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Understanding Market Efficiency: A Deep Dive into Quantitative Trading Strategies

Market Movers: The Opening Bell

September 2, 2025

Video Transcript

US markets looking to open the month of September in negative territory.

Now September has historically been the worst month for stocks, with the Dow seeing an over 1% loss on average.

Now September does follow a solid August.

We saw the Dow gaining over 3% in August, while the S&P rose nearly 2%.

Now looking ahead, markets could benefit from a likely return to Fed easing this year, but risks still remain, including high valuations, inflation, and on. trade uncertainty.

Well joining me live here at the New York Stock Exchange is David Chow, founder and chief investment officer at SPX Management.

David, great to have you here.

Thank you so much for joining me.

Thanks for having me.

Well, we're all back from the summer months and here we are ahead of the open.

We are looking at a pullback for the major stock averages, the Dow, S&P 500, Nasdaq in terms of futures pulling back by 1%.

But when we think about the trade uncertainty that we saw in the first Top of this year.

What are we seeing when it comes to hedge fund performance and what are we seeing with Pont Trader?

Well, there's bulls, bears, and there's me, Captain Condor, right?

I focus on a quantitative strategy that's, you know, delta neutral, so we don't really focus on whether or not the market's going to be green or we don't really rely on whether or not the market's going to be red because the market is an efficient place and markets will markets will pay based on the risk that you take.

Yeah, and risk is something that we're all paying attention to.

And when it comes to SPX derivatives, I understand that that sends out a signal.

So can you break this down for the layperson who's watching right now?

Sure.

The interesting thing about the Os market is that the markets is an efficient efficient place, and it gives you an expected move every single day.

And us being a non-directional trader, we trade iron condors, so it doesn't matter if the market goes is green or red tomorrow.

We focus on a range bound trade setting trade setup, yeah, and when you're talking about SPX options being the market heartbeat, why do you say that?

Well, I really think that the market moves in a way where it's very unpredictable.

And so as traders we're not in the business of predicting what the market's going to do, right?

We just need to understand what the market, what the market does and how to exploit that.

Yeah, when it comes to options, depending on how well versed you are in the markets, there are a lot of myths out there.

So can you just dispel some of those myths for us?

Yes, so the thing with options trading is that options are typically priced against you.

And there's a big misconception that the higher accuracy rate that you have when trading means higher probability of making money, and that's not the case.

If you have a 99% accuracy when you're trading, you can still lose money because you can still generate a negative expectancy rate.

And David, when it comes to market behavior as well as sentiment, what do you think is important to keep in mind?

Well, the important thing is that It's our job as traders not to really focus on things that are always changing because we're not in the business of predicting, right?

And so our job as a quant trader is to really exploit an efficient market because the markets will give you an expected move every single day and it's just your job to really price your options to make sure that you're trading a standard deviation.

And for people out there who might be watching and thinking that strategy tends to work best when markets move in one direction for a certain amount of time, but given everything we've seen, how are you looking at the rest of 2025?

Well, the rest of 205, the great thing about our strategy is that we don't really have to look forward to what's going to happen in 2025 because the market will always tell us what will happen.

Right, and so in the market, money is finite and so it takes a tremendous amount of money to move the markets down or up and reaching the standard deviation consecutively.

And David, before I let you go, tell me what the markets are telling you right now.

Well, because, I mean, the market's down and implied volatility is going up, it means that people are hedging, right?

They're they're hedging against a portfolio and they're they think something is going to happen.

So and that's not our job to really figure out what that is.

OK, David, well thank you so much for joining us.

We are looking at red on this Tuesday morning.

Appreciate your time.

Thanks for having me.

“We’re not in the business of predicting what the market’s going to do, right? We just need to understand what the market does and how to exploit that.” – 02:08

David Chau, Founder & CIO of SPX MGMT, joins Remy Blaire at the New York Stock Exchange to discuss his unique approach as a quant trader, focusing on a delta-neutral strategy that allows him to navigate the market without relying on whether it will trend upward or downward. He explains that the market is efficient, and traders should concentrate on exploiting this efficiency rather than attempting to predict market movements.

The conversation shifts to the options market, where David emphasizes the importance of SPX derivatives as indicators of market sentiment. He breaks down the concept of expected moves in the options market and addresses common misconceptions surrounding options trading. David clarifies that a higher accuracy rate does not necessarily guarantee profitability, explaining that even with a 99% accuracy rate, traders can still incur losses due to negative expectancy rates.

As they explore market behavior and sentiment, David stresses the importance of not getting caught up in the constantly changing landscape of market news. Instead, he advocates for focusing on the data and expected moves provided by the market. He reassures listeners that his strategy does not require forecasting future market conditions, as the market itself will indicate the direction of movement.

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