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b'Matthew Rossi is the founder, managing partner, and chief of research for MarketDNA Investment Research. In this episode of\\xa0Strategic Investor Radio, Mr. Rossi explains his firm\\u2019s eponymous MarketDNA product, which takes intraday data and runs it through an algorithm to \\u201cspit out\\u201d equity trades with 80-90% accuracy. Host Charlie Wright calls MarketDNA a \\u201cfascinating approach of how to invest.\\u201d
MarketDNA uses around 100 filters to ex-out \\u201cnoise\\u201d and find the 1-2 big derivatives trades happening because of inefficiencies in information. Sometimes this means finding \\u201cinsider trading,\\u201d and Rossi shares a story of meeting Martha Stewart\\u2019s brother on a golf course before the infamous ImClone trade that landed her in prison. According to Rossi\\u2019s story, Ms. Stewart\\u2019s brother asked him to lie on her behalf, claiming she traded on the basis of his research instead of illegal inside knowledge. Needless to say, Mr. Rossi refused!
Rossi also discussed an incident with OPRA (the \\u201cOptions Price Reporting Authority\\u201d \\u2013 no relation to Ms. Winfrey) when MarketDNA\\u2019s algorithms noticed its servers were down and received a phone call from a suspicious OPRA executive asking how they knew \\u2013 no one else in the country had.
MarketDNA typically holds 7-10 positions, long or short, at any given time, and each of these positions is normally held for 3-5 weeks. The firm\\u2019s clients are hedge funds and institutional investors, but it has begun making a la carte research available to individual investors. These one-off recommendations come instructions to buy or sell-short with entry and exit prices, but no other research.
When asked what causes some MarketDNA trades to fail, Rossi blames short squeezes and raised guidance around quarterly earnings. Fortunately, most of MarketDNA\\u2019s trades aren\\u2019t earnings-related.
When asked what keeps him up at night, Rossi cites the excitement of his work \\u2013 trying to identify a previously unobservable trade, and making sure no one out there is cheating.'