The reason I mention this is because in the past year or two, there are so many new aliases that pop up here, say outrageous things, stir up trouble, and are gone. So even though you don't post much, seeing that you have been registered since 2002 meant that you were at least a long time member/reader and that does give some credibility.
Of course all of this is the dream, but the devil is in the details, so I eagerly await your examples.
Using what you have written so far, I wonder how it can be achieved to not be directional because even with a hedge, you still have to have one trade work out better than the other. I mean you go long and short in two different accounts, they just cancel eachother out. If you go long something like ES, and short something like YM, which I have read some people do in order to make the money value smaller, they still take a direction since ES the dollar value of ES is higher than YM. (unless of course YM for some reason makes a much bigger move than ES, and lets also not forget that sometimes the correlations break down so both indexes might go against you such as long ES, and it goes down so you lose, and you short YM, but it goes up, so you lose again).
Going to hedging with options, once again, how many puts need to be bought and what does this cost in order to hedge out an ES position that might go down 10 or 20 points?
This is why I hope you can provide a direct example because there are so many combinations and on the surface, I don't think any truly fulfill the idea you are trying to get across.
Thank you, Gotcha ! My guess is that we both need a Life, as today is Saturday and beautiful sunny day and we are jabbering on ET. For shame on us.
That said, let me try and answer, somewhat intelligently, what your good observations point to as questions of what appears to be posted by someone who may have devious methods to harm the unsuspecting reader. BTW, I share your distrust of Trollers who are looking to sell something. Baron, no doubt has a way to eliminate them. Just an aside, years ago I would have bought gladly from scammers who might have found the Holy Grail.
Some would call my trading, "Statistical Arbitrage" or "Delta Neutral" trading -- much information is available on a google search on those terms. I call it a 2-Horse Race and should perhaps copyright or trademark that name. Clever maybe, but descriptive of the problem; Which is Directional Trading using Stops. Directional trading is at best a coin flip when entering the trade. Heads you win tails you lose (Long wins or Short Wins). To protect from loss or to create a condition where one can be profitable with winning 6 out of 10 trades is the plan. Most know it ain't gonna work regarding of your choice of indicators, and razzle dazzle software which tells you with an arrow to go short and then exit with the up arrow.
Nothing is new about trading. It is just old stuff repackaged for the newbie wannabes. Avoid trying to predict the markets -- that is my conclusion, and finally, has produced consistent income. Now let's talk about some key concepts.
Using what you have written so far, I wonder how it can be achieved to not be directional because even with a hedge, you still have to have one trade work out better than the other. I mean you go long and short in two different accounts, they just cancel eachother out. If you go long something like ES, and short something like YM, which I have read some people do in order to make the money value smaller, they still take a direction since ES the dollar value of ES is higher than YM. (unless of course YM for some reason makes a much bigger move than ES, and lets also not forget that sometimes the correlations break down so both indexes might go against you such as long ES, and it goes down so you lose, and you short YM, but it goes up, so you lose again).
This is Pair Trading. Yes it can and does work. I do that sometimes but only when certain conditions excist and the markets are truly Corolated. Not the best trade in my arsenal but occasionally I do trade for example 2 ES long and 5 NQ's short as a pairs trade. Works a high percentage of the time. (Just providing an answer, not suggesting that it is Fav). Don't try this at home unless you have the rules which are not part of this discussion.
You are also correct that I cannot be Long the ES and Short the ES in the same account. Even with 2 accounts which would be possible, it is Not a profitable strategy except for the brokers.
Now we need to discuss a key to hedging which will permit both long and short the ES in the same account and will produce profits. The terms needed to understand this is Symmetrical and Asymmetrical returns. Symmetrically is like trading stock or the future. For each penny AAPL goes up you make $1.00 if you are long 100 shares of stock. Same with futures for every tick that ES move up, you earn $12.50 if you are long the futures contract. (Sorry if this is too "Ned and the First Reader", but one never knows who the reader's of ET are. Options are not linearly priced these are Asymmetrical Returns. If the future goes up one point the value of the option may not increase by the same 1 point of value, as in the ES example $50. There are several factors that make up the pricing formula for options. Fortunately, we need not know the meaning
No need to stress, the formula is not necessary for us to make money.
The important point is I can be Long The ES using options and in the same account, I can be Short the ES Future. I now am in a "2-horse race" and non-directional. I have the opportunity to make money if the ES goes up or down or even sideways.
Is this Way too Complicated and hard to learn? NO. It has been said, "If you can Order a Pizza" you can learn to trade this way. You order a futures contract Long and you add 2 ES options Short (instead of anchovies) and you can do this trade with just one push of a button on your computer. WoW.
Here is the "rub" -- you need to learn when to optimize the quality of the Pizza by ordering at the right time and place. So in this example, we are Short1 future at say 45 and short 2 Puts.
Will try and post examples. Will open a new Thread to not ruin Mr. Doug Stewart's excellent thread.
