HowardCohodas Index Options Credit Spread Trading Journal

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Quote from Rodney King:

What would make this -- or any -- option spread thread "different" would be if the author recommended an equal amount of <i>credit</i> and <i>debit</i> trades -- i.e. was <i>premium-neutral</i> in aggregate, so readers could distinguish real alpha from being short premium during a low realized-vol period in the market. (Of course, Dr Cohodas is under no obligation to do so.)
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Should I forget to cover this, please remind me as we get into the discussion of selection.

Thank you for the "Dr," however, I have never achieved that level of accredited education and would not want to diminish the respect that should be shown to those who have.
 
Quote from HowardCohodas:

A good case can be made for both approaches. My belief is that the strategy is easier to understand by first observing its management. Some of the preference for approach depends on one's learning style.

Please bear with me and take the time to understand the positions I have taken and the decisions that go into their management. The "why" will come soon enough and then we can both discuss the merits of each approach from a stronger position of knowledge.
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I think you're insulting the intelligence of your readers with answers like this - simply doesn't make sense. I think the real answer is that you still don't know how to articulate your edge (most likely reason is that you don't have one), so you put that part of the discussion off for as long as possible while trying to lure people in by posting 65%+ returns.

If you can state why you have an edge, then it should only take a sentence or two to explain why it exists. If you can't, then your long term expectation is - (comm + bid/ask)...so then most would view this as a waste of time.

Its real easy to shut me up (in fact, I hope more than anything that you're right and I'm wrong...means i've been making this whole positive expectation thing way too difficult) - just post the quick explanation of your edge.
 
Quote from bs2167:

I think you're insulting the intelligence of your readers with answers like this - simply doesn't make sense. I think the real answer is that you still don't know how to articulate your edge (most likely reason is that you don't have one), so you put that part of the discussion off for as long as possible while trying to lure people in by posting 65%+ returns.

If you can state why you have an edge, then it should only take a sentence or two to explain why it exists. If you can't, then your long term expectation is - (comm + bid/ask)...so then most would view this as a waste of time.

Its real easy to shut me up (in fact, I hope more than anything that you're right and I'm wrong...means i've been making this whole positive expectation thing way too difficult) - just post the quick explanation of your edge.
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Your patience will be rewarded.
 
Quote from HowardCohodas:

Your patience will be rewarded.
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Here we go with the silly answers that you repeatedly resort to when asked the most critical questions about your "strategy".

Would you be more willing to answer in multiple choice format?

You:

A) Believe volatility is consistently overpriced
B) Can identify mispricings in specific options
C) Can predict the direction of the underlying
D) Have no edge, but rather a strategy that wins most of the time but gets crushed at other times

Howard, my intention is not to be harsh, but rather prevent the type of frustration that I sensed in one of your previous journals. If we can get this question resolved (which I don't think was ever accomplished in the other thread), then I think everyone will benefit more from the discussion here. Without resolution, it may just be a waste of everyone's time.
 
Quote from bs2167:

Here we go with the silly answers that you repeatedly resort to when asked the most critical questions about your "strategy".

Would you be more willing to answer in multiple choice format?

You:

A) Believe volatility is consistently overpriced
B) Can identify mispricings in specific options
C) Can predict the direction of the underlying
D) Have no edge, but rather a strategy that wins most of the time but gets crushed at other times

Howard, my intention is not to be harsh, but rather prevent the type of frustration that I sensed in one of your previous journals. If we can get this question resolved (which I don't think was ever accomplished in the other thread), then I think everyone will benefit more from the discussion here. Without resolution, it may just be a waste of everyone's time.
More...

Thank you for your input.

By what name do you go by in this other thread?

The teacher deserves some deference regarding his pedagogical choices.

For the time being, we will proceed as I have outlined. Part of my reason for doing it this way was the difficulty I got into on the other thread in presenting a coherent explanation.
 
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10 JAN 2010 Trading Plan

The Dashboard above informs me as follows:
Opportunity - Takeoffs are optional
Spread #61 is unpaired. Opportunity to form an Iron Condor

Spread #64 is at 85% of it's potential profit. Opportunity to roll.

Spread #55 is at 80% of it's potential profit. Opportunity to roll.

Jeopardy - Landings are mandatory
No spreads show excessive probability of touching.

No spreads are within their last week of trading, which requires extra effort at management.

All but one spread is showing positive return. The one that does not is showing a 1.8% loss with 38 days left to trade at a 25% probability of touching. No action required at this time.

New Opportunity
NDX weeklies are available for entry.
 
Summary of trades in this account to date:
PHP: 
Total closed spreads:       59
Profitable spreads:         55
Average profit per spread: 6.1%
Unprofitable spreads:        4
Average loss per spread:   9.3% 

How were spreads closed?
Rolled spreads:             21
Exited spreads (last day):   7
Expired spreads:            31

Some interesting observations:
One of the questions that comes up frequently is the reliability of the probability of touching probability estimate. Of the seven spreads that were not allowed to expire, only one exceeded my loss limit. The other six were too close by my probability of touching rules. None of the six actually settled ITM. I was just exercising an abundance of caution.

38 were open on the last day of trading. 1 ended ITM. It would seem that the probability of touching underestimates the true probability. The market conditions included up, sideways and down conditions with low volatility. Higher volatility conditions remain untested with money trading.

Although the statistics are small, it seems that the performance did not vary with market condition. That is, PoT adjusted for market conditions encountered. Since volatility is one of the components of PoT, it remains to be seen how that will adjust for higher volatility conditions.
 
The last summary looked at my results from the point of view of individual spreads. Here we look at the results from the point of view of completed Iron Condors.

Summary of trades in this account to date:
PHP: 
Total closed Iron Condors:         16
Profitable Iron Condors:           15
Average profit per Iron Condors: 20.3%
Unprofitable Iron Condors:          1
Average loss per Iron Condors:   20.3% 

x ICs had y spreads each for a maximum return of z
x   y     z
8   2   12.6%
2   3   25.9%
4   4   35.2%
2   5   51.5%
 
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