How does a guy Running a Long Volatility Mean Reversion Strategy get a Job at a Hedge Fund?

Overall the idea looks reasonable, but the execution and presentation is really horrific.

1. Your returns have beta to CTA strategies precisely because you are trying to catch a trend during the last few hours before market close.
2. It's difficult to reconcile a positively skewed pnl profile with your worst loss being twice as large than your best gain.
3. No one takes seriously an alpha calculated on less than 1 year of data
4. Your positive sharpe ratio makes no sense if you lost money for the year
5. If you're not trading options you can't have gamma or convexity by definition. However, although you denied it you are trading vol products (options) not just delta 1.
6. Trading costs for single name stock options (especially at retail level) are extremely large. Given the tiny edge you're trying to harvest, there is no chance your strategy has any positive expected returns after you factor in the commission + spread.

You sound extremely confused about basic finance definitions and even the pnl profile of your own strategy. Most people who sound like this are cranks. If you act like one, that's what people will conclude.

Trading is about discovery, not computation. Study the definitions and books on asset pricing, so you aren't using your own ad-hoc terms and methodology on interviews. Study your own strategy returns and ask yourself if the PnL is telling a consistent story about the world. I would finally suggest embracing a bit more humility. Most trading strategies don't work: finding one tiny alpha which is at most 15% complete does not make you anywhere close to a master of the universe.

I am not sure what these numbers are, to be honest. The Sharpe ratios are daily, I assume? What's the turnover rate or average holding time? What are your execution assumptions, separately for the futures and for the options?

PS. feel free to move to the PM, it's probably gonna be boring for the general pubic

Wow first person I’ve ever seen come right out and post data with massive losses. Have to give you credit for that. Usually it’s hidden for a while as they talk up their algo.

Best of luck. Hope that wasn’t your own money.

a couple thoughts

1) you should post returns in % of AUM, rather than absolute $$ 2) sharpe and sortino etc,. ratios should be annual..inputs either daily or monthly returns 3) backtests should have 10+ years of data to have any meaning, unless you are doing HFT. 4) you did not indicate what kind of leverage you are using

as a start, i would suggest posting a series of data on an annual basis (so, if you backtest for 10 years, then 10 rows of data....one row for each year) include 2-3 largest drawdown periods per year (size and time) and time to recover from each drawdown (measured in days?).

also, assume no profit reinvestment, to keep the AUM% math simple

nobody will hire you to directly run $$ as a PM with what you have described...the finance world has found that 99% of people who don't come from a standard finance background fail as a PM (either developed in-house, or hired laterally from another large firm), so that door has closed. You might have a chance to get a job as a quantitative researcher and then get promoted up tp PM over the years (but you haven't indicated your skills in that arena...so hard to tell). Most PMs either come from ibank trading desks, or work as analysts, or researchers for many years, publishing their ideas and developing a following.

DV Trading as mentioned above (and other prop shops) are mainly focused on leveraged strategies...prop firms have capital...but usually in the 50-200mm range....they don't have billions...that kind of $$ is found in traditional asset managers and hedge funds...and they recruit from the cream of the crop from the ibanks...its a fairly standard pipeline. Prop firms don;t care about "beating an index"...they only care about absolute $$ being made..as a % of AUM deployed

Prop firms will only hire prop traders that have a consistently profitable trading strategy..usually wanting 2-3 years of recent profitability. Otherwise, they will hire researchers / analysts...but they don't need as many as a larger asset manager, so there are fewer openings. Most prop traders do their own research.

Morning Traderlife - Yes, I agree with some of what you said in the first and second paragraphs. There are a lot of constraints on realized volatility. The strategies i was running were mostly dependent on positive convexity, which would have been enhanced by a higher rate of volatility.

This year thus far would be a great example how hard it is to pull off these strategies given all of the factors influencing and pushing realized volatility lower.

Also, your last point in terms of selling convexity into the market or "picking up pennies in front of a steamroller" it works until it doesn't. Every decade there are groups of convexity sellers that get blindsided by a jump in realized volatility. In 1997 Victor Niederhoffer using the same strategy in the equity market Cordon (sp?) used in the natural gas market blew up his hedge fund. In some sense he was purposely selling convexity to collect premium to leverage up and re-invest, but realized volatility did not mean revert as quickly as he thought and it spiked leaving the fund insolvent.

Last year i purposely avoided a lot of strategies where i would be selling a ton of convexity into the market. Although, I did at times engage in selling 4% strangles on the index, but it was more a strategy to bring down overall volatility in the portfolios to get it back under 20. Keep in mind I am purposely and intentionally pushing the dispersion in the portfolio wider with the strategies i was using. In general I was attempting to extract the difference between implied and realized, which would have the effect of pushing the portfolios 1% to 3% on a daily basis. Typical hedge funds have volatility in a range of 5 to 8 (or moves less then 0.15% daily) If the market dispersion was really wide, i'd attempt to push the portfolio 5% in a given day. Obviously, there are a lot of risk when you're intentionally attempting to push a portfolio and positively skew the returns by attempting to consistently land to the far right side of a distribution curve. The pendulum swings in both direction if your analysis or timing is off by a small amount.

I think this year, i would pursue the same strategy, but I think this end of cycle will be a bit different with the Federal Reserve resuming QE "lite" in October, so if consumers in the US are unable to widen the trade deficit, it will eliminate a lot of the financing that would come through the portfolio channels unhedged into the US equity markets, which could lead to a meltdown in July or August. Although, if the Fed communicates a rate cut at the September 2019 meeting, it may dampen realized volatility, which again hurts or doesn't allow a huge spike in volatility, which would benefit a lot of premium buying strategies late cycle. Again IMO

The standard places. Millennium, Cubist, BAM, etc. Just search on Linkedin for Quant Researcher profiles, or reach out to headhunters there.