About Paul Rowady

Paul Rowady is the Director of Research for Alphacution Research Conservatory, the first digitally-oriented research and strategic advisory platform uniquely focused on modeling and benchmarking the impacts of technology on global financial markets and the businesses of trading, asset management and banking. He is a 30-year veteran of the proprietary, quantitative and derivatives trading arenas with specific expertise in strategy research, risk management, and techno-operational development. Contact:; Follow: @alphacution.

Mr. Volatility: What’s the Next Catalyst?

“You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something – your gut, destiny, life, karma, whatever.” – Steve Jobs (2011) It was the one question we could be sure would be asked. Every. Time. And, it changed my perspective on the whole game... Scene: It was a Spring day, 1990. 730 am. Pre-market open equity option traders meeting. O'Connor & Associates, 7th Floor, 141 W. Jackson Blvd., Chicago. Arguably, the world's leading proprietary derivatives trading firm of the era. My first of a few years' worth of these meetings. A neophyte member of the fledgling fundamental research team sitting amongst new colleagues whose first language was either Greek, or 1's and 0's. Clay Struve - the Chief Brain of the operation and legandary conjugator of FX crossrates through the haze of the previous nights' yard of beer - plus a few other partners and senior traders - sat at the big boy [...]

By | 2019-04-03T20:52:50+00:00 February 14th, 2019|Alphacution Feed|

Case Study: What Happened to Spot Trading?

"Don’t get involved in partial problems, but always take flight to where there is a free view over the whole single great problem, even if this view is not a clear one.” – Ludwig Wittgenstein As we build - and promote - our case to elevate Alphacution's value proposition and research output to a more viable economic support model, we are beginning to focus on the development of deeper and more comprehensive premium content.  This plan has been outlined in our recent Support the Feed! post, a portion of which will now be appended to the bottom of each new post going forward. BTW, the sooner you respond to that plea in some way, the less likely it will be that I become increasingly obnoxious about the topic... ;-) Anyway, I had hoped to develop this case study on Spot Trading - a noted Chicago-based proprietary option-focused trading firm that closed at the end of 2017 - as an example of what we are able to highlight specifically in cases where [...]

By | 2019-04-03T20:51:33+00:00 February 13th, 2019|Alphacution Feed|

Alphacution’s Book: Not Hiding, In Plain Sight

"Are you not entertained?! Are you not entertained?!!  Is this not why you are here?!!" - Maximus Decimus Meridius (Russell Crowe) Executive Summary The chart that follows represents the content to be covered in this post, and foreshadows a core focus of Alphacution's research calendar for the weeks and months ahead... Furthermore, at the end this post, I am also going to ask you to support this work (in exchange for certain content benefits), like this: Individual Subscription Options Annual Subscription : $275.00 USD - yearly Monthly Subscription : $25.00 USD - monthly Note: Business credit cards and bank accounts can be used via our PayPal payment portal. So, with that in mind, you can opt to bounce right now... Or, support right now... Or, learn a bit about our opening chart, see what it means and how it relates to what we have coming up in the research calendar, and then make your support decisions... It's your call. My job is this: Have I captured your attention yet? We live [...]

By | 2019-04-03T20:47:43+00:00 February 8th, 2019|Alphacution Feed|

Support the Feed!

Individual Subscription Options Annual Subscription : $275.00 USD - yearly Monthly Subscription : $25.00 USD - monthly Note: Business credit cards and bank accounts can be used via our PayPal payment portal. Alphacution is in the intelligence business. We are uniquely focused on harvesting, packaging and distributing intelligence about the impacts of technology in financial markets and on the businesses of trading, asset management and banking. Our growing model library is our intelligence asset. Today, this intelligence asset primarily supports written research content, which can be accessed via standardized subscriptions and customized engagements. Occasionally, this core asset also supports video, audio and live presentation content. In time, Alphacution's intelligence asset will support a broader platform of products and services, like data feeds and software. For the past year or so, Alphacution has been publishing most of its research content on its Feed for free, and promoting that content via periodic newsletter. The purpose of this strategy has been to assess the interest in and demand for a unique perspective and [...]

By | 2019-04-03T20:41:01+00:00 February 7th, 2019|Alphacution Feed|

Welcome to Jane Street

“You can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something – your gut, destiny, life, karma, whatever." - Steve Jobs (2011) You've got to wonder if the founders of Jane Street Group, which began as a subsidiary of Henry Capital prior to 2001, had any inclination that the "dots" would connect as they have when they were first starting out. Certainly, looking backwards, what now amounts to 64 quarters of track record has produced a "shape" that we can confidently say is worthy of applause... Behind these scenes, Alphacution has nearly completed its initial modeling of Jane Street and the various legal entities that make up its track record, from a portfolio construction and positioning perspective. And, since we have done several of these modeling exercises so far among a roster of some of the more mythological managers and trading firms on record, it's natural that one begins to grow an intuition [...]

By | 2019-04-03T20:42:52+00:00 February 7th, 2019|Alphacution Feed|

Virtu’s, Flow Trader’s Optionality? Not So Much…

"Research is what I'm doing when I don't know what I'm doing." - Wernher von Braun In the hierarchy of preferred trade types, the riskless trade sits at the top. Capturing a perfectly hedged spread or pricing anamoly, or performing a round turn across the spread and back to flat in some temporal duration measured in micro- or even nanoseconds are examples of riskless trades. Like poker's rare royal flush hand, a mechanism to persistently discover and then capture ~riskless trades is the most coveted of the trading world. What comes next in this hierarchy is the directionless trade, where the trader essentially plays both sides of the trade and where success is achieved whether the target ultimately wins or loses. Like poker's next-in-line straight flush hand, the key caveat to the directionless trade is the requirement that the price of the target moves; that there is enough volatility during the life of the trade to cover the cost of entering and maintaining that trade. It is here that we [...]

By | 2019-04-03T20:44:02+00:00 February 6th, 2019|Alphacution Feed|

Stevie Cohen’s Performance Art: Hiding in Plain Sight

“Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, the just saw something. It seemed obvious to them after a while” – Steve Jobs For Mitch (1957 - 2018) Let's start this one close to where we left off in The Privatization of Alpha: "He’s a dubious character – and, he maintains specific distinction as my all-time strangest interview; sitting there in his personal office’s gymnasium – like an antechamber – as I sat there at the leg press machine in my Armani suit and him, as Tom Wolfe wrote in A Man in Full, eventually breaking out in “saddlebags of sweat” on his spin bike as we chatted. That was 1994 – and I did not get the job." If it had not been for the perpetually warm and generous teddy bear known as Mitch Lester - who I met and quickly befriended to become "the Wadster" in 1990 while he and brother, [...]

By | 2019-02-12T15:28:44+00:00 January 31st, 2019|Alphacution Feed|

Donald R. Wilson Jr’s Book: Hiding in Plain Sight

"To create something exceptional, your mindset must be relentlessly focused on the smallest detail." - Giorgio Armani Taken out of context, one might legitimately jump to the conclusion that today's installment on the Feed is about 11-time kickboxing champion, Don "The Dragon" Wilson. Or, better yet, that the initials "DRW" represent the greatest hockey team of all time, the Detroit Red Wings... However, unfortunately for Mr. Dragon and my Wings - and given the context of the mythological trading landscape we have been exploring lately - this post can only be referring to Chicago's very own Don Wilson and his eponymous proprietary trading firm, DRW Holdings, LLC (DRW). Here's some personal perspective to get us started: In the history of legendary Chicago trading firms, one could draw a line with options trading prop shop O'Connor & Associates (and the O'Connor brothers, Billy and Eddie) and the CBOE on one side, and rival futures trading prop shop CRT (Chicago Research & Trading - and founder Joe Ritchie), and the CME on [...]

By | 2019-02-12T15:32:38+00:00 January 30th, 2019|Alphacution Feed|

Jump (Experiments In) Trading, LLC

In the riverfront level of the 600 W. Chicago building (which is in Chicago) - the famed concrete fortress originally home to Montgomery Ward's mail order business - there used to be the trendy, over-priced hotspot known as Japonais. Japonais is gone now - after an eviction lawsuit from 2015, which apparently means they weren't high-priced enough - but, I was just thinking how much I could go for one of their blueberry saketini's about now, which is odd for a bourbon guy... Anyway, an elevator ride to the 8th floor of that very same building - past the old Thinkorswim, now TD Ameritrade, offices - brings you to the global headquarters of Jump Trading, LLC - the legendary and mythological prop shop known mainly for its prowess and longevity in high-speed futures trading, and little else (except among a small group of Chicago quant cognoscenti). With this as a brief backdrop, we found our tour of their 13F and X-17A-5 reports illuminating, both on absolute and relative bases. Here's [...]

By | 2019-02-12T15:33:24+00:00 January 24th, 2019|Alphacution Feed|

Bridgewater Associates: Modeling Ray Dalio’s Modeling

Image Credit: Brad Trent / The Times "Treat your life like a game." - Ray Dalio Before we get to the overview of our recent modeling of famed hedge fund leader, Bridgewater Associates and its founder, Ray Dalio, we need to set the stage for why this particular profiling is so important. It starts with what we have been calling personal alpha... Personal Alpha Ray Dalio is a singular phenomenon in the modern financial world. For starters, he's performed the feat of building the world's largest hedge fund (with $160 billion AUM as of latest count) and delivering "stellar gains" in its flagship Pure Alpha fund of 14.6% for 2018 while most others struggled. In Alphacution's asset management ecosystem map, Bridgewater defines the boundary between active and passive management zones due its role as the largest hedge fund. But more than stretching AUM boundaries and strong performance, Ray Dalio is a singular phenomenon because he has built an amazing business culture, and has recently set out to share his wisdom [...]

By | 2019-02-12T15:34:38+00:00 January 23rd, 2019|Alphacution Feed|