Biggest black hole in the cosmos discovered

"The most massive known black hole in the universe has been discovered, weighing in with the mass of 18 billion Suns. Observing the orbit of a smaller black hole around this monster has allowed astronomers to test Einstein's theory of general relativity with stronger gravitational fields than ever before.

The black hole is about six times as massive as the previous record holder and in fact weighs as much as a small galaxy. It lurks 3.5 billion light years away, and forms the heart of a quasar called OJ287. A quasar is an extremely bright object in which matter spiralling into a giant black hole emits copious amounts of radiation.

But rather than hosting just a single colossal black hole, the quasar appears to harbour two – a setup that has allowed astronomers to accurately 'weigh' the larger one."...

Find the rest here.
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Listen to what the man said

Digital Mystery

Photo clues lead to camera's owner

IB Olympiad Week Three (GREEN!)

Liquidation Value: $1,038,799.64 +$232,189.79 on the week

Positions:

Longs:
FDG

Shorts:
CVH
KMB
NVS
VRTX
WYE


Naked option positions (options sold short):
ARTC Feb 35p
EJ Feb 25c
GRA Feb 25c
IOC Feb 20c
LULU Feb 25p
MTG Feb 20c

Woohoo, in the green! The account had been up much more today (another $100k), but once I turned on the program it set stops on DSL, CSIQ and LDK which quickly got hit on top of a few problems with filling 25k market orders. Today was the only day that the program ran this week but I hope to have it on all next week. After the +28.8% gain this week I think I'm back in this thing for the top ten.

Paul McCartney & Wings

If you have been reading Stock Geometry then you know that I have been listening to Paul McCartney & Wings lately. I knew that Paul had a successful career after The Beatles, but I didn't realize so many great songs were actually from his Wings years and not by the Beatles. This all started when I heard Band on the Run the other day on the radio. I was thinking to myself 'what Beatles album is this from..?' I was pretty sure that I knew all The Beatles' albums and it wasn't on any of those. Sure enough, it was a Paul McCartney & Wings song:

I bought a best of Paul McCartney CD last weekend and realized they actually have a bunch of awesome songs. And since Paul is obviously the center piece they give alot more attention to the bassline (McCartney plays bass). This song is kind of cheesy, but Paul rips on the bass!:

Seeing these guys reminds me of a post I did about the Traveling Wilburys. Those guys are in a whole nother realm of music, but they are another example of major musical success for a member of The Beatles after the breakup. Thats really encouraging because my two favorite bands broke up over the last few years. The String Cheese Incident and Phish, like The Beatles, were composed of equally amazing musicians and it was sad to see them call it quits. I'm not too concerned though, I'm sure they'll go on to jam another day:

More of that wicked bass:

Another classic:

Olympiad Week Two

Week two was a hard lesson for the program as volatility continued to expand in the downward direction. The S&P 500 fell a whopping 5.71% last week as the VIX exploded from a low of 18.28 to at high at 29.30, a staggering 60.3% increase! As you may recall my program had written a ton of puts on solar stocks ahead of last week since these stocks have extremely expensive options and made big declines. Well the solar stocks fell pretty much the hardest of all sectors, causing these puts I was short to dramatically increase. I also realized there was a glitch with large market orders on options that take a long time to fill, as occurred with SOLF. As a result I didn't run the program much except for the beginning and end of the week. As a result, written options (puts) that were in the money expired and I got put shares on DSL, CSIQ and LDK.

Liquidation Value: $806,548.01 -$173,520 on the week

Positions:

Longs:
ABT
CSIQ (I was put 25,000 shares)
DSL (I was put 25,000 shares)
LDK (I was put 25,000 shares)
MCK
SDS

Shorts:
IWM
MRX

Naked option positions (options sold short):
LULU Feb 25p

Options that expired worthless:
CAL Jan 25c
CROX Jan 25p
UAUA Jan 25p

Of course I am not happy with the account's 17.7% decline but this week represented an extreme worst case scenario for the program. I have some good ideas about how to fix the problem, certainly the SOLF catastrophe cost me about $160k (16%). This doesn't seem so bad when you consider that my program was aggressively writing naked SOLF puts and the stock dropped more than 50% in two weeks. On the bright side, the program has the potential to swing very rapidly and averaged over long periods of time it should be market neutral. If the market had bottomed and rallied early last week then I'd be sitting over +20% on the week. I'll add more here later, check back.

For those of you who will be doing some coding this weekend try jamming out to this while you write. And if any readers are into the disco biscuits be sure to comment, I can recommend some good shows.

Dolphins Blowing Bubble Rings

Relaxing huh?

Robot Evolution

I wish my ATS could learn and evolve based on experience like these bots. The concept of an artificially intelligent auto trading system that could learn from mistakes and increase yield over time is very appealing. Of course I wouldn't complain if it did other things. Maybe a beer every once and a while? A snow shoveling, dish washing, laundry folding, floor cleaning, fish feeding, bill paying, back massaging, auto trading robot would be a friend of mine.

Current Rankings

The rankings after the first week are out and damn, that is some fierce competition. I told you I expected to be +20% by the end of this week but the top six places were already better than that at the end of last week! Much of my strategy depends on option decay so I will be seeing the biggest gains during options expiration week (this week), but still. Congrats to those top contenders I recognize a few of you from last year. I have a link to the current rankings on the left hand side of the blog if you want to see the standings directly from IB. They will be updating the rankings every Monday afternoon.

On a sour note, my program had a major catastrophe while I was in class today. SOLF tanked again and the program once again got stopped out of its position (at a huge loss). But the order took so long to fill that the software sent out another order to cover which resulted in a net long position in arguably the worst options in the market. There is a glitch in the program where if market orders take more than 20 sec to fill another order gets sent. I need to resolve it but I just don't have the time right now. I have an algorithm for exiting any long option position at a 50% losss or a 150% gain, so perhaps that will get hit (most likely the 50% loss). All around SOLF has cost the program $56k + $71k in realized losses and another $30k in unrealized losses on this new long position it acquired due to the glitch. If it weren't for that stock my program would be up $70k or 7% right now...

Ron Paul talks about "Arab Nations" and all McCain hears "al-Qaeda"

McCain is an angry war hungry old man and it scares the heck out of me that he has so much support. Frankly, if people voted with their conscience and not with their emotions Ron Paul would win by a landslide.



Who associates the beach boys with starting a war? The world would be a scary place with someone like McCain running the US. On the issue of bombing Iran, check this video below out. Ok, Ritter is a little dramatic but he makes some damn good points about bombing Iran. Its time to fix our broken foreign policy.

Olympiad Week One

Here's a quick update on the competition. This was a very tough week for the program as essentially a perfect storm hit it in the first three days. Without going into details, let me just say that very volatile stocks moved much more than is typical then kept on moving. In particular SOLF dropped around 20% on Monday, my program wrote naked puts, then it kept dropping. The software initially wrote $30 strike puts but got stopped out of those at a $55,000 loss (5%) ,then the program initiated a position in the $25 strike puts later in the week. In other words, the puts that were very expensive Monday got more and more expensive all week and my program won't get out of its second SOLF position until it breaks $25 and some change.

The software lost big on that position but made it up on other trades to close the week down slightly. There was a big swing for the account value being down more than 10% at one point but its now only down 2%. Here are the week ending Jan. 11th stats and holdings:

Liquidation Value: $980,064.37 -$20,000 on the week
Options Value: -$196,501 (I can reasonably expect +20% next week)
Net Stock Value: $55,523
Unrealized Profit: $49,760

Positions:

Longs:

XTO
SEPR
PPDI
KGC
IBN
GOLD
GDX
DBA
BVN
BAX
AUY

Shorts:

TIF
SYY
NIHD
DIS
BBH
AXP

Naked Option Positions (options sold short):

UAUA Jan 25 puts
SOLF Jan 25 puts
LDK Jan 40 puts
CSIQ Jan 20 puts
CROX Jan 25 puts
CAL Jan 25 calls
ABK Jan 20 puts
ABK Jan 15 puts

I'll post a link to the standings as soon as its up but I don't expect to be in it this week. The program takes an intial loss on every option position so I would expect it to not be up so much after writing all of those options this week. Next week however, those options will hopefully all be out of the money and expire worthless, meaning the software will rake in 100% profits.

May the best robot win! (IB Olympiad 2008)

Tomorrow the 3rd annual Interactive Brokers (IB) Collegiate Trading Olympiad gets underway and will last eight weeks. The competition involves writing a auto trading software (ATS) that syncs with the IB trader workstation (TWS) to retrieve market data and execute a trading strategy. In the first annual Olympiad the top three programs returned 119%, 83% and 46.5% over two months. Last year the top three returned 294%, 161% and 110% while my software placed me in 10th with a two month return of 27%. See previous winners here. So the competition is fierce to say the least. If any real fund manager could consistently generate these kinds of returns they would be getting paid millions.

This year the returns are certain to be smaller because the starting cash has increased by a factor of ten, from $100k to $1M. The simulated market that programs will be trading on is sophisticated enough to include market size from the top of the book, so liquidity is even weaker than in the real market. Now I'm not sure what strategies others were using last year but a small cap or options strategy might run into trouble scaling up their system x10 because those markets are less liquid. At any rate, it will be very interesting to see how much the top yields change.

The competition is only open to students (undergraduate and graduate (me)) so the prize money is a big deal and certainly represents a major augmentation to income if you get in the top 13 places. See the prize money breakdown below. Some have argued that this competition is a sour deal for contestants because they agree to give up the license to their strategy by competing and these programs would potentially return much more than the prize money if adequately funded. This point is valid I think but the fact of the matter is that in order for students to build the kind of reputation that you would need to be given a $1M investment they are going to have to have some nice auditable performance numbers. This competition does that (I can always put on my resume now that my software made 27% in two months) and provides a significant award for students who do well (I got a $10k check). So I'm not complaining.

I actually started this blog a year ago as a venue for posting my program's trades and progress. Those of you who were reading last year may have noticed that I removed all the posts about my software's activity. I did that because I started getting alot of emails from people who were clearly dissecting my software's strategy in hopes of doing well in this year's competition. I really want to do well this year and beyond, so given my success last year I decided to temporarily remove those posts while people developed their software this year. Plainly put, I think I have a very profitable and reliable strategy and I didn't want to give myself trouble by competing with others who are doing the same thing. Those posts are merely hidden from view and they will be put back up in the future.

This year I won't be posting every trade like last year because its very time consuming and my software will be trading more frequently than last year. I will however post my liquidation value every few days or so with some of the pivotal trades. IB will be doing a weekly ranking so I will post a link to that when they begin doing that on January 14th.

This year should be very interesting with the increased account sizes and the bear market in stocks. Last year the competition was running during the "glitch day" where the markets saw their biggest drop since 9/11. I expect that we will have some equally dreadful market swoons over the next few weeks to separate the floor cleaning robots from the gigantic city destroying mech warriors. Good luck everyone, may the best robot win!!!