Episode summary
DIY Hedge Funds Unleash AI to Crack Wall Street’s Secret Code | Bloomberg Businessweek
Bloomberg Businessweek Daily
· · Hosts: Carol Massar, Tim Stenovec · Guests: Bernard Goyder
Summary
GenAI is moving retail trading closer to the playbook of hedge funds, according to Bernard Goyder, who says individual investors are using AI to build and run automated options strategies once reserved for institutional desks. He points to traders who left their day jobs, used “vibe coding” or agentic tools, and now let systems place trades with rules like stop losses and portfolio caps. One example in the story has returned about 14% this year, though Bernard stresses that these are still early efforts and not proof of a permanent edge.
The bigger argument is that AI could democratize sophisticated trading while also creating new risks. Bernard says the tools are making it easier for ordinary investors to attempt complex strategies, but that doesn’t erase the danger of losses, crowding, or models that fail in unfamiliar market regimes. He notes that some systems were trained on limited history, including zero-day options data that only goes back to 2022.
He also says the shift could pressure the economics of retail brokerage, especially payment for order flow, because more advanced traders are harder to trade against. But Wall Street remains far ahead in market making and other professional strategies, so the change may be less about replacing institutions than about narrowing the gap.
Key takeaways
- Bernard Goyder says retail investors are using AI to automate options trading in ways that resemble hedge-fund workflows.
- He says some traders are keeping risk limited, with one person putting only 5% of a portfolio into an AI-managed strategy.
- Bernard says the biggest disruption may be to payment for order flow if retail traders become harder to trade against.
- He warns that many models have not been trained on a true bear market, especially in zero-day options.
- He says Wall Street firms like Jane Street and Citadel Securities still remain many steps ahead of retail investors.
Notable quotes
“there is this question of crowding. Are people going to make a lot of the same same decisions”
“your job becomes a lot more like a quant at a hedge fund and much less like an individual punter kind of throwing darts at a dart board”
How the episode opens
Bloomberg Audio Studios podcasts, radio, news. — You're listening to Bloomberg Business Week with Carol Masser and Tim Stenc on Bloomberg Radio.
It's one of the most read stories on the Bloomberg terminal. It's about how Genai is transforming retail investing. It's enabling individual traders to build and execute institutional-grade quant strategies that have once been reserved for major Wall Street hedge funds.
Bernard is one half of the duo behind this story. He's US options reporter for Bloomberg News. He joins us here in the Bloomberg Interactive Brokers Studio.
Congratulations on the story. I'm struck by all of the individuals you highlighted in the story because there's this pattern that has emerged. They were doing one thing before.
Yeah.
They quit that job — To vibe code or create some sort of AI solution — To trading that they think can get them a salary. — Mhm. How are they doing it?
Yeah, I think it it's really indicative of that broader trend in retail investing we've seen since the pandemic with people um putting aside what they were doing before and jumping in and trying to to make a living out of trading really. And these are some of the more professional side of uh the retail investing world. I think we often like to characterize retail investors as having this really high risk appetite, but if you're doing this as a job, actually your risk appetite is going to be pretty low and reasonable.
So, I think one of the guys said he put 5% of his portfolio into this kind of magic money machine that's trading for him. Uh, somebody else was doing one trade a day on uh on Robin Hood, but it was an agentic AI and he he goes and does his day job in it and lets this thing in the background he'll get a notification on his phone sometime during the day being like, "Your trade went through.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai trading
- options markets
- hedge funds
- individual investors
- volatility modeling
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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