Great post Drew. I'd love to hear more about your trading system. What's your thesis, what types of trades are you doing, what types of signals are you looking for, what worked in testing, what didn't work. What services or software did you have to buy? What was surprisingly free? What limitations did you run into? What was surprisingly unlimited? Do you think you could apply this to other markets like equities? Go down that rabbit hole!
Mark Thanks! Happy to share some thoughts/lessons without revealing the entire playbook.
The Core Thesis: Exploit short-term momentum inefficiencies using order book depth + macro momentum indicators (QQQ as my North Star for now). The idea was that brief imbalances create tradeable edges if you can move fast enough.
What Worked in Testing: The signals were solid—depth chart analysis + momentum alignment caught real moves. Backtests looked promising with 60%+ win rates on paper.
What Killed It: Fees + execution constraints. Exchange fees were brutal—taker fees (0.26-0.40%) destroy profitability on small edges. To make it work, I had to operate as maker on both sides (placing limit orders), which kept round-trip costs around 0.32-0.52%. But here's the catch: maker orders mean you're not guaranteed fills, and momentum opportunities don't wait. The second you go taker to guarantee execution, fees eat your entire edge. The opportunities I found were 0.2-0.4%—barely break-even at best.
Surprisingly Free: Exchange APIs and WebSocket feeds gave me everything I needed—real-time order books, trades, and pricing data. Python libraries (ccxt, pandas, ta-lib) handled the rest all via Claude back/forth testing and changes to work effectively.
Had to Buy: VPS hosting for reliability and uptime. Very limited cost if you search around but the key is the VPS has to be closest proximity to the exchange.
Limitations: Biggest one was limiting myself to single-exchange arbitrage. Trading pairs on one exchange (BTC/USD vs BTC/USDT) meant competing for razor-thin spreads. Cross-exchange arb would open more opportunities but adds withdrawal times, transfer fees, and complexity. Also hit API rate limits during volatile periods.
Equities? Possibly, but similar fee challenges exist. PDT rules are another gate. Futures might be better due to lower transaction costs, but you need serious capital and margin management.
Bottom line: Built a system that identified opportunities well but couldn't capture them profitably at retail scale. The maker/taker dilemma was key—speed vs. cost is a brutal tradeoff. Great learning experience though—forced me to understand market microstructure deeply.
Trading costs are a killer. I'm doing an options trading strategy that is all about managing trading costs to eke out a small edge. Could you just deploy more capital and do cross exchange arb with well funded accounts on each exchange? My limited knowledge of crypto (as a decentralized product) is that there is no one true price so that feels like a place you could find edge. API rate limits are horrible too. I've dealt with that just on trying to get data downloaded to set up my trades. You could consider putting time into optimizing your code to be easy on the API. Sometimes there are some surprising gains to be had there. Finally, US equities and futures can have extremely low trading costs for customer accounts on IBKR, esp if you are willing to be a market taker. Oftentimes even negative trading costs for options (for sure) and (maybe) equities. You could literally lose money on every trade and still be profitable (which is what I do for reasons other than exchange rebates). Some options spreads are consistenly a penny wide in names like QQQ and TSLA. Tougher to find arbitrage. But maybe your other signals can give trade indicators so you put short-term risk-on trades based on your signals. Fun stuff!
I just checked and for penny-pilot equity options you can get a $.48/contract rebate on Sapphire. Brokers like IBKR and DashPrime will pass that rebate along to you. IBKR charges $.65/contract commission. Dash prime is negotiable and you should be able to get it as low as $.35/contract. There are also a few other fees (like OCC and SEC) that add a bit. So in the end equity options trading could be about breakeven.
Kudos to you, Andrew. We’ll have this elephant mapped soon.
We have to remember that what we observe is not nature in itself, but nature exposed to our method of questioning.
— Werner Heisenberg
Great post Drew. I'd love to hear more about your trading system. What's your thesis, what types of trades are you doing, what types of signals are you looking for, what worked in testing, what didn't work. What services or software did you have to buy? What was surprisingly free? What limitations did you run into? What was surprisingly unlimited? Do you think you could apply this to other markets like equities? Go down that rabbit hole!
Mark Thanks! Happy to share some thoughts/lessons without revealing the entire playbook.
The Core Thesis: Exploit short-term momentum inefficiencies using order book depth + macro momentum indicators (QQQ as my North Star for now). The idea was that brief imbalances create tradeable edges if you can move fast enough.
What Worked in Testing: The signals were solid—depth chart analysis + momentum alignment caught real moves. Backtests looked promising with 60%+ win rates on paper.
What Killed It: Fees + execution constraints. Exchange fees were brutal—taker fees (0.26-0.40%) destroy profitability on small edges. To make it work, I had to operate as maker on both sides (placing limit orders), which kept round-trip costs around 0.32-0.52%. But here's the catch: maker orders mean you're not guaranteed fills, and momentum opportunities don't wait. The second you go taker to guarantee execution, fees eat your entire edge. The opportunities I found were 0.2-0.4%—barely break-even at best.
Surprisingly Free: Exchange APIs and WebSocket feeds gave me everything I needed—real-time order books, trades, and pricing data. Python libraries (ccxt, pandas, ta-lib) handled the rest all via Claude back/forth testing and changes to work effectively.
Had to Buy: VPS hosting for reliability and uptime. Very limited cost if you search around but the key is the VPS has to be closest proximity to the exchange.
Limitations: Biggest one was limiting myself to single-exchange arbitrage. Trading pairs on one exchange (BTC/USD vs BTC/USDT) meant competing for razor-thin spreads. Cross-exchange arb would open more opportunities but adds withdrawal times, transfer fees, and complexity. Also hit API rate limits during volatile periods.
Equities? Possibly, but similar fee challenges exist. PDT rules are another gate. Futures might be better due to lower transaction costs, but you need serious capital and margin management.
Bottom line: Built a system that identified opportunities well but couldn't capture them profitably at retail scale. The maker/taker dilemma was key—speed vs. cost is a brutal tradeoff. Great learning experience though—forced me to understand market microstructure deeply.
Trading costs are a killer. I'm doing an options trading strategy that is all about managing trading costs to eke out a small edge. Could you just deploy more capital and do cross exchange arb with well funded accounts on each exchange? My limited knowledge of crypto (as a decentralized product) is that there is no one true price so that feels like a place you could find edge. API rate limits are horrible too. I've dealt with that just on trying to get data downloaded to set up my trades. You could consider putting time into optimizing your code to be easy on the API. Sometimes there are some surprising gains to be had there. Finally, US equities and futures can have extremely low trading costs for customer accounts on IBKR, esp if you are willing to be a market taker. Oftentimes even negative trading costs for options (for sure) and (maybe) equities. You could literally lose money on every trade and still be profitable (which is what I do for reasons other than exchange rebates). Some options spreads are consistenly a penny wide in names like QQQ and TSLA. Tougher to find arbitrage. But maybe your other signals can give trade indicators so you put short-term risk-on trades based on your signals. Fun stuff!
I just checked and for penny-pilot equity options you can get a $.48/contract rebate on Sapphire. Brokers like IBKR and DashPrime will pass that rebate along to you. IBKR charges $.65/contract commission. Dash prime is negotiable and you should be able to get it as low as $.35/contract. There are also a few other fees (like OCC and SEC) that add a bit. So in the end equity options trading could be about breakeven.