In the Media
Wednesday, March 20th 2019
Backtesting, AI, Machine Learning, and Fitness Functions in Options Explained
Michael Mescher, Founder of Gammon Capital, joins Matt Amberson of ORATS and Mark Longo of the Options Insider to discuss Artificial Intelligence, Machine Learning, Backtesting and the Fitness Function in options.
Summary
Michael Mescher, Founder of Gammon Capital, discusses backtesting, AI, machine learning, and fitness functions in options with Mark Longo of the Options Insider. Topics include the dangers of selling volatility, practical applications of machine learning in finance, and testing models on out-of-sample data. Mescher's background in derivatives trading and statistical analysis of backgammon games informs the approach at Gammon Capital.
I received a nice email from a client who had just listened to a podcast I co-hosted with Mark Longo at the Options Insider last year and my client loved it. I went back and gave it a listen, Michael Mescher from Gammon Capital does a great job as guest.
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?
Here's a link to the podcast and here's a video with sub-titles. Enjoy!
Michael's bio:
Michael Mescher heads the team at Gammon Capital which he founded in 2015. Mr. Mescher is the Chief Investment Officer of Gammon Capital’s program offerings. Over the past 15 years, he has established himself as a successful trader with extensive experience in listed derivatives.
Prior to founding Gammon Capital, he was a partner at Ronin Capital in charge of managing structured volatility strategies. His experience also includes 5 years on the sell side at Lehman/Barclays where he was the Head of Special Situations Volatility Trading.
Mr. Mescher began his derivatives trading career on the floor of the CBOE. It was there during his free time, that he began applying statistical analysis to backgammon money games with great success. It is these methods and processes that inspire the approach at Gammon Capital.
Disclaimer:
The opinions and ideas presented herein are for informational and educational purposes only and should not be construed to represent trading or investment advice tailored to your investment objectives. You should not rely solely on any content herein and we strongly encourage you to discuss any trades or investments with your broker or investment adviser, prior to execution. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. Option trading and investing involves risk and is not suitable for all investors.
All opinions are based upon information and systems considered reliable, but we do not warrant the completeness or accuracy, and such information should not be relied upon as such. We are under no obligation to update or correct any information herein. All statements and opinions are subject to change without notice.
Past performance is not indicative of future results. We do not, will not and cannot guarantee any specific outcome or profit. All traders and investors must be aware of the real risk of loss in following any strategy or investment discussed herein.
Owners, employees, directors, shareholders, officers, agents or representatives of ORATS may have interests or positions in securities of any company profiled herein. Specifically, such individuals or entities may buy or sell positions, and may or may not follow the information provided herein. Some or all of the positions may have been acquired prior to the publication of such information, and such positions may increase or decrease at any time. Any opinions expressed and/or information are statements of judgment as of the date of publication only.
Day trading, short term trading, options trading, and futures trading are extremely risky undertakings. They generally are not appropriate for someone with limited capital, little or no trading experience, and/ or a low tolerance for risk. Never execute a trade unless you can afford to and are prepared to lose your entire investment. In addition, certain trades may result in a loss greater than your entire investment. Always perform your own due diligence and, as appropriate, make informed decisions with the help of a licensed financial professional.
Commissions, fees and other costs associated with investing or trading may vary from broker to broker. All investors and traders are advised to speak with their stock broker or investment adviser about these costs. Be aware that certain trades that may be profitable for some may not be profitable for others, after taking into account these costs. In certain markets, investors and traders may not always be able to buy or sell a position at the price discussed, and consequently not be able to take advantage of certain trades discussed herein.
Be sure to read the OCCs Characteristics and Risks of Standardized Options to learn more about options trading.
Related Posts
