Try front running client orders like the high frequency traders. Or get hold of hot US IPOs on a bull market with a bulge bracket lead manager.

If you think you can trade risk free without the dice stacked in your favour in some such way you are headed for disappointment and frustration.

Actually there is a way to trade without ever losing, it involves selling naked options. It has been described as putting your house up as collateral to gain a bicycle. When well capitalized it works I have intimated first hand experience with the strategy. Mark

Actually there is a way to trade without ever losing

Oh my goodness Mark. The Way the Truth and the Light. I guess you can also walk on water. Please urgently send me full details by the swiftest possible means. I am currently in India studying at the feet of the great Sai Baba who has taught me to manifest $100 notes out of thin air using faith alone. I am always looking for new risk free ways of making money however.

Hi Evan,

You might start by thinking about risk. From https://en.wikipedia.org/wiki/Risk_analysis, we have:

1. What can happen? (i.e., what can go wrong?)
   
2. How likely is it that it will happen?
   
3. If it does happen, what are the consequences?

For example, the S&P 500 can drop 50%. It has happened and might happen again. If all of my retirement savings are in the S&P 500 when I'm 70 years old, it'll suck.

It'd help if you were to elaborate a bit on what you are hoping to get out of trading/investing? Also, how much capital would be involved? It sounds like you might have $500 saved up that you can't afford to lose, but who knows, maybe you are a trust fund baby with $100M to invest. There's a big difference.

Evan,
You probably have your big boy pants on so don't be discouraged by what any others say. You only have to battle with an option trade for about 21 trading days at the most. Typically you only have the position on for 2 weeks and that's it. You do have to have some intelligence and fortitude to sell options, that's why professional's do it. Novices buy options because they have fixed risk, there is a huge price to pay for that security. No pain no gain, the more pain you can endure the more money you can make. It's not easy but well worth it to VERY few. Mark

Grant -

Thanks, this is a good starting point and will allow me to think more holistically about risk as opposed to specific day-over-day prices changes. In your example, the S&P 500 dropping 50%, certainly is something that can happen, but would have a very low probability assigned to it. I'm not looking to generate a strategy that tries to capture extremely-low probability events. That seems for too complex and out-of-scope of what I'm trying to accomplish. That is, however, not to say I will not consider low -probability events. I'm just looking to ignore extremely-low probability events.

Like most 20-somethings, I'm working with a small capital-base. I am looking for weekly, steady fixed-income, the amount can be small, but as long as it's consistent, I'll be content.

Mark -

Thanks, when I put my pants on this morning, I made sure they were the big boy pants. Can you elaborate on what you mean when you say that I would only have to battle an option trade of 21 days at the most? For each purchase of a security, you are saying there is a counter purchase on an option for a lower price that I would have to somehow defeat?

Thanks,
Evan

Evan,

You would sell options in the front spot month only which is about 21 days of risk. You get an immediate credit to your account when you sell options. Creates lower cost of capital for stock positions and do not have to be exactly right to profit. You will need to defend the position to keep the credit to your account. It's a "intelligence required" endeavour for sure. Mark

Well, as an exercise, you could pick out of the top 10 or 20 ETFs on http://etfdb.com/compare/market-cap/ and consider what sort of algo could be concocted.

Here's an example of how to do minimum variance with a constraint:

https://www.quantopian.com/posts/minimum-variance-w-slash-constraint

That is, however, not to say I will not consider low -probability events. I'm just looking to ignore extremely-low probability events.

If you want to ignore low-probability events, then selling naked options is reasonable. However, it's really, really important to know that one day, almost certainly, you will lose all your money and then some, unless you are maintaining hedges.

Your real challenge is finding a risk-free algo which yields a higher return than the risk-free rate. That's really hard to find. If it existed, you could borrow infinite money at the risk-free rate, invest it in your risk-free algo, and make infinite profit.

Most strategies that look risk-free in fact have substantial tail risk, such as, for instance, selling naked options. There's no easy way to tell which is which just by looking at the returns stream, since the tail risk might never have actually happened.

Agreed. And anyone who says different is a) a fool or b) is trying to sell you something or c) has zero understanding or experience of the markets. On line forums have a good mix of all three categories.

if you want to sell naked options and ignore the responsibility to defend them then you would not be successful. if you have a solid strategy to defend your naked position then you will always be successful. from there you can own three jets, two homes and a exotic car company etc. and slum on quantopian.

Had an interesting chat with an ex hedgie from California today. What he says is undoubtedly right but depressed me hugely. I'm an austere intellectual snob and if people don't want to buy what I have to offer then to hell with them. He was rightly telling me this is not how digital marketing works. Mike the Mouth, Big Dave's Trading University, the Ever Win Acedemy, and Trade your Way to untold Wealth and happiness is what sells product.

Intellect pays little part in making a success of a trading "biNiss"..... Bullshit and moonshine is all you need for that. And you will find it in spades in the trading world.

Having said all that anyone who seeks "risk free trading" has it coming to them!

from there you can own three jets, two homes and a exotic car company etc. and slum on quantopian.

Sounds like I should start selling naked options.

yea just stay away from owning nightclubs and fancy steak restaurants when you make lots of money. i can give you some more tips but anthony's head might explode he is struggling so. ;(

The only way to tell the difference between a) the morons and b) the sharks is to wait and see how the conversation develops. The morons make no move; they have said their piece and while they may continue to defend their absurd fantasy they are basically harmless.

The shark will try and sell you something.

then there's the sheepdog, he has bad ass fangs but rest among the stupid sheep, cause he kinda likes the stupid sheep and puts up with allot of their crap even though they don't really like him at all. but he makes no mistake that those who chatter are just sheep and so he keeps his fangs retracted and continues to be vigilant anyway.

@ Evan,

Not sure where the other guys are going with this thread, but for truly "risk-less" just go down to your local bank and take out a CD. If you'll actually need the full capital for something important within the next 5 years, then don't speculate with it (I'm in my 40's and my bet is that you are gonna need the money...girlfriend, wedding, honeymoon, house, cars, kids, retirement, college, vacations, and the list goes on).

This discussion about selling naked options, risk vs reward etc reminded me the fiasco of Karen the Supertrader. A trade hero fantasized by Tastytrade. I wonder how the status of the SEC complaint is...

@Grant, have you been working or developing further the minimun variance w/ constraint algo? Have you ever tried to add different types of constraints?