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This is really the crux of the issue. I think what people are struggling with (myself included), are the concepts of strategic dominance and statistical advantage. I still don't exactly understand the source of dominance and advantage from having the players "recycle losses", or of remembering...

Thank you for taking the time to read my (long) posts and reply in so much detail. I have read all your responses, but I won't quote every piece -- it would just take too much space! A couple more things... I wholeheartedly agree. The only reason I was looking at the actual short-term PNL as...

This is another part I have trouble understanding. You say the hedging orders appear like stops, but in fact, they are stops - at least in the sense that your overall account no longer has an open position. So this is part of why I am confused about the use of "unrealized". Once you have opened...

OK. I have identified one source of misunderstanding. It comes from your post on Nov 2. The bottom of your simulation screenshot contains the following information: [ SIM Process: GBM_MR, Vol: 77.19%, Drift: -3.22%, Rev. Speed: 0.11 ] My interpretation is that you are simulating on a mean...

I seem to have offended you and for that I am sorry. I am not able to right this minute, but I will try to give very specific examples of my understanding of your method from past posts.

I infer the approach is not making money because the liquidation PNL is negative. Didn't the PNL on the prior live trial also go negative because of big drawdowns before you pulled the plug and reset the chart? I am making no claim about "get-rich-quick" or otherwise, and I am really not...

I should add that the "trading game" may be very valuable in terms of simplifying the programming of otherwise very complex logic. That is a great benefit. I just think it's important to zoom out to the level of the aggregated actions on your trading account, and make sure that the big picture...

Dear Tom, I have been following your posts for years now, going back to when you were first simulation testing this thing. I admire all your work and I think the software you have created is really impressive. However, I feel obligated to tell you that I think there may be no edge in your...

Mr. Crayon, I will try to answer your question directly. You seem to be asking why your call spread is not worth $1 before expiration when the underlying is above the upper strike. The answer is that the market is pricing in some positive probability that the price falls before expiration. The...

I am not sure 100% follow the trade you are proposing, so I am not sure I get what you are trying to accomplish. Could you give a detailed example? I like the idea of trading vol against terminal distribution using mean reverting underlyings... but I think mean reversion may explain why...

Cool. Thanks. To extrapolate this a little bit, it seems important to recognize when going to the trouble of formal modeling actually generates any insight. In the case of news, it modeling effort might just be wasted.

Gotcha. And then the simulations begin in earnest! Martin, another question for you about sims. I am pretty familiar with running simulations in general, but what about the specifics here? I assume you'd want to run some scenarios over the range of (per time period) historical vols, and...

Thanks for the advice Doobs. The real heart of my question is what are some modeling approaches people actually use to form these opinions? I guess I started the thread because I am trying to narrow the modeling universe somewhat -- I feel like I have too many choices based on all the reading...

You can change the year in the URL to go backwards in time...

Thought folks might find this interesting. It is the papers archive for NCCC-134, a USDA multi-state project for research on Applied Commodity Price Analysis, Forecasting, and Market Risk Management. http://www.farmdoc.illinois.edu/nccc134/Year_search.asp?Type=Year&Year=2013

I agree, and even more so without access to expensive data. It's exactly that costly trial and error that has kept me out thus far. I have a Python script scraping tick/order data from netfonds.nl... so am hoping over time that can accumulate into at least some more granular insight about moving...

I've thought of it, but it seems like the ag options are super thin/only traded for a very few strikes. I actually have some ideas about listing different ag futures that actually provide the right hedge for everyone who is not a grain processor. If those options were liquid, it would really...

People are trying to tell you that it's highly unlikely that their incorrect model happens to perfectly predict profit and loss scenarios. In other words, "as long as I'm making profit when I should be making profit" is not likely to happen if you rely only on the models in TOS.

I appreciate the advice. In the case of cash protection, I am gonna have to do a lot more research/data work to determine how much edge there really is once my terrible RegT margin is considered. From a distributional perspective (or a put-call-parity perspective, for that matter), that risk...

Ah, ok. I guess I was thinking that vol is positively correlated with vol of vol and so the term structure would be expecting both to trend back in the direction of more normal levels over time. This was my idea of what drives the term structure. That make sense? Just stating it based on...