Hi Gene,
Interesting to hear about your evolution and new interests. I was hoping you might get some responses from people in the know about hedge funds, but so far at least I'm not seeing any. I'm not terribly surprised by that, since I doubt that few of us who have read this thread would meet the eligibility requirement to invest in such a fund. It's well outside my range of experience, but it is my understanding that except for a limited number of participants the investors have to be well capitalized, sophisticated individuals who are likely to fully understand the risks. Perhaps you might fill us in on your understanding of the nature of such a fund, the requirements that must be met by investors, and the requirements that must be satisfied by a fund manager. For example, does the fund manager need special certification, or any certification at all for that matter? Could an unregistered person decide to start such a fund and solicit investors? Perhaps you could point to some reference material on the internet for those interested.
I, and several others I have talked to share your belief that very short term trading has become increasingly difficult. I don't know how to allocate the cause of this to SuperSOES, or decimalization, or anything else, but I can certainly see that penny increments have made it impossible to profit from a "true" market making function (profiting only from taking the spread while serving as a middle-man between buyers and sellers). I have always believed that MMs served a legitimate (at least in theory) function as providers of liquidity, and that they deserved fair compensation for doing so. My heartburn with what I have observed in the market has been my perception that instead of making markets, those who have ben given granted the tools to do so have evolved into hugely capitalized swing traders with the power to drive the markets wherever they want them to go. In the absence of any profit motive for taking the spread that will be the only game left, so I don't see this as a positive change, and certainly not "better prices" for investors.
I have toyed with a few hedging strategies of my own that I think have good profit potential. I doubt it's anything nobody else has thought of, but clearly there are things one could do with offsetting options and futures positions that would offer considerable leverage and consistently profit from time decay. It will be interesting to see what opportunities are created by the emerging single-stock futures market. I'm guessing the futures will not have the liquidity needed to make this attractive for some time, but who knows.
Good luck to you, and the rest of us still trying <ggg>
Dan |
