For Another Life

[Concinnity]

Feel free to post here. Sounds like you use NR7 / NR 11 days that Linda Raschke has discussed. Reminds me of an adage, enter when it is quiet, exit when it is wild. Given recent action, “Relatively speaking” applies here. Then again, so might using a shorter time frame.

Interesting I actually don't. I just did a 20 year back test on the ES Daily chart and saw what price did on average when we have the current setup / readings we are in now. Wasn't a perfect super in depth exact test, but generally the theme was a lot of 4-7 days before we had the expansive move and one where we stayed in the range for up to 11 days before we either took out the relative lows (4101.75 in this case) or expanded above to daily resistance (4514 in this case).

Just taking it day by day and intra-day trading it. Don't have anything super high probability that's 100% objective one way or the other here to really go in and attack hard yet.

 

[Handle123]

...

I will often partially hedge my equities related position delta either directly, or indirectly, as in the case of multiple equities positions, using MES futures or ES options spreads based on my directional confidence and desire to increase net theta and net vega contribution to total returns.

QOTE]

This Journal will focus mostly on volatility trading by structuring option spreads according to volatility differences across the volatility surface, my volatility outlook, and of course the expected direction of the underlying.

I will often partially hedge my equities related position delta either directly, or indirectly, as in the case of multiple equities positions, using MES futures or ES options spreads based on my directional confidence and desire to increase net theta and net vega contribution to total returns.

I will use a combination of macro and technical inputs as a basis for my directional outlook.

Starting account value will be about $75k. Money management per position will be initially 1%. Trading instruments will be futures, ETFs for volatility and crypto, and stocks for longer term positions.

Growth, defensive, small capitalization, and monetary themes will be considered for capital allocation purposes, but this is still a work in progress as my dynamic hedging strategy should allow reasonably safe high concentrations of capital to relatively few trading ideas.

When do you put on hedges?

 

[BeautifulStranger]

When do you put on hedges?

I will often reduce delta of a option position at inception with a position in the underlying. On a portfolio basis, I will hedge against adverse market moves using MES based on a short term trading methodology.

 

[BeautifulStranger]

Lost .88% on Monday after buying a bull trap hook, line, and sinker. Had small gain today scalping RTY on the five minute, where momentum was solid and noise was relatively low, after being down early in the session.

Assessing the macro environment and creating a viable trading thesis is kind of tough right now. US oil and technology companies have either pulled or have announced they were pulling out of Russia, leaving over $100 billion in investments plus revenue streams behind. Hello write downs and decreased earnings outlooks. This suggests the West is committing to long term sanctions and accepting increasing risks of trade friction with Russian allies. The effects of this can be increased inflationary pressure for some items, reduced business activity for certain sectors, and increased geopolitical tension. Further, I worry that Fed policy will be hampered by high inflationary pressure in commodities and weakening economic growth. I see consumer and business confidence declining along with spending and snowballing into all sectors of global economy. Then comes financial stress. Conversely, shipments of goods are currently strong and backlogs are high. It is said the market discounts the future and the future certainly looks uncertain. At best.

I now question my assessment a couple of days ago that March will be an up month for equities. There is increasing risk of an accelerated move to the downside should there be increased evidence of systemic financial stress domestically or internationally.

Been studying payoff diagrams of options strategies that are combined with a position in the underlying. The basic idea I'm looking at is to earn theta while maintaining a position consistent with the confidence I have with my directional expectations. The effect of such a combined position is to reduce profit potential of unusually large moves in exchange for expanded profit probability or reduced losses, assuming no adjustments are made during the duration of the trade. In addition, I outperform if this combined position stays within a certain range. Notably, it appears longer duration on combined positions improve my reward to risk of contemplated trade idea, based on my personal, technically based, position management points.

Looking forward, there appears to be a relative divergence between ES IV and ES performance over the last couple of days. Not drawing any conclusions yet, but am willing to trade in either direction with combined positions or in the underlying for momentum trades.

 

[BeautifulStranger]

Account value up .2% today on small positions in EWA, EWC, and micro CAD. No intraday trading today.

Quite gap up for RTH session, which I presume included a fair amount of short covering. Don't know how significant of a signal this runup is, but I will treat it as short term bullish and enter after corrections. I expect to be actively trading tomorrow.

 

[BeautifulStranger]

Account value up .15% after an active trading day. I feel as if I’ve overtradied and was not very focused. I need to better prepare for the trading session.

The following is a payoff diagram for an option position combined with the underlying. This diagram is not entirely accurate because it does not take into account changes in IV as the underlying moves. Further, there is not enough granularity for short terms until expiration where intraday statistics would be useful.

The dashed line is current payoff and the solid line is payoff at expiration. The bottom of the dashed line is above the breakeven line, which indicates a deficiemcy in how the positions are calculated. However, the payoff range is actually wide with a very favorable R/R. The trade idea depicted in the diagram was not entered for execution because my attention was needed elsewhere at the time.


Probably should has held EWA, EWC, and MCD instead of buying FXI on a short term reversion to mean idea and expected rebalancing between asset classes as the Chinese equity markets may be on it’s way to a meltdown with a possible spillover effect on other markets. I must remember we are definately in a different environmemt than we were a few months ago, but the Ruusia-Ukraine war is obviously untenable and I expect quick resolution, perhaps from hours to days. Now that cryptocurrency is getting political recognition of a sort in the US, especially in light of recent sanctions against Russia and her need for a liquid and recognized monetary instrument that is accepted in a good number of major markets, I’m short to medium term optimistic in this space. Further, there are major custodians that have recently announced they will be offering their clients easy access to cryptocurrencies, potentially greatly increasing demand.

I will look to do fewer, but larger trades in the future that seem to represent the best overall opportunity according to my macroview, technical assessment, and volatility outlook.

 

[hilmy83]

Hi i have a question. Does IB really have a daily 1 hr downtime during overnight hours in futures?

 

[Overnight]

Hi i have a question. Does IB really have a daily 1 hr downtime during overnight hours in futures?

I don't think it is just in futures, I think it is for everything, where they "reset" their servers or something, based on previous comments about it.

 

[BeautifulStranger]

Trading performance update and analysis for 2022:

Ended up losing money trading in 2022, about .7% of account value. As suggested by my Sharpe ratio and my small trade size, my trading performance was considerably worse than indicated, especially at maximum drawdown.

On a positive note, since June 2022, my account started to recover, which continued to the end of the year. Trade size was similar to earlier in the year.

My trading results suffered from inconsistent adherence to entry criteria and especially closing trades before exit criteria being reached. Further, two order entry mistakes cost me .7% and .4% of account value respectively on illiquid options spreads because I failed to notice order price reversions to the default of taking liquidity after I changed order quantity. This resulted in me paying the full spread. I've been consistently able to offer slight improvement to mid price and obtain fairly quick execution, including option trades with wide bid/offers.

I believe my trading system is fairly sound, but my lack of discipline and diligence it keeping me from being profitable.

The above account is still open and positive performance continued to mid January. Since then, my equity has been trending down. Performance for 2023 to be updated later.

I have opened an additional account and will be focusing on that in my Train Wreck thread. Hopefully I have put the worst of my discipline problems behind me and will never make major order entry mistakes again. I need to be methodical, process oriented, and to always take an extra moment to confirm my order is correct.

 

[BeautifulStranger]

Twenty trades.

Going to do some scalping next week and evaluate my performance after twenty trades. May do some longer time frame trades as well. Will post results here.