Aneet Chachra - Surfing Flow for Fun and Profit (S5E4)
Flirting with Models
00:00
Signal Turns to Noise Because of Arbitrage, but Noise Turns to Signal Because of Reflexivity
markets are adaptive and flexible. Even if general strategies can persist overtime, it generally makes sense to adapt and evolve overtime. A good example of that isike, what's happened with option selling. There was absolutely a real signal there around voltilerus premia. But in the sheer amount of money that went into it, it took this signal and people made huge fortunes from voltily selling. It's an edge that got completely ground out, and now it's basically noise, at least for now. This might change, and it's something to watch, but it's really not a great signal any more.
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