Am I an ambitious idiot? I want to start my own Hedge Fund....
I'm a high school senior and after college, maybe after working a few years in finance, I really want to start my own hedge fund. Now listen I know it's not that simple, but I have a genuine interest and passion for stocks. Currently, I manage my own stocks portfolio of around 50k and I achieved a return of 55% YoY (I started in June 2024). I focus on short premium strategies, primarily selling cash-secured puts, and covered calls on leveraged large-cap equities. I target about 1% a week and it has been working very well for me. Anytime I get assigned on my puts I just turn around and sell calls at strikes which are above my cost-basis. The result is either I chip down my average cost or the shares go away for a profit. Obviously, I have a few technical indicators I look at before I take a trade but that is essentially it.
I swear I'm not lying when I say that I have a 100% win rate with my strategy. But do you guys think this is a viable main strategy for my hedge fund one day or at least think I have the applicable skills to start my own hedge fund.
Lastly, I know my account size is small and doing this with millions is definitely much different. Also, I feel with my strategy the only thing I could really suffer from is some crazy 2008 market crash, but even with that I would recover eventually. And yeah, I only sell these puts on stocks that aren’t going to drop to zero overnight, so blue-chip names with some volatility like NVDA. Also if you have any recommendations on things I should study on related to this share with me! Thanks please don't get on my ass if I seem like an idiot.
You're not an idiot at all, you're just a high schooler. You'll learn that managing a PA of even a few million is peanuts and in no way prepares you for the big leagues. It shows you have a passion for investing, which is a crucial part of the job, but that's about all it really does for you. Go to college, get decent grades, get a job at a good firm, and knock it out of the park. Play your cards right and the rest will come with more time + experience under your belt. Good luck!
OP, this is the kindest, most constructive advice you will get here. You would do well to follow it.
Appreciate the solid advice—I’ll stay focused, keep learning, and build up that experience over time.
Ditch the GPT dawg, writing is an important skill
Starting your own hedge fund is an ambitious goal, but ambition isn't inherently idiotic—it's the execution and preparation that determine success. Based on the most helpful WSO content, here’s what you need to know and consider:
1. Your Strategy and Its Viability
2. Building Applicable Skills
3. Recommendations for Study
4. Starting a Hedge Fund
5. Next Steps
Final Thought
You’re not an idiot for dreaming big, but success in the hedge fund world requires relentless effort, adaptability, and a willingness to learn. Keep your passion for investing alive, but temper it with a realistic understanding of the challenges ahead. As one WSO thread emphasized, the key is to absorb as much knowledge as possible and focus on the long-term journey, not arbitrary milestones.
Sources: Ho-Hum to Hedge Fund, Explain to me like I'm a 12 year old the benefit of a hedge fund, Hedge Fund Careers: Getting a Hedge Fund Job Out of Undergrad and Beyond, Q&A: Non-Target School to Portfolio Manager at a Top Hedge Fund – 6 Years Out of Undergrad, Random Thoughts on the HF Industry
Hopefully you understand the risk profile of your first strategy is picking up nickels in front of a steamroller, and the second is heavily exposed to the equity market premium... and depending on how it is implemented it could be years before you see a loss. Also depending on how it is implemented, more likely the strategy is suited to be a low fee asset management product than a hedge fund product.
Have seen people at trading firms that make a little bit every day for 5 years with similar trade structures and then lose (almost) all of it in one day, before they start building the P&L again. The strategy is still positive EV so they run it, but the track record doesn't mean anything until you've been steamrolled a few times (and even then, that might not reflect the true risk, so there are better methods to evaluate expected edge). As soon as your strategy skews away from a normal distribution of returns, metrics like "win rate" don't mean anything, and length of track records needs to be a lot longer to be meaningful.
Sophisticated investors will understand this before putting their capital at risk for you to manage - the second they hear you are selling puts / covered calls, they will evaluate you very differently than say an Equity L/S PM (which most of the advice on this forum is geared towards), and with a lot more skepticism - usually selling options is the niche in the industry where they want people with the longest tenures not shorter ones.
As per what the other poster said, keep at it and learn as much as you can, you may find that it takes more than a "few years in finance" to start your own fund, but the earlier you start learning and start making mistakes the faster you will get there.
dumb question: what happens to the covered call strategy when erp is wide vs tight? i actually cant much material on what happens to option pricing given different erp since you’re using rfr to price, no?
when ERP becomes wider options prices go up because of higher vols... stocks likely went down but you don't benefit because you covered, and net you lose. fundamentally you are owning a stock and selling some of the upside, and the higher ERP / vol means the value of the upside you gave up just went up.
inversely if ERP tightens you make money (but perhaps less than if you had just been long the stock).
Thank you. That’s a great perspective, I definitely need to respect the long-term risks and focus on building a track record that actually proves durability, not just short-term gains.
With how much did you start the strategy with?
Started with a little under 30k.
Found my exit liquidity
There's no reason why you couldn't emerge from college very well positioned to get a seat or even win seed funding. But to do that, you need to focus on what actually matters (knowing what moves a stock, idio vs. factor returns, research process, etc.) and avoiding what doesn't (technicals, basic options strategies, etc.).
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