A free Trading System that guarantees at least 180% p.a.

Status
Not open for further replies.
Shay said:
what about commissions of buying and selling the stock ?
More...
Shay, I updated my wording in my previous posting: the stated commission of $1 is for the 100 shares of the stock belonging to the 1 option contract.
 
Last edited:
botpro said:
That is simple to answer:
static transaction costs for 1 contract (100 shares) = $1 (at the broker IB: $0.005 per share, minimum $1).
Ie. 100 shares means Commission = max(100 * $0.005, $1) = $1.
MaxHedgingTrades <= (X / $1), ie. X times
If X equals the credit, ie. $460 like in the example, then with the monthly options obviously upto 460 hedging trades can be made before the credit gets eaten up.
Ok, there are also some more costs (exchange fee etc) added to the commission, then let's say MaxHedgingTrades=400, ok?

FYI: I think it was ironchef who tested it with SPY and discovered 13 crossings in the month he tested, ie. 13 trades...

And: the hedging trades are necessary only if the current spot is near the entry level. If the current spot is away, then one can simply ignore all gaps or whatever .
More...
Firstly, how certain are you about your $4.60 calculation? With S=100, K=100, T = 21 days, vol of 40%, I don't get 4.6.

Secondly, let me rephrase. You specifically mention that you will be using some bands around the strike, in order to avoid trading too frequently. Assume your hedge needs to be taken off and reinstated at strike +/- 10 cents, you will be selling at 99.90 - bid/offer and buying at 100.10 + bid/offer. Including commissions that you have calculated above, how many such round-trip iterations until you break even?
 
Martinghoul said:
Firstly, how certain are you about your $4.60 calculation? With S=100, K=100, T = 21 days, vol of 40%, I don't get 4.6.
More...
Hmm. what does your calculator give instead?
Secondly, let me rephrase. You specifically mention that you will be using some bands around the strike, in order to avoid trading too frequently. Assume your hedge needs to be taken off and reinstated at strike +/- 10 cents, you will be selling at 99.90 - bid/offer and buying at 100.10 + bid/offer. Including commissions that you have calculated above, how many such round-trip iterations until you break even?
More...
Sorry, but a funny question I must say because I'm not interested in break-even :D, but in taking nearly all of the credit.
Ok, if it makes sense, I'll shortly post the number of the break-even trades under the above constraints too...

Update:
The following formula should give the answer:
BreakEvenTrades = $460 / ($1 + $0.10) = 418
ie. one can take the previously said 400.
 
Last edited:
botpro said:
Hmm. what does your calculator give instead?
More...
I get 3.82 and change...
Sorry, but a funny question I must say because I'm not interested in break-even :D, but in taking nearly all of the credit.
Ok, if it makes sense, I'll shortly post the number of the break-even trades under the above constraints too...
More...
You should be VERY interested in the breakeven as well as all such questions. I am sure you can figure out why.
 
botpro said:
Hmm. what does your calculator give instead?

Sorry, but a funny question I must say because I'm not interested in break-even :D, but in taking nearly all of the credit.
Ok, if it makes sense, I'll shortly post the number of the break-even trades under the above constraints too...

Update:
The following formula should give the answer:
BreakEvenTrades = $460 / ($1 + $0.10) = 418
ie. one can take the previously said 400.
More...
Are you sure about this?
 
Status
Not open for further replies.
Back
Top