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Augen is a genius, and I am surprised that with all of the mathematical knowledge demonstrated here, that it is not readily apparent. There is no need to make it too complex; he is simply expressing how to isolate conditions when the market is stretched liked a rubberband so that you can...

DaveyC, Thank you for your reply to my reply to your reply! :D Your clarification makes much more sense. Delta neutral trading as you are describing has always been a secondary concern for me since I manage a portfolio and seek to build up an inventory of the underlying while benefiting...

Thanks to everyone who has posted their thoughts and suggestions. It has made me consider a number of issues and I am now formulating/refining a structure for trading the inverse indices. The question I have is whether it is optimal given the conditions and desired outcome... For clarity, I...

Roreilly. My intention is to isolate and capitalize upon the time decay while remaining as directionally neutral as possible. Exceedingly high volatility for both indices at the time of entry will be present, so there is a high probability that volatility will fall after entry. Bull Call...

While an offer of assistance from Bob or anyone else is appreciated, I am not sure how this topic turned to this unrelated subject matter. I never expressed an interest prop shops or in shopping this concept around as an HFT. Thanks.

That is exactly what I am attempting!

spindr0, Magnitude of the daily ROC is relative as an entry would only be considered when the spread is in a statistically abnormal state, lets just say with a probability of 5% or less of occurrence. The daily trading pattern is already sorted out as this is just a matter of creating a...

Daveyc, Yes, the indices are ETFs and both have strong option markets. However, one is much liquid than the other. With all due respect, I must disagree with your statement that theta is the least important of all the greeks. I have been using it as my primary metric for a trading...

Hi Bob. Thanks for your offer. Rather than talk offline, is there any way you could post your suggestion in this forum, so that others can benefit from your suggestion? Thank you.

For some time now, I have been monitoring two indices (I'll refer to them as index A and index B) which are almost exactly inversely correlated; when one moves up by a certain %, the other moves down almost the exact same %. I will refer to the combined % moves of each index as the "spread."...

Heech, It took me three years to raise US$100k to start my incubator fund. And by incubator fund, I mean a fund where I cover all of the costs, charge no fees and do not represent myself as an RIA. Also, I have no pedigree or direct connections to Wall Street. Most likely, it will take me...

I have come to believe that trading styles are unique, much like fingerprints. Often, we try to adopt another trader's methodology, but when it doesn't fit our psychological profile/mindset, we experience stress, fatigue and ultimately failure. IMHO, the key to successful trading is not to...

To take it one step further, Jesus taught us that we should not be at peace with the world. And in fact, the road to peace often meanders through strife. I always found it interesting that so many expected Jesus to play a significant part in toppling Roman dictatorship and ending the...

If I sell someone the right to sell me something, that is a purchase. Therefore, saying that someone will blow out based on this concept is misleading and reflects the lack of development of a "complete" methodolgy as I posted earlier. In addition, if you feel reading direction is the basis...

Yeah, right. I keep hearing that. Usually from traders who don't set aside the capital to buy the underlying if assigned. They strictly trade the options and have no interest in the underlying. Limiting leverage or not using it at all improves the option selling strategies significantly...

Or maybe just statistics? And it isn't even necessary to predict a high or low. Close is good enough. If you know when vol is at its max and that asset is not going down any futher, why trade an OTM put and not just buy the asset? First, no one knows when vol is at its max. So it is...

Could you elaborate on this first point? While your expected value is probably positive in selling puts, it comes with very high volatility. Not if you sell at periods of maximum volatility. Also, don't underestimate the power of Theta decay.

But you have a successful trade whether the market goes up or sideways and even in some cases, down. 66% probability of a winning trade beats 50% every time!

Iceman1, I typically hold positions from 4 to 180 days and over the past year have experienced no more than a 4% drawdown. The key is to remain hedged AND to trade directionless trades. I am smart enough to realize I am not smart enough to predict where any market is going. Best of luck.

Great suggestion! Thanks. Unfortunately, given the attributes of my trading methodology, there are reasons this solution may not work for me.