Remote Prop Trading Firms that Aren't Dog Shit?

Hi Folks,

I've been a lurker on the forum for a while, but this is my first post. I have really enjoyed all the insight from this diverse group of financial professionals and look forward to your feedback on my question. I am posting because I'm curious about what my options might be for pivoting from being a Financial Advisor to Prop Trading. This post will be a bit lengthy to give relevant context.

My background: I went to a Top 10 Liberal Arts College. I have a 3.0, but the school is notoriously rigorous. Many of my friends went directly into big 5 consulting and IB straight out of school.  I have my CFP and plan on getting my CAIA by next August, primarily so I can perform DD my own Alternatives portfolio. I am also considering getting an MSF and like my chances of getting into a tier 2 (most interested in Georgetown).This would partially be to build skills and knowledge to augment my trading capabilities, partially because I just really enjoy learning. I raced bikes professionally after college before I started as a Financial Advisor at one of the massive discount brokers. I quickly became a top performer and have built a comfortable nest egg so compensation isn't the top priority.

I could live off my current investment portfolio, but that would be boring, isolating, and I wouldn't be saving much. My top priority isn't earning a ridiculous amount; it's having a community of brilliant people to talk markets with, making more on my own trading without having to use leverage (way too expensive right now), and work life balance. I'd prefer a meritocracy where I can work remotely, have unlimited PTO, and for my worth to be judged solely be judged on my returns. Decent training and the opportunity to learn how to be a better trader are important I don't necessarily need a salary. I'm perfectly fine making 50k in year one assuming 20% return on my portfolio in return for remote and unlimited PTO. I would be thrilled to be able to make a few hundred grand after a few years of making 20-30%.

I guess my biggest question is does this even exist? It seems like it's either go all-in with a top or second tier firm working in an office full time, or join a shitty little cash-grab firm where I won't find that community of intelligent people for pre and post-market briefings, spit-balling trading ideas, finance talk etc. Or maybe there is some other sort of investment or trading house that would meet my needs that doesn't fit the definition of Prop Trading or hedge fund?

Oh, and as it pertains to my strategy: Longer term holds on index LEAPs, index credit spreads (1-2 day holds), VIX-based hedges for the spreads, high quality bond ladders as income producing, marginable collateral for my short spreads. I use back-testing and probability based on IV to make trading decisions. I don't have a super long history trading the strategy. Just 1.3 alpha over the past 3 years because I was mostly indexing prior to this year, but I can articulate a basic rationale behind the different pieces of the strategy. I don't have super in-depth technical quant knowledge and no coding skills but I can engage in quite in-depth conversations on the markets, the macro outlook, potential implications of political, policy, and international affairs developments (aka, I read WSJ and Bloomberg Econ, Market, Political and Global affairs cover to cover every day). My thought is CAIA and MSF from Georgetown with help with the technical, more quant-focused expertise.

Any insight would be most appreciated.

Comments (5)

Most Helpful
Liam Gallagher, what's your opinion? Comment below:

So you sound quite genuine in your interest and I doubt you're unintelligent, but a couple of issues:

1. Lack of coding/quant degree

2. No professional trading track record

3. No apparent network of people already in the industry based on your post

You really need at least one of these for what you are wanting to do, especially assuming an at least semi-legit shop. Additionally the quanty stuff you describe sounds pretty low level and more just fundamental with a sprinkling of stats, which is fine, but will not be enough for most legit prop shops. Also skip the MSF as that won't help you very much.

The good thing is you could potentially work on the network/quant degree aspect. It sounds like you have an interesting background and so if time/money is not an issue you could get a MFE  from a top 10 school (I'm sure you could get into one at least), and from there you'd have a real chance. Hope this helps.

JAH92, what's your opinion? Comment below:

Liam - Thank you for the insight. I knew that might be the case and figured the MSF would give me some more legitimacy in the eyes of Prop Trading employers, but it makes sense that MSE is more relevant to most of those firms' strategies.

I guess one question I have is if the strategy I'm developing is really a Prop Trading strategy at all.

For Context:

  • I have back-tested (to 2005) and packaged each sub-strategy into theoretical mutual funds so I can run portfolio optimizations, construct efficient frontiers, map correlations etc. While I don't have a Quant Degree or recent coding exposure, I can present my strategy in an articulate manner but would need to go look at my models and written procedures to answer any advanced technical questions. I also use a number of macro indicators to guide weightings on the sub-strategies within the larger portfolio. I'm not necessarily interested in high frequency trading/arbitrage/market making. I can change the allocations of the strategy to match different target returns and volatilities/max drawdowns.
  • My strategy involves daily trading with about 20% of the portfolio. I weigh the risk of potential outsized market moves due to Fed meetings, earnings timing, important macro econ prints to determine this weighting (eg close the strategy leading into a Fed meeting, Amazon earnings, CPI releases). That portion is the biggest driver of outsized return but that whole amount is at-risk when the trade is open (no longer than the market open to the following day's close). Feasible daily return on that strategy ranges anywhere from .2% to .6% depending on IV. Target return around 4-12% per month. Annually can vary drastically based on how often it is rebalanced with the rest of the portfolio ex as little as 50% with daily rebalances to 350% with no rebalances. I personally prefer rebalancing once per month as there would have been around a handful losses if I had run it since '05. I also don't like to lean too much into assumptions of success rates when we only have data for 3 real bouts of volatility available for these instruments (07-09, Covid, and 2022).
  • The LEAPs are multi-year holds ranging from few percent to maybe 20% of the portfolio. Feasible annual return of 20-90% depending on chosen delta. I've averaged 150% per year for 3 years but that was just due to good timing and market conditions. Average return with monthly buys would be quite a bit lower. This is the only part of the strategy I've run for more than a few months and I made some bone-headed moves with other securities so my account as a whole only has 1.3 alpha for it's 3 year history.
  • Two VIX hedging strategies are traded anywhere from once per week to every month or two, rebalancing each time I roll a position.
    • One is specifically designed to hedge the daily trade strategy (eg massive gains in the case of a catastrophic day in the market that would lead to total loss of at risk amount for spread strategy, but small losses pretty much every other day). This one is kept at a specific % of the amount at risk in the credit spread strategy since it is a hedge specific to that.
    • The other is designed to hedge the LEAPs. Solid inverse correlation to the SP. It goes up more than the SP when the SP is falling, and it falls less than the SP when the SP is rising. Great hedge without a ton of drag on the portfolio when the SP does well, but given it's performance during SP drawdowns, great dip-buying tool for SPY and the LEAPs when disciplined rebalancing to target allocations is employed. I have bought dips and sold peaks consistently over the past few months since rolling out the strategy as a result and it takes emotional distractions out of buying the dip.   

I could go much more into depth as it pertains to why I chose xyz delta and why I hedged using put spreads for one strategy and calls for the other, but I think you get the point. I have constructed a genuine methodology and a complex modeling system for it, but for the most part it is untested.

With those additional details on the strategy, are there any Prop Trading firms that might be receptive to that strategy? Or are they all focused on high frequency trading/algo trading etc. Would I be an idiot to present it without being hired? Again, it doesn't have to be a top-notch shop and I don't need a big salary. Just want to get some decent training, have the opportunity to learn from and work with intelligent people and a solid cut of the profits I produce.

  • 2
Liam Gallagher, what's your opinion? Comment below:

So look, this is all fine and I'm sure you've put a lot of effort into your strategy, but you just said that you've never actually tested it live. Unfortunately what that means is that it is not worth much to most of these firms. Additionally from everything you've described this sounds a lot more hedge fundy than prop shop. Since you've never run money, and the only thing you have is a backtested strategy which may or may not work in practice, you're going to need one of the 3 things I mentioned above. No one is going to touch you without that, and unfortunately no one is going to care about a backtested strategy either. Get one or two of the above and you will have options. Additionally you need to start testing your strategy if you want that to even be a small asset to your profile.

Edit: additionally even if your strategy is functional, a real question you would be asked is, "if your strategy is so successful and money is not a huge issue for you then why wouldn't you just trade your own money?" And even if it is an issue, "why not source funds from friends and family?" Which is basically the same as asking "why do you want to share your strat/money with us if it is so successful?"

JAH92, what's your opinion? Comment below:

Yeah, that makes sense. I had a suspicion that it was more Hedge Fundy but didn't want to lead anyone into saying that.

I've actually been working with a mentor who has become a good friend that founded a top 25th percentile fund of fund hedgy with $500m. He's had super helpful insights and said he would go to bat for me based on what he's learned about my thought processes from our discussions, but NYC would not be my jam.

Using the strategy in my portfolio now so perhaps by the time I get that MFE I'll have a bit of a track record and will have networked enough to the point where I have a shot at a decent firm that allows remote work. 

What respectable prop shops do you know of that allow full time remote? I haven't found much this far but could be useful stuff to figure out who I should start having conversations with.

Cheers and thanks for the insight.

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