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Expectation: How Much Does Your Trading Method Earn in the Long Run? “What can you expect to earn on each trade on average over the long run from your investing decisions or your trading rules?” Or, as a blackjack player would say, “What is your edge?” A first step for the Turtles...

Our overlay strategies reflect our philosophy of using relatively short-dated, out-of-the-money S&P 500 Index option call spreads and put spreads to earn premium income based on time value and perceived volatility. While the strategy is unbiased as to market direction, we actively manage it to...

Is not Sector Rotation a "cycle" itself?

Being uncorrelated to the absolute level/direction of the market (highly influenced by macroeconomics events) can be an edge.

Nice insights on the state of enlightenment, the question of gods and much more: https://www.instagram.com/ug_krishnamurti/ https://en.wikipedia.org/wiki/U._G._Krishnamurti Q: What is your concept of God? Very often you say that God alone can help. UG: No, that's a manner of speaking. (...

Selling a vertical or atm straddle with ~30 days to expiration is an option trade in the Gamma sector: --- Without delta hedging, one is exposed to the payoff profile of option at expiry (overall move of the underlying) --- With delta hedging, one is exposed to continuous realized volatility...

Selling long dated (leaps) ATM straddle is more a "pure" volatility play; low gamma big vega, while 30 days to expiration straddle requires delta hedging to mitigate gamma risk. "Volatility" is an elusive term.

There is indeed risk premium that can be harvested from the option market; it is a "structural alpha". Compare 30 days ago vix level and sp500 today realized volatility over the last 30 days. That is (variance) risk premium. The idea to collect that premium for ever - despite market regime, is...

How much can IV influence a short-dated credit spread? It's gamma sector rather the vega sector. it's all about time decay (open at 40 days to expiration and close 15 days later). You collect time benefit and sell optionality - non linear payoff. This is what the media is advertising. Pretty...

I believe trading the outright is about random walk while trading the relative value is about mean-reverting property. Being well capitalized in order to meet margin calls is crucial and that's what affected big funds as LTCM (ultimately they were right on every single trade) Relative value is...

Here's the 1:1 NQ-YM chart in total notional value (at the moment $22700): https://it.tradingview.com/symbols/spread/CME_MINI%3ANQ1!%2A20-CBOT_MINI%3AYM1!%2A5/ Here's a video about Pairs Trading Equity Indices:

"From the start of 2019 through July the Russell 2000 ETF has generated total returns of 17.6%, versus 20.1% for The S&P 500. Interestingly, small cap stocks have underperformed despite strong overall market gains. And while the long-term evidence points towards small-cap stocks outperforming...

So, gold increases, yield curves invert (in negative rates territory in europe) and small caps have been lagging...what's next?

The big takeaway is that no matter if I trade a PCA- or DV01-neutral strategy (butterfly, non-directional steepener/flattener) the position will be affected anyway by factors such as level, slope and curvature. One is supposed to factor that and accept the approximation.

"Quantity ratios are calculated based on DV01 of respective cheapest-to–deliver securities" So, the butterfly 4:3:1 (as in the schatz bobl bund fly) is a DV01-neutral based ratio. If I want to achieve a PCA-neutral ratio I must run the PCA toolbox on schatz bobl bund respective...

Hi, Over the last year the small caps have not outperformed large caps for the first time. I was considering placing a relative value trade between Russell 2000 and S&P 500. I understand it's almost impossible to achieve zero market correlation. Also, there's usually more volatility on the...

Hi, Originally I used to chart a 2s5s10s fly as in 2x05Y-02Y-10Y then I found out other weightings on a fixed income research paper (78%-100%-68% weighting on german bunds) where they compare it to a "3y3y - Spot 10yr Beta Adjusted Spread". Interestingly enough the 4:3:1 shatz bobl bund fly...

I often hear "if I had more money I could make more money (and risk less)" and I for one find it true; is it an excuse?

Suppose I expect the german yield curve to steepen. Since DV01 for FGBS is 24.80 and FGBL=95.80 I get and hedge ratio of 3.86:1 If I buy a 4:1 spread (long 2yr short 10yr) am I slightly long or short rates? https://www.tradingview.com/symbols/spread/4*EUREX:FGBSZ2018-EUREX:FGBLZ2018/ Thanks

https://www.gurufocus.com/news/256254/naked-short-put-options--warren-buffetts-little-secret