The Crysply News: Wonders of Quant Hedging
It’s a beautiful Tuesday morning. You step outside to take a breath of fresh air and notice a titanic tree a thousand feet tall, myriad branches sparkling and coruscating in the noon-day sun, shadowed at its impossible summit by a halo of mist. Growing from its trunk are $100 bills, every time you pick one out another grows in its place. Do you run and tell your friends? Finance geeks might snitch to the government in fear of inflation (but hey how much higher can it go?), but the one thing no one will do is share this wonder with the world.
Successful quant shops are quite the same. Jim Simmons, who famously founded Rentech's Millennium Fund which has been posting 60% annual returns for 30-years straight, has no incentive to dive into the murky waters of consumer fintech and try to get moody zillenials to adopt his money-making machine. In money markets there is a buyer and a seller. In other words, you need to find a frayer (Hebrew for sucker) that will buy a stock from you at a high price, although you know the stock will go down. Hence - if everyone knows your method for anticipating market movements, you lose your edge.
As a result quantitative hedge funds, or more simply put: automated trading strategies, have kept their investment algorithms close to heart. For the first 24-months of Crysp we were no different. Waking up excited to monitor the money-making machine we created and see how our algorithm is outsmarting millions of investors every day. But in parallel something else was happening, our entrepreneurial bug was growing, feeding off the constant requests from friends and family to join in on the algo party.
Maintaining the edge in different macro conditions requires us to constantly improve and tweak our strategies, always staying a step ahead of the market. Generally, our algorithm includes two steps: (1) identifying alpha on social media by continuously backtesting historical alerts of hundreds of thousands of finfluencers and (2) hedging those positions with a basket of complementary stocks (i.e. beta hedging) that cater to the micro position (the specific stock strategy) and our macro fund portfolio.
The bottom line is Crysp knows how to anticipate a small upward move in a stock and place its (protected) bet on that. In short: we are betting on a specific move in a specific stock and do not care to be influenced by what’s happening in the macro market. This social stock-first approach has given birth to the idea of Crysp: allowing every retail investor to deploy automated hedging strategies once they find their own alpha. Basically we are sharing (2) with our dear users while keeping (1) close to heart (for now). Our "Cryspy" positions as we call them (automatically hedged positions) are consistently outperforming traditional long positions.
Helping users identify the right alpha has been a hot topic in discussions amongst the three of us, and is undoubtedly a trend evident in the “feed” which WeBull introduced just last week or the broker/dealer functionality recently adopted by StockTwits. While I decided to keep my tree locked up in the basement inaccessible to the rest of the world, Crysp is democratizing the money tree seeds - allowing anyone to actively grow their wealth overtime without robbing them of their sense of autonomy and choice.
Text me on telegram for an intro to your local Crysp seed dealer.