Grinding it out, day after day

[Garbage Can Ray]

What a terrific thread and an unbelievable service to any trader who has been fortunate enough to come across it. I sure hope that it stays up on ET. Read the whole thing this weekend.

I wanted to offer some comments on an issue that was touched much earlier in the thread and then never brought back up. Lescor, it is interesting that you have been pulling in big $$$ recently even as the VIX has been falling. This fact might mitigate what I am about to talk about.

It seems to me, in a very general way, that with your long history of profitability and the stats that you have accumulated, that you are very confident that you can kill it when Vol is on the rise. When conditions are not so good, you grind it out.

Don't you think you could have added another 100k this year by shorting Vol month after month? Maybe buying VXX puts or puts on VIX futures? If you buy the puts, you are able to define and control your risk.

If the VIX rises, your put buying for the year, might cost you let's just say 100k. But, by your own admission, in volatile markets, 1M+ is more than reasonable.

Hence, you would most likely come out ahead either way if you were hedging your business (I am sure this is how you view your trading) using VIX products.

 

[saico]

Hi Lescor,

I would like to add a question regarding your vola. calculations. I hope its to much into detail. You stated once that you have your own way to calculate the volatility for the stocks you trade. What 'look back' period is interesting for you here?

Thanks in advance!
Saico

 

[jayjay121]

hi lescor,

just wanted to wish you a good xmas and new year and thankyou for this thread and your time.

i really hope you can do another 'grinding it' thread for 2011, i think its good for you and helps you talk about your trading as your performance has been great this year and you have knuckled down to it. You have been a true pro and an assest to et.

thanks again

jason

 

[austinp]

Quote from lescor:

Back to back really good weeks. +37k, 464k shares traded. Daily pl 0 ,0, +9, +11, +17

Two more weeks to close out this year. Big bucks, no Whammies!

out on a limb here, but the pattern of your results against the market appears to be (in part) selling calls/puts or credit spreads, either atm or otm.

is short options trading a part of your current basket strategy and if so, how big a part has it played in 2010?

 

[Chuck Krug]

Hello there,
From reading your journal, I believe a lot of your strategies include shorting stocks. Did you find that the upwards trend of the last months has effected your short strategies?
Thanks,

 

[lescor]

Quote from Garbage Can Ray:


Don't you think you could have added another 100k this year by shorting Vol month after month? Maybe buying VXX puts or puts on VIX futures? If you buy the puts, you are able to define and control your risk.

If the VIX rises, your put buying for the year, might cost you let's just say 100k. But, by your own admission, in volatile markets, 1M+ is more than reasonable.

Hence, you would most likely come out ahead either way if you were hedging your business (I am sure this is how you view your trading) using VIX products.

Very good question. I've thought of doing something similar many times. I'd have to build it into a trading plan with clearly defined rules. I absolutely cannot wing it on something like that because as soon as I take any significant heat, I start covering for a loss. Without a plan that spells out my risk and how to handle all situations, I would just be floundering around without direction. I just don't know enough about options that I'd be confident I would be covering all the bases.

I could delve into it and work on it as a project, because I agree it would probably be worthwhile. I have a list of projects and ideas to work on. Some are completely new strategy ideas, some are major strategy overhauls and some are in depth studies of current strategies to find ways to make them better. With a lot of ideas, I have to prioritize them according to how quickly or easily I could accomplish them and how much return I can expect for the time put in. And then I have to weigh that all against complacency and comfort, because honestly that's what holds me back the most. I'm just comfortable with how things are now and I like all the free time afforded to me with how my trading is currently set up.

Now, I am getting better at holding positions for a long time. I'm in long swing trades now that I've been sitting on for two months. I have been able to hold my nose and buy stuff and just sit on it and not pay attention to the day to day noise. It is just a matter of growing some balls and upping my size on these trades. It would have a similar effect to selling vol directly.

 

[lescor]

Quote from saico:

Hi Lescor,

I would like to add a question regarding your vola. calculations. I hope its to much into detail. You stated once that you have your own way to calculate the volatility for the stocks you trade. What 'look back' period is interesting for you here?

Thanks in advance!
Saico

I use a three week look back period and update it weekly. But I will make day to day adjustments for stocks that have had a sudden spike in volatility.

 

[lescor]

Quote from austinp:

out on a limb here, but the pattern of your results against the market appears to be (in part) selling calls/puts or credit spreads, either atm or otm.

is short options trading a part of your current basket strategy and if so, how big a part has it played in 2010?

Not really. The only options shorting I do is selling calls on spy when we get big spikes in market volatility. But those are discretionary trades, pot shots I call them. Usually only 5-20 contracts, risking and making a few thousand dollars.

 

[lescor]

Quote from Chuck Krug:

Hello there,
From reading your journal, I believe a lot of your strategies include shorting stocks. Did you find that the upwards trend of the last months has effected your short strategies?
Thanks,

Yes, I do short stocks, and yes a constantly up grinding market makes shorting less fun.

 

[smili]

lescor,

regarding the big negative day you had back in May(?) when you had spreadsheet columns out of align and all sorts of open positions in error...

I was wondering if you put a check in your system to cap the number of positions that your automation would open before flagging you to make sure you wanted to continue opening positions above say 30 or 40 at a time? (I ask as I'm beginning to think of automation myself but want protection in case things fly off the rails.) It sounds like you're submitting hundreds at a time, so I'm wondering if a cxl all remaining after a certain # fill is an approach?


I also wonder if you have an emergency stop that attempts in various ways to close all positions opened today asap should the need arise similarly in the future? just curious of from a process "fail-safe" perspective.