Exploring the Nexus of Machine Learning, AI and the Options Markets

Listen to Trading Tech Talk 62: Exploring the Nexus of Machine Learning, AI and the Options Markets

Mark is joined by co-host Matt Amberson, Principal at Option Research & Technology Services (ORATS).

CTO Interview: Our guest today is Michael Mescher, Founder of Gammon Capital.

He discusses:

  • What is Gammon Capital?
  • You’ve talked a lot about the dangers of selling volatility and how short vol managers aren’t worth their fees. What are your thoughts on the maelstrom of the past week? How have your funds fared over the past week?
  • Machine learning is a hot buzzword these days, but what are some of the practical applications that you’re seeing in the financial markets right now? Is it ready for prime time or still in the nascent phase?
  • Unsupervised learning/ fundamental strategies?
  • Supervised learning / quantitative strategies?
  • Classification vs. Regression problems
  • Hiring machine learning specialists vs. Products specialists
  • 90% of the world’s data was created in the past two years. Is that an opportunity or a terrifying statistic?
  • Testing models on out-of-sample data vs. carefully constructed back tests?
  • Should managers be concerned that the robots are coming to take their jobs and their clients?

The Inbox: Listener questions and comments

  • Question from BLAL9 – What do you see as the outlook for AI and machine learning in the financial management space going forward? I see a lot of smoke but is there much fire? Are there many funds currently using it to generate alpha right now?
  • Question from Tonc – What are the best ways to invest in blockchain right now?
  • Question from Mark Kalis – How are comps getting the edge on us in trading? Is it just pure correlation trading?
  • Comment from tDok3 – No debate to be had there. It’s a simple & foregone conclusion. Higher fees ==> lower participation perhaps goal for CB market manipulation
    In response to tweet: Are exchanges shooting themselves in the foot by continually hiking market data fees?
  • Question from See16 – Can you please do a deep dive into smart routers on a future program? They are the secret sauce of the market these days, but no one really seems to understand how they work. Shedding some light on the otherwise dark world of routing would be a great service.