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<b>ADDING a VIRTUAL PLAYER to keep track of expired options</b> So let's see how to add a "virtual player" to keep track of the loss of the option unit, and the rationale of that. In our example, we had 1 CALL 81 sold at 2.38 (1.07 comms) and 3 CALLs 88 bought at 0.68 (3.65 comms). Note...

Thank you elitetradesman, just my own application (those discussed in this thread are all original concepts). [In case you are interested, you can get it (free) from my website (just google the app name + "algorithmic trading") and trade along with us (on paper trading) if you wish.]

It has been brought to my attention that I erroneously wrote (and also copy/pasted) in the previous post: "-1 PUT 81 @ 2.38" while we we are obviously talking of a CALL (as shown in the picture) and the -100 shares are obviously due to the CALL expired in the money: "-1 CALL 81 @ 2.38"...

<b>DEALING WITH OPTION EXPIRATION: HOW TO CONVERT THE EXPIRED OPTIONS INTO POSITIONS TO BE DEALT WITH AUTOMATICALLY</b> Before addressing the FAS hedging topic, let me clarify how to deal with expired options within the algorithmic system. <b> General introduction </b> You will remember...

Let's see how the algorithmic trading is developing. The following 2 pictures summarize the current situation. You can see we have developed a gain in excess to the loss of about 7.5K at this moment (about 40 days), so with a daily average of about $ 185. The drift is probably excessive. A...

Hi JoshDance, sure, one can use multiple means to the purpose of hedging, depending on the situations and personal preferences. Sometimes you can just use a correlated instrument, when there is a good reason to do so (e.g., instrument momentarily not tradable, desire to counterbalance or...

So let's recap the metrics we have seen so far. For greater accuracy it is appropriate to include also the <b>commissions</b> in the computations, as, for instance, a greater frequency in general can help smoothing the equity curve and exercise a finer control on drawdown, but it will cost...

While we wait patiently for our algo to pull up our PNL (beyond the influence of mkt volatility), let's produce some more "theory", also useful for a finer dynamic control of the scalping/ hedging action. In the previous posts we have introduced the "Relative drift" (<b>RD</b>) and "the...

After some "theory", let's switch back to "practice" and see how it is going. The current (real $$$) situation is as shown in the picture below. <img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=3902435" /> In particular at this very instant we have about 17K of gain and...

In the previous posts we have discussed how to possibly measure the <b>relative drift</b> (<b>RD</b>) caused by recycling the "past losses" into the realized gain component. We mentioned we could use the following: <b>RD := "Relative Drift" := (Gain + Loss ) / | Loss | * 100</b> (where...

This is an example picture (from a simulation study) showing the forced-hedging-entry mechanism I mentioned in the previous post at work and also envisioned by Johnny. Here, for instance, I have programmed it to "kick in" at a $ 200 drawdown (DD) (and other additional directional conditions...

> I would be interested to have your opinions about this. >But what if the unrealized losses happen at the beginning of the operation (maybe due to a runaway in the wrong direction, and maybe with a wrong diversification that gives too much weight to one particular market going wrong)? In...

More in particular, it's the positive "resolution" itself of the "hedging orders" (in practice, those which would appear like "stops" to an external observer) which provides the possible edge for the whole algorithmic work. That is, the source itself of systematic profitability (in statistical...

Yes sure, thank you for asking abattia. The conceptual point is that what on "physical" account will possibly "look like" stop orders, to an external observer (and to the MMs), are instead all "kept in memory" by the application, which if possible at a later time will "resolve" as positive...

Now let's proceed explaining a bit more the architecture, and the motivation. There are 2 main aspects that we need to address. 1. Player superposition - How it works, and why we need it. 2. Layer overlay. - Why we need this too and how do we coordinate the different layers by...

This is a picture showing a possible order cloud generated by <b>player superposition</b> on a single layer: <img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=3894676" /> [ This particular picture is taken from the "game analysis" tool, a facility to study the statistical...

Only "virtually" (purely in the application "imagination" and mathematics). For instance, If you hypothetically had (only) 1 CY BUY and 1 T SELL, your "physical" account will have 0, of course. See the pictures with the NG example before. Assuming that only these 2 layers were working and...

At this point it becomes clear that in order to play a (statistically) consistently profitable trading game we need to organize ourselves in a way which allows us no to realize losses in a systematic manner and we need a proper architecture. This is done in my approach by first introducing the...

And here is a real world example (these are real trades on NG, tickdata is actual and current). <img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=3892832" /> (Imagine the difference, if we have simply "stopped and forgot" when the long position (2 contracts) on the first...

I have been totally overwhelmed coding new ideas and features this weekend. Anyway, let me give you some initial ideas about some hedging technique, so that you can sleep on them, and then provide some feedback and discussion. I have mentioned "superposition" and "layering". Let me introduce...