s reading anything but this airport business section self help bullshit.
Read fiction, non-fiction, choose your own fucking adventure, I don’t care, just don’t needlessly poison your mind like this.
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sam altman was buying lunch for his girlfriend on expenses and he was fired when he couldn’t convince the board that he had two bowls of soup and two prawn sandwiches in one sitting
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You know who I really feel sorry for in all this? Matt Levine. He got this gig thinking he’d write about niche finance stuff (debt restructuring, proxy fights, derivatives etc) but instead is forced by the Market Gods to write about Elon Musk and crypto day after day after day.
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I was a “gifted child” in high school. My gifts were bullying nerds and playing lacrosse — skills which I parlayed into a legacy placement at an Ivy League university and now I make $2m a year working for my father’s real estate company.
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I just got a cold email asking for an internship from a candidate whose resume says they “Implemented a web scraper in Python to email over 5,000 people with information scraped from their LinkedIn profile” lmao
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I am begging CFAs to learn the difference between notional value, market value, and delta though to be honest I don’t hold out much hope.
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Couple of thoughs about trend following is probably the most straightforward systematic trading strategy to implement - you're just buying the stuff that's been going up and selling the stuff that's been going down.
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I’m pillpilled and maxxmaxxing. I’m going mode mode. In my “in my arc” arc.
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Incredible, GPT-3 can now write sentences that are completely indistinguishable from VC tweets.
This is revealing, but not in the way that VCs hope it is.
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A while ago I said I'd do a thread of recommended books for people looking to get into quant finance, or just starting their careers. This is that thread.
It's v biased to buy side because that's where my experience is -- derivatives/risk quants look elsewhere pls!
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“If he’s at a hedge fund, have a friend look him up on Bloomberg. If he doesn’t have an ACTIVE profile he’s back office. Or he’s a quant trader.”
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In my experience running algo trading competitions at universities, the winning team is often the one whose code doesn’t have any bugs that cause it to crash.
If multiple teams have bug-free code, the winner will be the one that avoids making stupid trades.
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1/
Get a cup of coffee.
In this thread I’ll slowly and painfully describe an idea.
That could easily be grasped in under two minutes.
If I didn’t insist on writing in this inane fucking format.
👇🧵
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The biggest lesson I had from my time in hedge funds was that a 23yo with zero knowledge of finance can start managing a book and, surprisingly often, lose a fuckload of money.
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Running a hedge fund is a tough, thankless biz.
We have $10bn in aum from hundreds of clients.
We grind out mid-high single digit returns every year with low beta, taking a modest 3-4% fees.
But lose 40% in one VIX blowout and BAM, suddenly everyone wants to redeem.
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Cute fact about the Zillow thing is that even if Zillow's model was more accurate than local agent valuations, local agents/property owners can still win on average because they get to choose which houses to buy/sell.
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it’s impossible to overstate how much people who think like this are ngmi
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having reserves is lowkey goated in situations where solvency is the vibe
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@nope_its_lily
In this scenario are they planning to buy a lot of US imported goods in the retirement?
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Only millennials and older will remember this, but the famous “jealous girlfriend” meme is based on this scene from The Matrix (1999)
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What dense 700-page Pulitzer Prize-winning history book should Chris Nolan adapt for film next?
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Half of the skill in trading is finding people like this who are willing to be your counterparty.
@EpsilonTheory
@profplum99
All you nerds care about the math of the bet and hedging. I couldn’t give a fuck about that.
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god grant me the confidence of a guy who vaporises $10bn into thin air and proclaims “predictable as always” when the next big move has already happened
Here we go. 4 year cycling. Predicable as always. The Supercycle.
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A useful little quant trick -
1. Many things in finance decay like a power law (volumes, volatility, impact etc)
2. Power laws are a pain to work with
3. Power laws over finite timeframes are very well approximate by sums of exponentials
4. So just use EMAs for everything 🚀
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This email literally won $90m of business and the threadbois are in the comments complaining about typos, lack of professionalism and how it’s “clunky” and “hard to follow” lmao
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Incredible to think that if these guys were around today they probably wouldn’t pass the third round interview at Jane Street
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pressing F9 repeatedly in the excel model as the PM screams over my shoulder, crying and shaking as the model spits out increasingly large and implausible numbers, $10m, $25m, $1 billion, no matter how many times i rerun it,
My friend is a quant at one of the largest hedge funds globally.
The PMs keep asking his team to re-run their Bitcoin model because no matter how many times they adjust it, it predicts a terminal BTC price over $10M per coin.
They don’t know whether to go all in or shut down
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Is anyone else a little sketched out by the backgrounds on some of the Renaissance Technologies analysts? As someone that works in the asset mgmt industry, you typically see people with real investing experience on their resume. I'll start with the top and work my way down. 1/7
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As a special advent treat I’m going to do 24 days of backtest errors — 24 different ways to mess up your backtest of a quant strategy so that you think you’re going to make money when you won’t (yes I’m starting late, what’s your point)
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Good news everyone, Alex left finance to get his PhD, it’s safe to trade stocks again!
Next time you think about trading stocks, think about your competition.
The most decorated international math olympiad participant of all time is that competition.
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A very funny outcome would be UST collapses, Celsius collapses, Nexo/BlockFi/YouHodler/Crypto.com etc all collapse, but it turns out Tether reserves were fine.
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Apparently you can make $500k/year running a couple of big twitter accounts and selling newsletter subs to gullible idiots and all it costs you is your soul and the last tattered shreds of your dignity.
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Half of the skill in trading is finding people like this who are willing to be your counterparty.
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I went to MIT & studied CS, one year under SBF
When he graduated in 2014, the place where all the top tier engineers went was Palantir
If you couldn't pass that interview, then it was Dropbox/FB etc
And the third-tier was quant/finance, ie Jane Street
SBF was tier-3 bad eng
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Options greeks ranked from worst to best, by someone who doesn't really understand options.
10. Rho -- worst sensitivity, very boring, mostly ignored except by people trading very long maturities (who you should not trust anyway)
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Why pay $3k/mo for a terminal when you can implement 0.1% of the functionality yourself for free?
bloomberg for 2024. why is anyone paying 3k/mo for a terminal designed in 1985.
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If anyone ever says you aren’t smart enough to work in finance just show them this post.
Any obstacle can be overcome, even a room temperature IQ and having your brain replaced with a textureless pâté
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Decided to do a thread really explaining, step by step, how to build a quant trading strategy. Data cleaning, machine learning pipeline, portfolio construction, execution. The whole shebang.
And in the last tweet, I’ll drop some serious, actionable, alpha.
🧵👇
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Incredible to me that tens of thousands of people pay for substacks giving economic and financial commentary from people who do not even understand basic facts about finance.
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blackthorne: i mostly trade based on order flow but i watch the book too, and I’m introducing more TA into my process, and stay alert for offsides positioning that might present an asymmetric opportunity
mariko: the anjin is a retail trader
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Peter I’ll take this bet with you. Any size up to $5m/$1m. Only condition is we need to escrow collateral with a trusted third party. Let me know.
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If you own a stock at 100 and it drops to 80, then goes back too 100, you only lost 20% on the drop but you made 25% on the bounce.
This is alpha.
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My wife’s uncle told me that he had a decent chunk of cash in a bank account as part of his retirement plans, so I explained to him how he could get double digit tax-equivalent yields on gilts and he looked at me like I was a fucking sorceror.
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1) I don’t usually like parties.
But watching a room of people wake up for the first time in a year was beautiful.
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This is an absolutely insane list that exposes the vapid faux-intellectualism of accounts like this.
I love Lord of the Rings but it doesn’t belong on school curricula. The idea that anyone should study The Alchemist, a self-help book masquerading as a novel, is frankly…
25 books that should be on every school curriculum but aren't:
Fiction:
1. The Brothers Karamazov - Fyodor Dostoevsky
2. 1984 - George Orwell
3. Anna Karenina - Leo Tolstoy
4. The Lord of the Rings - J. R. R. Tolkien
5. Brave New World - Aldous Huxley
6. Atlas Shrugged - Ayn…
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A couple of people asked how to price this bet. As a reminder the bet Peter offered was 5-1 against that BTC/USD would hit $100,000 before the end of the year (i.e. he receives $20,000 if Bitcoin hits 100k, and he pays $100,000 if Bitcoin does not hit 100k)
Peter I’ll take this bet with you. Any size up to $5m/$1m. Only condition is we need to escrow collateral with a trusted third party. Let me know.
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Tether has slipped off its peg and currently trading around 0.996 to the dollar.
What does that mean? Should you be worried?
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If you’ve ever submitted a market order don’t worry about what’s in the vaccine.
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Cute poker fact - starting hands are non-transitive. A pair of 5s is favorite to win against A-K offsuit, which is a favourite to win against 10-J suited, which in turn beats a pair of 5s.
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Yes, more people should definitely do this and put it to work with real money, as much as possible please.
Top tip, if your historical simulation doesn’t look good, just keep adding more parameters until it does! The more parameters, the better the performance 📈
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I present: $500 of groceries.
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Joe Rogan’s mind is a completely empty vessel that just gets filled up with whatever the last person he spoke to said, it’s amazing to watch.
1/ I watched Robert F. Kennedy Jr. on Joe Rogan yesterday and it gave me an opportunity to look into some of the "old-school" antivax claims.
First Joe Rogan let's us know that he used to think RFK Jr. was "kinda loony", but now he's a true believer in RFK's antivax claims.
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This is peak “I don’t have good brain so I’m going to use big math word and hope it’s obtuse enough that no one calls me on it.”
People should be embarrassed to be associated with e/acc after seeing this.
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How much do you guys tip the forex desk at the airport? I normally do 20% but if they make a good spread it seems fair to give them 30%, thoughts?
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This is what it looks like when you know a bit of math but have never traded profitably in your life 🫠
Hidden Markov Models:
They’re rumored to power Renaissance Technology’s $15,000,000,000 Medallion Fund.
They decode the secret patterns of the markets.
You can use them too.
Learn how:
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Deleting my dating apps because I want to meet someone the old fashioned way (a cute girl from my broker calls and tells me I owe $400m on a margin call)
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This dumb experiment underperformed the S&P for the first month, so they stopped sending updates for two weeks and are now pivoting to “long term investment strategy” because the only thing of value they have is the hype around GPT and 130k twitter followers.
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Happy one year (and a bit) anniversary to the greatest exchange to ever take place on this cursed website
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People are saying I am not posting enough finance content. FINE.
Once you have decent alphas a lot of the skill in running a systematic strategy is reducing turnover. Alpha is unknown but trading costs are certain. Keep trading to the minimum needed to monetise your alpha.
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>researcher proposes new feature
>ask if new feature is orthogonal or more momentum
>he doesn’t understand |> pull out illustrated diagram explaining what is orthogonal and what is momentum
>he laughs and says “it will add uncorrelated alpha”
>run the backtest
>it’s momentum
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“Yeah so essentially that’s why you don’t use the sample covariance matrix, the smallest eigenvalues will blow up the inverse. Instead project into a low dimensional factor space and use that to build the asset-level covariance matrix which has much better stability properties…”
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The VIX1D calculation linearly weights the 0dte and 1dte options, with more weight to the 1dte as time passes. Since tomorrow is CPI day (high implied vol) you would expect exactly this behavior as we get close to the end of the day, it has almost nothing to do with call buying.
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If you’re a serious interview candidate you will give yourself a 30 min buffer AT MINIMUM.
If you arrive early, just go sit in a nearby bar or whatever, have like 1 maybe 2 beers, and then show up exactly on time.
It’s called professionalism.
Close friend runs serious co
has interview w/GenZ candidate @ 10:00
Candidate is 6 minutes late 10:06
Friend calls front desk
checks when candidate checked in
Desk says 10:05
Me: How was she?
-She was smart
Me: Hiring her?
-6 mins late. Not a chance
🚨GenZ BOUT TO GET SHOOK🚨
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Reminder that if you’re going to trade on insider tips, you should do it by buying call options that are close to expiry (so the feds won’t have much time to notice) and far out of the money (so you won’t impact the market much, which would give away your intent)
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I have something to admit -- I have been deceiving you all this time. I'm not actually an octopus. I'm a London-based quant hedge fund manager who used to trade commodities but now mainly trades crypto. I am so, so sorry for my deception.
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Quant interview question. Each dot is an average over a few thousand executed orders, x-axis is participation over the execution period (signed order qty divided by market qty traded) and y-axis is how much the market moved over the period. Why is there a discontinuity at 0?
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Short volatility is not magic, it's basically long equities with a slightly higher mean and worse performance in the tails.
Chart below shows long SPX vs short VIX, each day as a point, blue line is OLS regression and the red line is a shitty unregularized local regression.
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sometimes you make money because of your sophisticated trading acumen and sometimes you make money because you are one of like 5 people in the world who are insane enough to fully understand the ludicrous byzantine details of the weird third tier market you are trading in
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Only problem is that the price series is one I generated using 100% random noise, it is completely unpredictable by any signal. Congratulations, you now know how to overfit a backtest. Welcome to quant research.
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Here's a quick primer on how to build a quant reversion strategy.
First step is to find a price series that looks like it may have some reverting behaviour -- this is a random stock I found that looks reasonable but you could use an ETF, currency, whatever really.
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@typedfemale
idk I just visualized the track wrapping around the dice and saw where the last square ended up, I guess that’s brute forcing it?
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The new rules explicitly allow garden leave, specifically if the employer continues paying full base salary and benefits then you are not in a post-employment period so it is not considered a noncompete (this is basically the model that already exists in the UK btw)
BREAKING: FTC Announces Rule Banning Noncompetes. This is detrimental to HFT / quant industry employers, amazing for employees. No more garden leave!
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If you convert your salary to Bitcoin immediately after it’s paid to you, you are not “taking your salary in Bitcoin”.
I have a plan that automatically buys stocks whenever I get paid, that does not mean I am “paid in $VTI”
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Yes sure. The problem with SBF was that he didn’t know what the rules were. If only he’d taken a semester of basic financial education he wouldn’t have done any crimes and customers wouldn’t be out $8bn.
What planet are these people on?
#SBF
was financial illiterate. He thought effective altruism meant he could rip people off, that it was OK to use new investor money to pay the old… Another reason why we need early financial education - to help kids understand money ethics, hopefully preventing future SBF’s.
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This is the go-to example for alternative data in finance, it’s so ubiquitous that’s it’s almost a meme at this point, and anyone who tells about it is either messing with you or wasn’t anywhere near to a pnl generating seat.
Friend of mine used to do network security work for hedge funds and he told me one place he worked with bought access to satellite photos over the parking lots of all major retailers and then used ML to count the number of cars and could estimate quarterly earnings with precision
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@bml_khubbard
You cannot play God then wash your hands of the things you've created. Sooner or later, the day comes when you can't hide from the things you've done anymore.
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Occasionally I remember that there’s an entire parallel fintwit full of analysts and associates at banks and PE firms with 1-10k followers who talk about nyc clubs and brunch spots and watches and post fake pictures of their girlfriends, real Patrick Bateman wannabe hours imo
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Imagine admitting that you're so bad at your job that you costs your client 1.5% in fees and a further 1% in slippage on a trade that should have been 0.25% all-in cost in the very worst case.
I sold $262k of BTC & ETH for a client today on a major exchange.
The trade fee to sell was $4k and the execution price was so far below spot she lost another $3k instantly.
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My first instinct is to send it straight to the trash but I kind of respect the hustle…
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This is a sort of “folk knowledge” in quant finance. It’s rarely discussed in books/papers because it’s so basic that it’s assumed everyone knows it, so I couldn’t find a good reference for it. Derivation is below.
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Few people know this but financial returns are not normally distributed. Mean-variance optimisation, Sharpe ratio AND the Black-Scholes formula are completely useless and can’t be used to make money.
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quant's worst nightmare
- develop a new alpha
- predicts future returns well
- uncorrelated with existing alphas
- not too fast to monetize
- consistently selected in walk-forward model fits
- increased correlation of forecast with future returns
- backtest pnl unchanged
fml
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My 5yo daughter came home from school shouting “I’m an egirl! I’m an egirl!” so now I need to call up her teacher and ask what the fuck they’re teaching them.
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