Decades of experience
How simple are professional trader's strategies?
- Thread starter iamnewuser911
- Start date
I actually think so. But I haven't tested it (I probably will early next year...I'm curious enough). It would be close. The big selection criteria I have is actually the price relative to the strike so extrinsic value is enough to make money, but not so large as to decrease the probability of profit. I guess the way I would frame the question is of I'm better at choosing stocks that are going to go up than the market's natural bias, and to an extent that a shotgun approach would tilt the odds out of my favor (and if it scaled to overcome commissions). I don't know and the margins are tight enough that very small changes in probability would filter through to large changes in profit.
It's been some time since I had sufficient data to score my short term directional calls, but it was 53 or 54%. It seems like I've improved a little on this. And that doesn't take into consideration the position being closed on delta moves, or slight adverse price moves that keep the position profitable...which is where the bulk of favorable probability comes from (high 60s is where the overall profitable percentage is).
Some things I do know though:
Compounding 8% from one week to the next is fatal to the strategy because loss potential exceeds gain potential. But 4% isn't. (Managing risk over time)
Unbalanced position sizes tilt the odds out of your favor, but initially look like tilting them in your favor. (Managing risk of over exposure)
I've been unsuccessful with the strategy with a bearish sentiment. I'm unsure if this is natural (puts tend to be bid up a little more), a sign of the times (one hell of a bull since 2009), or a matter of hedging (because down moves tend to exceed up in magnitude)...
So, back to your question, I don't know. It's a good question. And it's close enough I may never have a definitive answer because subtle changes in other variables can affect the strategy as much as my directional abilities.
And my definition of risk management? Having more fingers than holes in the boat.
Thank you. I read enough of your posts and Buy1Sell2's posts to know that neither of you are dummies. So, there must be some validities behind your statements.I actually think so. But I haven't tested it (I probably will early next year...I'm curious enough). It would be close. The big selection criteria I have is actually the price relative to the strike so extrinsic value is enough to make money, but not so large as to decrease the probability of profit. I guess the way I would frame the question is of I'm better at choosing stocks that are going to go up than the market's natural bias, and to an extent that a shotgun approach would tilt the odds out of my favor (and if it scaled to overcome commissions). I don't know and the margins are tight enough that very small changes in probability would filter through to large changes in profit.
It's been some time since I had sufficient data to score my short term directional calls, but it was 53 or 54%. It seems like I've improved a little on this. And that doesn't take into consideration the position being closed on delta moves, or slight adverse price moves that keep the position profitable...which is where the bulk of favorable probability comes from (high 60s is where the overall profitable percentage is).
Some things I do know though:
Compounding 8% from one week to the next is fatal to the strategy because loss potential exceeds gain potential. But 4% isn't. (Managing risk over time)
Unbalanced position sizes tilt the odds out of your favor, but initially look like tilting them in your favor. (Managing risk of over exposure)
I've been unsuccessful with the strategy with a bearish sentiment. I'm unsure if this is natural (puts tend to be bid up a little more), a sign of the times (one hell of a bull since 2009), or a matter of hedging (because down moves tend to exceed up in magnitude)...
So, back to your question, I don't know. It's a good question. And it's close enough I may never have a definitive answer because subtle changes in other variables can affect the strategy as much as my directional abilities.
And my definition of risk management? Having more fingers than holes in the boat.
Thanks you, Buy1Sell2 and JackRab.
So you still depend on your directional edge to make money instead of just having more fingers than holes in the boat?
I'm not sure I do. I wish I'd paid attention to my score vs "everything goes up", actually kept the records, and paid more attention to its context of the broader market.So you still depend on your directional edge to make money instead of just having more fingers than holes in the boat?
It feels like I get it right more often then not now and I'm definitely more frequently scared off from a position by more discrete signals. But I'm unlikely to check on something I didn't initiate a position on, so the reality is I don't know.
With credit spreads, reducing risk by 1% on every position does the same thing to my profits as as increasing my directional accuracy a few percent. (I'm actually really curious now. Just leaving town for the weekend, but when I'm back home I'll pull out my log and get an exact percentage for that). So my attention goes to reducing risk rather than improving chart skills (though, the amount of time I spend looking at them, I hope I'm absorbing something). Once the credit spreads income stream is sufficient, I'll start exploring other strategies.
Also, the space of traders generating 'edge' is much more crowded than that of traders managing risk. What risk management there is tends to be geared towards the risk averse. So whatever advantage I may have and generate by managing risk, there's a lot less people trying to shave every penny off of my profits.
And finally, my insurance background made a lot of the first steps of market risk second nature and gave insight into discrete risks.
So long as you don't do this, trying to bail out a sinking ship.
https://www.aol.com/article/finance...company-another-dollar100m-lifeline/23235204/
Am pretty sure if they asked their clients about lending Sears billions they say no.
Clients? ESL is wholly owned by Lampert, I believe. It's also the largest owner of SHLD, and the loans are in fact backed by the valuable and substantial real estate of Sears. He'll get a nice payday when the shareholders are left holding the bag at bankruptcy.