Don's Opening's Journal....
- Thread starter Don Bright
- Start date
Did well, 3 out of 4 winners (got out of aol too soon)., about $800
Don.
Why don't you post the spreadsheet that you use. It would be useful for us to know which stocks you trade for openings, and how you manage the trades after getting filled.
Thanks.
Jim
Why don't you post the spreadsheet that you use. It would be useful for us to know which stocks you trade for openings, and how you manage the trades after getting filled.
Thanks.
Jim
I really can't put up the stocks that I trade (I am not keeping a secret, I do show people in the office)...because of liability concerns. This is a very heavily regulated business and if someone were to employ the same type strategy based on my exact stocks and lost money we are setting ourselves up for a lawsuit.
I can tell you that I have 2 banks, 2 brokers, 4 Drug stocks, 2 retailers, Freddie and Fanny, and 3 techs in the mix. I modify the list a little bit every so often, but rarely.
Today was a bit rough, and I had to hold on to a couple for half of the day, and ended up losing about $600 overall on 5 fills. Still a very good month!
Thursday a bit rough, had to wait for FNM to come back(-220). Today was a quick in and out, 5 minutes (with a student watching....good thing!)...2 for 3 +$500.
Have been reading these posts with interest. Some thoughts:
I question whether a pre-market fair value calculation adds any significant edge when it comes to profitability of opening only trades. Does the specialist make a fair value calculaton before deciding where to open his (her) stock? (Are there any female specialists? I'll bet there are.) While I don't doubt he/she is keenly aware of pre-market futures levels, I presume he'll open his stock primarily based on the orders he sees on his book. Like he always does. If he's the EK specialist, and the globex futures closed 1% above fair value where will he open the stock? What if there's a 500,000 share seller up a dime from EK's close? If the total shares to buy are 75,000 shares, I'll bet he opens the stock under the big offer, shorting a chunk of stock at the same time with the intent of covering lower. Fair value in this case is irrelevant. Am I wrong?
Experience and research tells me that the main advantage to pre-market fair-value calculatons is to gauge how many of your opening only orders you might expect to fill. If futures are way up, it's logical to expect to be hit on a lot of shorts, so it you don't want that you should limit you exposue on the short side in some way.
When I backtested a portfolio of 25 liquid, thick, NYSE stocks over the last eight months, I had no simple way of calculating historical fair value, so I just skipped it. The results were consistently profitable. The only caveat was that on a few days, 20 of the 25 stocks filled. Days with many fills were overwhelmingly profitable, but trade management is an obvious issue.
Bottom line: The big edge to opening-only trading on NYSE stocks is in trading with the the specialist. The specialist opens the stock at a point where he/she will make the most $$. All other considerations--including fair-value--are secondary. Any thoughts?
I question whether a pre-market fair value calculation adds any significant edge when it comes to profitability of opening only trades. Does the specialist make a fair value calculaton before deciding where to open his (her) stock? (Are there any female specialists? I'll bet there are.) While I don't doubt he/she is keenly aware of pre-market futures levels, I presume he'll open his stock primarily based on the orders he sees on his book. Like he always does. If he's the EK specialist, and the globex futures closed 1% above fair value where will he open the stock? What if there's a 500,000 share seller up a dime from EK's close? If the total shares to buy are 75,000 shares, I'll bet he opens the stock under the big offer, shorting a chunk of stock at the same time with the intent of covering lower. Fair value in this case is irrelevant. Am I wrong?
Experience and research tells me that the main advantage to pre-market fair-value calculatons is to gauge how many of your opening only orders you might expect to fill. If futures are way up, it's logical to expect to be hit on a lot of shorts, so it you don't want that you should limit you exposue on the short side in some way.
When I backtested a portfolio of 25 liquid, thick, NYSE stocks over the last eight months, I had no simple way of calculating historical fair value, so I just skipped it. The results were consistently profitable. The only caveat was that on a few days, 20 of the 25 stocks filled. Days with many fills were overwhelmingly profitable, but trade management is an obvious issue.
Bottom line: The big edge to opening-only trading on NYSE stocks is in trading with the the specialist. The specialist opens the stock at a point where he/she will make the most $$. All other considerations--including fair-value--are secondary. Any thoughts?
By no means am I an expert at OO orders...but I will try to answer some questions. Also, my methods are slightly different than Don's just so you know.
<i>Fair value in this case is irrelevant. Am I wrong?</i>
I don't think you were wrong, you just wouldn't have been filled on the EK short that day because it would be likely that your short order would be .2 or so higher than that sellers price. Or maybe I am not understanding what your question is.
<i>Experience and research tells me that the main advantage to pre-market fair-value calculatons is to gauge how many of your opening only orders you might expect to fill. If futures are way up, it's logical to expect to be hit on a lot of shorts, so it you don't want that you should limit you exposue on the short side in some way.</i>
When I set up my spreadsheet I created custom envelopes so that each stock (according to 2 months of historical data) would get a fill on the long and short side 25% of the time. So, I would now expect to get filled on approximately 50% of my OO orders. An example would be like .5% on the buy side and .35% on the short side if a stock was historically getting too many fills on the short side. If I feel the need to "limit exposure" then I adjust my buy/sell prices a few cents in the same direction. For example, if my charts tell me that the market is really strong, and even though it's gapping up I have a strong feeling that the market will continue up at the open then I would raise my buy price and sell price...but that's tweaking the OO system for discretionary purposes which could harm profitability.
<i>When I backtested a portfolio of 25 liquid, thick, NYSE stocks over the last eight months, I had no simple way of calculating historical fair value, so I just skipped it. The results were consistently profitable. The only caveat was that on a few days, 20 of the 25 stocks filled. Days with many fills were overwhelmingly profitable, but trade management is an obvious issue. </i>
So in essence you just played the gaps with no FV calculation? Not quite sure I understand that. The way I backtested was just to get historical daily close/open data for the s&p 500...it's not exact but I think close enough...all you need is that gap %.
<i>Fair value in this case is irrelevant. Am I wrong?</i>
I don't think you were wrong, you just wouldn't have been filled on the EK short that day because it would be likely that your short order would be .2 or so higher than that sellers price. Or maybe I am not understanding what your question is.
<i>Experience and research tells me that the main advantage to pre-market fair-value calculatons is to gauge how many of your opening only orders you might expect to fill. If futures are way up, it's logical to expect to be hit on a lot of shorts, so it you don't want that you should limit you exposue on the short side in some way.</i>
When I set up my spreadsheet I created custom envelopes so that each stock (according to 2 months of historical data) would get a fill on the long and short side 25% of the time. So, I would now expect to get filled on approximately 50% of my OO orders. An example would be like .5% on the buy side and .35% on the short side if a stock was historically getting too many fills on the short side. If I feel the need to "limit exposure" then I adjust my buy/sell prices a few cents in the same direction. For example, if my charts tell me that the market is really strong, and even though it's gapping up I have a strong feeling that the market will continue up at the open then I would raise my buy price and sell price...but that's tweaking the OO system for discretionary purposes which could harm profitability.
<i>When I backtested a portfolio of 25 liquid, thick, NYSE stocks over the last eight months, I had no simple way of calculating historical fair value, so I just skipped it. The results were consistently profitable. The only caveat was that on a few days, 20 of the 25 stocks filled. Days with many fills were overwhelmingly profitable, but trade management is an obvious issue. </i>
So in essence you just played the gaps with no FV calculation? Not quite sure I understand that. The way I backtested was just to get historical daily close/open data for the s&p 500...it's not exact but I think close enough...all you need is that gap %.