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Not the worst idea, especially the naming part :D

10% with a Sharpe of 2 is a dream for pension funds. I knew a guy who got financed ($5MM) on a much crappier system just because "it lost less when market went down" and "made same or more when it went up", or so it claimed. Not all systems are supposed to work on a Robinhood $2000 account and...

It needs at least a few $100,000s to work. I can (and will) only test it on a virtual trading account, just to confirm I'm getting the same figures as in a simulation.

Yes, this is an alternate approach, though I might start with at least a free if not fully open source tool. I'd start with: - Display and validate market data. So you can browse through years of data, step through day by day, select a term and view the vol curve and options. Data validation is...

I got this: 1) A software to research, develop and test option trading strategies on historical market data, then run them on live data by using Interactive Brokers API. 2) Several strategies developed using this software, latest of which I previewed in the thread labeled "How do these equity...

Another parallel with computing: a trading platform is to finance what an operating system is to computing. There's no lack of (failed) trading platforms, I also include here software to research and develop trading strategies, like there's no lack of (failed) operating systems. I worked quite...

I'm thinking the market for trading strategies has some similarities to the market for computer games. 1) The vast majority of end users are interested in the final product rather than the tools to develop it. - Software: end product is a computer game. Think "Angry Birds" or "Assassin's...

Well in translation: buy deep OTM options for protection. Only problem: 95% of the times you're throwing those money off the window because those options expire worthless so you never get back something for them. I've done enough backtests to confirm that. And $2 for an OTM option may not look...

I'm using Interactive Brokers on either Windows or Linux (Ubuntu) with no problems. Both Trader Workstation (IB's GUI application) and my own Java-based application that connects to TWS and uses the Interactive Brokers API. As long as you're writing in Java it's fairly irrelevant weather you're...

OK, will rename it "annual return". I just liked how "yield" sounds a bit more.

Several things: - The strategy is not making pigs fly but it consistently and reliably outperforms a simple long position on the underlier. If the underlier is very bad-behaved and would lose money, you won't get a terrific yield and Sharpe, but it's very probable that my strategy will still be...

So I arrived at a trading strategy that seems pretty good for my reckoning. It's something I developed incrementally through study of finance / quant theory, experimentation and use of a software tool I programmed. Also I'm using real historical options market data to backtest in addition to...

Yeah, it's not that bad. Selling a deep ITM put behaves much like being long stock, with the nice addition that you're being paid to take that position (in the form of the extrinsic value of the put). If stock goes down and you'd be long stock, you'd be losing money. But with the short put you...

The value of an ITM option be it call or a put is a sum of two components: - The intrinsic value, how much the option would pay if it expired right now. - The "actual" value (not sure the exact term). Example: stock price is $100, OTM put with strike price at $105. Well if the option expired...

Well obviously the official definition of VIX matters, since that's the underlier of VIX options, therefore payout will ultimately depend on it. But as StepandFetchit (and I) pointed out, in practice it doesn't make much of a difference when using a simpler approach yields almost the same...

Too complicated. VIX is "market's expectation of 30-day forward-looking volatility", hence 30-day implied volatility. When there's an exact SPX option term for 30 days, it's the at-the-money implied vol on it, otherwise interpolate the ATM implied volatility between the two option terms before...

Hmm, I'll check, thanks.

I guess the VIX futures. From a pricing point of view you need to replicate the option with the underlier and since in this case the index is not directly trade-able, you need futures in replication. So I expect a pricing model to take this into account.

Anyone knows what model is used to price VIX options? Clearly not Black-Scoles since the underlier returns are not log-normal. Tried fitting a Black-Scoles to it and was completely off, of course. So question is what is it?