AI arrived in Investing a long, long time ago. If you limit AI to deep learning, as in deep neural networks, maybe only 3-5 years ago. Strategies based on news have been around for decades. Figuring out what the news means isn't necessarily as helpful as it seems because it's hard to put much size on when there is limited time even if you are first. However, various patterns around news is much easier and to do that all you needed to know was that some important news had arrived, not necessarily whether it was good or bad, the goodness or badness was plainly visible in how the price action. Figuring out the magnitude but not the sign of the importance of a news item has not been difficult for a long time. Yet somehow we keep getting articles about how AI has arrived in investing.
As far as the return forecastability deniers out there, particularly the ones who claim to be doing it on the basis of some sort of empirical thing, well, if you can't be bothered to actually look at the data or even read academic literature on the subject, I can't be bothered to educate you.
I've literally missed the sign on a trade before, and it was 7-figure disastrous. (I've missed the direction of movement on individual symbols a number of times, but this one time I literally went the wrong way on everything by accident.)
Markets adjust too quickly to flip your position and profit in any reliable way. On planned or anticipated events, people are all locked and loaded waiting for something to happen.
However, I'd much rather know the sign because at least I can put on some position and guess a little at the magnitude.
I have no professional experience in finance, and I wouldn't try to go long volatility because it's too expensive and risky, but why can't you buy puts and calls at the same time? Or, I have read that there are options on the VIX.
Yes, but there are easier ways to make money trading volatility than forecasting single asset volatility. While you can fairly easily forecast volatility with R^2 higher than 60% for most assets vs 5-7% for the best models for returns, that's not the important bit. The important bit is whether you are better than the rest of the market. I would argue that implied volatility is harder to trade off a forecast than straight return because a greater proportion of the participants in the vol market are professionals, and also more likely to be highly quantitative geeks. Also my comment wasn't about being able to forecast large moves but being able to determine how much a news item was going to move an asset. As far as handling important news events and getting out of the way is concerned, options market participants are very good at it and have been for a while.
Only if the vol mkt is mispriced. Spreads on most single names are wide enough to make this difficult or impossible, and deeper/tighter mkts tend to be much more efficient anyway.
As far as the return forecastability deniers out there, particularly the ones who claim to be doing it on the basis of some sort of empirical thing, well, if you can't be bothered to actually look at the data or even read academic literature on the subject, I can't be bothered to educate you.