📢 Exciting News! 📢 Our co-founder and CEO, Raghav Malik has been featured in the Economic Times! The article dives into the often misunderstood role of derivatives in retail trading, offering a balanced perspective that aligns with our mission to empower retail traders. As part of this op-ed, we wanted to address the crucial role derivatives play for retail traders and other market participants as a hedging tool, and not just mere speculation. This important use case has often been overlooked in SEBI reports and media coverage. We’re proud to present a counter-narrative that gives the full picture. 📰 Read the full article here: https://lnkd.in/g2ed-bGp #AlgoTest #RetailTrading #Derivatives #Finance #TradingStrategy #EconomicTimes #SEBI
About us
AlgoTest is a full stack algorithmic testing and execution platform. We allow you to backtest, paper trade, and also deploy your trading strategies to the live market.
- Website
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https://algotest.in/
External link for AlgoTest (YC S22)
- Industry
- Financial Services
- Company size
- 2-10 employees
- Headquarters
- New Delhi
- Type
- Privately Held
- Founded
- 2021
- Specialties
- Backtest, Options Trading Strategies, Fintech, Trading, Nifty, and Banknifty
Locations
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Primary
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New Delhi, IN
Employees at AlgoTest (YC S22)
Updates
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AlgoTest (YC S22) reposted this
So, the Indian derivatives market. Everyone’s freaking out about how traders are losing money left and right. SEBI says it's because they're all just gambling. But as the co-founder and CEO of AlgoTest (YC S22), a test first trading platform, I’ve got news for you: that’s not the whole story. Derivative markets aren’t just some wild casino—they’re tightly linked to the equity markets. And if all you do is look at traders’ P&L in the derivatives segment, you’re missing the big picture. You’re missing the whole point: #hedging. #NotJustACasino: The Real Role of Derivatives Let’s get something straight. Not everyone playing in the derivatives market is there to gamble away their life savings. Sure, some are. But a lot of folks are using derivatives to hedge against potential losses. Or better yet, they’re trying to squeeze out a bit more juice from their portfolios by leveraging things like the volatility risk premium. But who’s talking about that? No one, apparently. Instead, we’re obsessing over who’s winning and losing in the short term without asking why they’re even in the game. #HedgingAin’tCheap, But It’s Worth It Hedging is expensive. It’s like buying insurance. You pay up front, and if the market goes nuts, you’re protected. But if all you do is look at the money spent on hedging without considering the disasters it prevented, you’ll think traders are just flushing cash down the toilet. It’s like saying, “90% of insurance buyers are losers!” because they didn’t need to file a claim this year. Makes zero sense, right? Yet that’s exactly the logic some people are using when they talk about the derivatives market. SEBI’s Take: #MissingTheMark Yeah, there’s speculation going on—no doubt about it. But SEBI’s reports are way too simplistic. They’re saying, “90% of retail traders are losing money because they’re speculating!” and calling it a day. But here’s the thing: not all these traders are speculating. Some are managing risk. Take calendar spreads on expiry day, for example. These are hedged positions, but SEBI’s treating them like pure bets. So, what do they do? Propose penalties for something that’s actually a sound risk management strategy. It’s like punishing someone for wearing a seatbelt because they’re driving on a busy road. But the bigger sin? The reports don't even consider excluding traders with offsetting equity or mutual fund positions from their data. By lumping everyone together, they’re painting a picture that’s completely off. If you want to know how much speculation is really going on, maybe start by separating the wheat from the chaff—the hedgers from the speculators. #RealityCheck What we need isn’t more of this one-size-fits-all thinking. We need a more nuanced take on the derivatives market—one that gets that derivatives are there for speculation and hedging. Regulators and analysts need to stop oversimplifying things and start recognizing that hedging, while it costs money now, can save way more in the long run.
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We will be addressing each point in Securities and Exchange Board of India (SEBI)'s proposal over the next few days. Tagging Neil Borate Sucheta Dalal Santosh Nair Madhav Chanchani for hopefully some more visibility to this counter narrative.
Addressing SEBI's Proposal 3.3.4: Securities and Exchange Board of India (SEBI) wants to increase margin requirements significantly for expiry calendar positions. It's like making seatbelts more expensive because there's too much racing going on, both with and without seatbelts. Let me explain. 1. Essential Risk Management Tools Calendar spreads are fundamentally hedged trades used to manage risk by balancing positions in different expiries. They are not speculative activities but essential tools for having better control over volatility (vega), directional movements (delta), and convexity (gamma) risks. 2. Misunderstanding the Distinction Between Hedging and Speculation SEBI's proposal fails to recognize this distinction, lumping hedging and speculation together. Calendar spreads help traders manage significant risks efficiently and cost-effectively, contributing to overall market stability. 3. Operational Challenges with Varying Margin Requirements Varying margin requirements only on expiry day creates operational challenges for broker RMS systems. While initiating new calendar positions on expiry day may be easy to handle, older calendar spread positions carried over from the day before will suddenly require a lot more margin. This will be a headache for brokers' RMS. Nithin Kamath and the Zerodha team can add some more colour here. 4. Behavioral Shift and Relocation of Trading Volume Brokers will likely charge higher margins uniformly. If they don't, traders will close positions the day before to avoid higher costs, shifting trading volume and volatility to the day before expiry, relocating rather than solving the issue. 5. Increased Cost and Reduced Liquidity By increasing the cost of executing hedged trades, SEBI's proposal discourages the use of calendar spreads. This reduction in hedged trading activity will lead to decreased market liquidity. 6. Exacerbating Basis and Liquidity Risks Less liquidity results in more bad fills, increasing the likelihood of basis and liquidity risks. Ironically, the proposal aimed at mitigating these risks will end up exacerbating them. 7. Penalizing Legitimate Risk Management Increasing the cost of hedged trades penalizes those using derivatives for legitimate risk management purposes. SEBI's report fails to distinguish between speculative trading and hedging, leading to broad regulatory measures that do not address the specific nature of these activities. 8. Call for Effective Regulation Effective regulations should encourage risk management practices rather than penalize them. Differentiating between hedging and speculation is crucial for creating rules that enhance market stability without imposing undue burdens on prudent risk managers. Conclusion This proposal could inadvertently increase market risks, contrary to its objectives. It's essential to distinguish between hedging and speculative activities to ensure regulations support market stability and effective risk management.
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There’s a lot of discussion around discouraging retail traders from trading in the Indian derivative markets lately. Regulatory bodies are exploring various measures, from tax rate adjustments to market structure changes. At AlgoTest (YC S22), we offer a different solution for retail traders - a systematic approach to trading. Our internal data shows that 45% of our customers were profitable for the fiscal year 2023-24, a significant improvement from the 11% reported by SEBI for the previous year. While this achievement may seem self-congratulatory, it reflects our confidence in our methodology. We believe in the power of a systematic trading approach. Interested in learning more? Check out our detailed blog post below!
AlgoTest's Edge - The 45% Advantage
https://algotest.in/blog
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AlgoTest (YC S22) reposted this
Rajat Jaiswal and I are looking for a Quant Developer Intern for our Core Trading Platform at AlgoTest (YC S22). # About AlgoTest: AlgoTest is a dynamic and fast-growing startup revolutionizing the trading industry. Our platform is designed to empower retail traders with the tools and knowledge to make informed decisions in the financial markets. # Position Overview: As a Quant Developer Intern, you will play a pivotal role in the development and backtesting of various trading strategies. You will work closely with our founders, and other team members to build, backtest, and deploy trading strategies. # Responsibilities: * Collaborate with the team to research, develop, and backtest algorithmic trading strategies across various asset classes, with a focus on optimizing risk-adjusted returns. * Write clean, maintainable, and efficient code. * Collaborate closely with founders and retail traders to understand the requirements of Indian retail traders and make automated trading systems. # Requirements: * Currently pursuing a degree in Computer Science, Mathematics, Finance, or a related field. * Proficiency in programming languages such as Python, R, or C . * Strong analytical and problem-solving skills. * Excellent communication skills, with the ability to effectively communicate with founders and retail traders. * Solid understanding of database management systems (e.g., PostgreSQL) and proficiency in SQL. # Benefits: * Mentorship from experienced traders. * Exposure to real-time market data. * Opportunity to work in a fast-paced and innovative fintech startup. Prior adventures/experience in the trading or financial industry, including knowledge of trading systems, market data, or algorithmic trading would be preferred. DM me or AlgoTest (YC S22) with your resume and we can get started.
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Raghav Malik and I are looking for Founding Software Engineer for our Core Trading Platform at AlgoTest (YC S22). We are a dynamic and fast-growing startup that is revolutionising the trading industry by developing an innovative platform specifically designed for retail traders. Our goal is to empower individuals with the tools and knowledge to make informed trading decisions, ultimately levelling the playing field for retail traders in the financial markets. We are seeking a highly skilled and motivated Software Engineer to join our core team and help shape our platform. # Position Overview: As an experienced Software Engineer, you will play a pivotal role in the development and implementation of our trading platform. You will work closely with our founders, and other engineers to build a scalable and user-friendly platform that meets the unique needs of retail traders. # Responsibilities: * Architect and develop the core infrastructure of our platform, ensuring its scalability, reliability, and security. * Write clean, maintainable, and efficient code. * Collaborate closely with founders to define the technical roadmap and contribute to strategic decision-making processes. # Requirements: * Bachelor's degree in Computer Science, Software Engineering, or a related field. Advanced degree is a plus. * Proven experience (3 years) in software development, preferably in a fast-paced environment. * Strong proficiency in back-end and/or full-stack development, with expertise in web frameworks and technologies. * Experience in designing and implementing RESTful APIs and microservices architecture. * Familiarity with cloud platforms (e.g., AWS, Azure, GCP, DigitalOcean) and containerization technologies (e.g., Docker, Kubernetes). * Solid understanding of database management systems (e.g., MongoDB, PostgreSQL) and proficiency in a SQL and a NoSQL DB. * A self-driven and entrepreneurial mindset, with a willingness to take ownership and drive projects to successful completion. Prior adventures/experience in the trading or financial industry, including knowledge of trading systems, market data, or algorithmic trading would be preferred. DM me or Raghav with your resume and we can get started.