A Chinese quant-trading firm made 108% this year by selling every stock bought the previous day.
As long as the Fed is willing to promote gambling, guess what? People will gamble.
Please consider Quant Fund Gains 108% by Dumping China Stocks a Day After Buying
Zhang Ruiqi, the 34-year-old chairman of Shenzhen Qianhai United Fortune Fund Management Co., screens about a dozen mainland-listed stocks every day for their turnover, momentum and volatility. He then does it all over again the following day. That strategy, which he calls the “all-in-all-out” method, helped his flagship $5 million fund gain 108% this year through June, according to data provider Simuwang.com.
“Our strategy allows us to make money from stocks that have the strongest market sentiment on a day-to-day basis -- and that has turned out to be overwhelmingly successful so far this year,” said Zhang in a phone interview from his office in Shenzhen.
“As long as the trading volume remains above 400 billion yuan per day, this strategy will still be effective,” said Zhang, noting the upcoming revamp of the Shanghai Composite Index and ChiNext market reforms. “Volumes are unlikely to drop.”
Money's Cheap, Why Not Gamble?
Hedge funds typically take 20% of the profits.
If they can make 100% profits with Other People's Money (OPM) everyone is happy. If and when these strategies blow up the founders still make their 20%.
Attract $2 billion with these short term returns and the hedge fund just made $400 million off of OPM with no risk.
Not Just Quant Funds
I have a friend who is now day trading options, and short term ones at that. He does not know what a straddle is or even what a limit order is.
Day trading is inaccurate because the size of his account, under $25K, restricts him to a limited number of trades.
So far, he has done OK with long bets on Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA). But how long can this last?
I had a long talk with him this past weekend. He is out of a job and out of money.
No Other Choice
"I have no other choice he told me".
He wants to come by this week for me to explain more about options.
This is what the Fed has promoted.