Its been about three weeks now since the fourth annual IB Trading Olympiad concluded, about time for me to make my final comments about this year's competition. Tomorrow I'll be sending out the paper work to IB which is the last step I have to take to actually get the award. Each year its a long process and a lot of work but it has paid off with cash, for me anyways. I didn't do as well this year with a 5% gain that put me in 29th place. Last year I was 19th with a 35% gain and the year before I was 10th with a 19% gain. To a certain degree this competition is definitely about the money, $12k in combined cash prizes goes a long ways for a college kid. That being said, I think the experience of developing a trading system from the ground up will prove to be worth much more than the prize money. Each year I've had new ideas about how to improve my system and have grown more confident that automated trading is the most consistent way to profit in fast moving electronic markets.Each year I have been extremely impressed by the final results of competitors. This year Kevin Warner placed first with a 344% two month gain. Whats more, his software returned him 192% last year for third place. Now I don't know the details of his strategy or if he even used the same one both years, but the fact remains, his software has consistently returned huge profits. Kevin did stop by the blog and briefly mentioned that he was trading volatility spreads on energy and energy products. He said his strategy wasn't directional but that doesn't surprise me because oil was flat during the competition:
As you may recall, one of my strategies was to buy leveraged oil (DXO) with spare cash. That turned out to be a waste of trading power but it didn't lead to big losses either. My program ended up making all of its profits from shorting spikes in implied volatility. As you can see in the VIX chart below there were plenty of those:
On thing that hurt me was the overall net increase in volatility during the competition. Since my program was generally short options, a rising VIX went against those positions. I will say that I would have expected the VIX to increase much more given the 23% drop in the S&P:
Now that is a sight to behold isn't it? I seriously doubt that this competition will ever see such a big move in the general market in the future. It certainly makes all of those who profited this year look even better. As far as I'm concerned we can all add 23% to our returns since thats how much the benchmark index dropped. So once again I have to congratulate all of the competitors who placed this year. Ryan, Chintan, Kevin and the rest. It was a tough market this year.
IB never responded to my questions in detail, they just directed me to this media relations page. There wasn't a whole lot of useful information there besides this excerpt: "The College Trading Olympiad continues to attract the attention of university professors and their students with applications coming from 41 countries for the 2009 Olympiad with 372 applications accepted. In 2009, students from far-away places including Argentina, Costa Rica, Estonia, Indonesia, Morocco, Peru, the Philippines, Turkey and South Africa took part. " So as Kevin pointed out, "fewer than a fifth of the contestants built a compliant system and ended up with a positive account balance." That speaks to both the difficulty in getting a system working and to getting a working system to actually make money. It also suggests that IB has been successful in attracting an international participation for this competition. Chintan pointed out that IB gets great international press from this and I'd agree. It also means that a new generation of market professionals from around the world will be familair with the IB platform. Chintan is attending school in India I beleive.
So it seems clear to me why IB does this. Its great international pr, it creates customers, it creates employees (they offer internships to some winners) and I'm sure they get some tax write offs for giving money to college students. In Barron's this weekend, Kevin was quoted as saying he was funding a new IB account this week, so IB is sure to see their money boomerang to some degree. I certianly plan to put my $1k into my IB account. But I expect that since this was the fourth year for them to do it that they realize that in the long run they will get more out of it than they put in. I also hope that despite the ever weakening economy, IB will do this again next year. I have some ideas that are sure to improve my strategy. And I could use the money!!
Anyways, thats all from me on the Olympiad for now. Feel free to leave coments with your impressions of this year's competition. If you are interested in what I'm thinking about the markets you can check out my other blog Stock Geometry. Also, if any of you are trading your own accounts, you can often find me in an IRC room that I moderate. Email me at pythagoruz@yahoo.com if you are interested in joining us or have any other things to discuss. Until next year's Olympiad I'll revert back to posting math jokes, cosmological philosophy and other random stuff that I post typically post here. For now I'll leave you with a chart of the Japanese Yen during the Olympiad. A 9% drop in two months is a serious move for the FX markets, what volatility we had!!:
Cheers!
