HoCo struck me as an earnest, intelligent guy. My totally unsubstantiated guess would be that he lost enough to damage the potential marketability of his website and/or associated products, but not enough to cause him lasting harm financially.
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HowardCohodas Index Options Credit Spread Trading Journal
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HoCo struck me as an earnest, intelligent guy. My totally unsubstantiated guess would be that he lost enough to damage the potential marketability of his website and/or associated products, but not enough to cause him lasting harm financially.
What I think Howard should know is, as much as he wants to hide, any potential student that has the wherewithal to google his name will find themselves right here on this thread. And it will be in Howard's best interest to be here when they arrive. Because if he isn't, that just leaves us and I don't think Howard will like that.
Quote from arabianights:
I don't trade ES (although I am considering doing it around roll time etc.... first I want to get FTSE over rolls sorted though). I trade STIRs... won't give my pnl figures for last year but you're in right ball park, shall we say. As for how I do it, just look at my sig on t2w and view the "serious thread", which I am adding to slowly over time.
NEXT!
I presume your commissions are almost zero right?
Your average ES trader attempting to scalp 2 ticks is going to be paying 16% in commissions with retail comissions. That really puts a lot of pressure on in terms of win rate.
I think it's a hard road for a retail trader to play for such small targets.
Also - I presume yours is still a competitive market, it's not like shooting fish in a barrel is it?
Wow Atticus!
I get the glimmer of what you are saying and explaining. Thankyou! Not sure I can actually visualize it. But will consider it in the weeks ahead. It´s a bit like trying to catch smoke. I do know now where to find your explanation when I´m ready to explore it more fully.
Again, appreciated.
I get the glimmer of what you are saying and explaining. Thankyou! Not sure I can actually visualize it. But will consider it in the weeks ahead. It´s a bit like trying to catch smoke. I do know now where to find your explanation when I´m ready to explore it more fully.
Again, appreciated.
Quote from arabianights:
I don't trade ES (although I am considering doing it around roll time etc.... first I want to get FTSE over rolls sorted though). I trade STIRs... won't give my pnl figures for last year but you're in right ball park, shall we say. As for how I do it, just look at my sig on t2w and view the "serious thread", which I am adding to slowly over time.
NEXT!
Thanks for the invitation, but I'll pass. I'll stick it to the ES for a while longer. I never really liked trading camels.
Quote from DionysusToast:
I presume your commissions are almost zero right?
Your average ES trader attempting to scalp 2 ticks is going to be paying 16% in commissions with retail comissions. That really puts a lot of pressure on in terms of win rate.
I think it's a hard road for a retail trader to play for such small targets.
Also - I presume yours is still a competitive market, it's not like shooting fish in a barrel is it?
Yes, all true I suppose.
Atticus
I´m pondering your very kind revealing contribution. From a crusty old experienced old fella like you, I do appreciate your kindness for an amateur.
I theeenk I get it? Essentially you are talking a STRADDLE. I did trade that a few times last year in 2010 trying to see what would happen to the premiums, but obviously I did not have the magic trick on trying to figure out the conditions on how and when it would work. Certainly I was not impressed with the results and discarded the idea.
I can see how it works! Though I do not think in GREEKS like you do. I am assuming that if the DELTA is neutral that is one part of the trick to making a STRADDLE work ATM. There seems to be something not said and that is, do you have to have a forecast on market direction? I thought a straddle was when you expected a move, but not really able to forecast direction and strength in the volatility spike? I get from your directions that the money is in the volatility spike on one side.
Interestingly enough, the over the weekend trade, while from my long buying point of view, was CALLS, you are making with the STRADDLE the profit on the PUTS? Due to premium collapse. Sort of opposite the forecasted direction of the market. THe idea being that what you want is an explosive move, in either direction. Not caring which. I take it the Delta neutral on both opposing CALLS and PUTS as being the buying trigger. Since one is buying around ATM you would want matching deltas as close as possible. I assume therefore that the criteria without being able to forecast direction, or even if you could, is being able to match the deltas before putting on the STRADDLE? I may experiment with this idea, trying to identify the conditions on which a STRADDLE makes money in a short period of time ( like 45 minutes ) How you could forecast a volatility move early enough to get in buying and selling a straddle at neutral delta though is a point not at all clear. Certainly last Friday I was holding a couple of CALL trades over the weekend by buying, that did not succeed in the intra day trade, as premiums were collapsing through the day, but I had the confidence to feel there would be a bounce on Monday. Which happened, or the volatility spike. It was not however, something I could forecast that far away, from a Friday close to the Monday OPEN.
I´ve got a theory I´m working on, which is why the 197% return in 4.5 months. Don´t gamble, only bet on sure things. That and compounding by betting only on sure thing bets. Skipping as the lawyers say, all the trades that have any reasonable doubt. Less trading, but no losses to speak of either. In my limited experience, one loss wipes out 7 profitable trades. So no losses is the mantra.
I´m pondering your very kind revealing contribution. From a crusty old experienced old fella like you, I do appreciate your kindness for an amateur.
I theeenk I get it? Essentially you are talking a STRADDLE. I did trade that a few times last year in 2010 trying to see what would happen to the premiums, but obviously I did not have the magic trick on trying to figure out the conditions on how and when it would work. Certainly I was not impressed with the results and discarded the idea.
I can see how it works! Though I do not think in GREEKS like you do. I am assuming that if the DELTA is neutral that is one part of the trick to making a STRADDLE work ATM. There seems to be something not said and that is, do you have to have a forecast on market direction? I thought a straddle was when you expected a move, but not really able to forecast direction and strength in the volatility spike? I get from your directions that the money is in the volatility spike on one side.
Interestingly enough, the over the weekend trade, while from my long buying point of view, was CALLS, you are making with the STRADDLE the profit on the PUTS? Due to premium collapse. Sort of opposite the forecasted direction of the market. THe idea being that what you want is an explosive move, in either direction. Not caring which. I take it the Delta neutral on both opposing CALLS and PUTS as being the buying trigger. Since one is buying around ATM you would want matching deltas as close as possible. I assume therefore that the criteria without being able to forecast direction, or even if you could, is being able to match the deltas before putting on the STRADDLE? I may experiment with this idea, trying to identify the conditions on which a STRADDLE makes money in a short period of time ( like 45 minutes ) How you could forecast a volatility move early enough to get in buying and selling a straddle at neutral delta though is a point not at all clear. Certainly last Friday I was holding a couple of CALL trades over the weekend by buying, that did not succeed in the intra day trade, as premiums were collapsing through the day, but I had the confidence to feel there would be a bounce on Monday. Which happened, or the volatility spike. It was not however, something I could forecast that far away, from a Friday close to the Monday OPEN.
I´ve got a theory I´m working on, which is why the 197% return in 4.5 months. Don´t gamble, only bet on sure things. That and compounding by betting only on sure thing bets. Skipping as the lawyers say, all the trades that have any reasonable doubt. Less trading, but no losses to speak of either. In my limited experience, one loss wipes out 7 profitable trades. So no losses is the mantra.
Atticus
I just realized you DID NOT buy a CALL and PUT. But you made money on selling premium on the PUT. So you would have had a direction figured and the DELTA neutral then gave you the edge. Aaahhh! The penny drops ( I think? ) It was a directional trade.
The question then arises, in why you bought the CALLS? I presume this has something to do with margin requirements. Not clear on that point in how buyiing the CALL, but selling the premium in the STRADDLE on the PUT, was the play for expected collapsing premium in the volatility spike of the PUTS which was the real trade in here.
Not sure how the buying the Calls plays a part here? Got to be a margin requirement I presume? Can you clear that point up PLEASE?
_____________________________
You kibitzers forgive me for being long winded. I think with my finger tips by talking stuff out. Somebody complained earlier.
___________________________________
I just realized you DID NOT buy a CALL and PUT. But you made money on selling premium on the PUT. So you would have had a direction figured and the DELTA neutral then gave you the edge. Aaahhh! The penny drops ( I think? ) It was a directional trade.
The question then arises, in why you bought the CALLS? I presume this has something to do with margin requirements. Not clear on that point in how buyiing the CALL, but selling the premium in the STRADDLE on the PUT, was the play for expected collapsing premium in the volatility spike of the PUTS which was the real trade in here.
Not sure how the buying the Calls plays a part here? Got to be a margin requirement I presume? Can you clear that point up PLEASE?
_____________________________
You kibitzers forgive me for being long winded. I think with my finger tips by talking stuff out. Somebody complained earlier.
___________________________________
Oh sheesh!
Arabian Nights is in the million dollar ball park, doing WHAT? Some ticks on the E Mini´s?
Talk about Pavlov´s dog. You got me salivating.
Forgive my stupidness. But what is a TICK on the E Mini? I do use the E mini to watch market direction, but do not trade it. I use it for the PRESSURE. I think of the E Mini in points. Like it has move up or down 4 points, or ten points or something, while the OEX and SPY may be lagging.
I have not yet figured anyway, to even trade the E Mini, not being able to forecast anything on it so far. I think you got me interested and will see if I can find this thing on some charting programs with capability for trend lines and other indicators. Not sure how to do that?
Arabian Nights is in the million dollar ball park, doing WHAT? Some ticks on the E Mini´s?
Talk about Pavlov´s dog. You got me salivating.
Forgive my stupidness. But what is a TICK on the E Mini? I do use the E mini to watch market direction, but do not trade it. I use it for the PRESSURE. I think of the E Mini in points. Like it has move up or down 4 points, or ten points or something, while the OEX and SPY may be lagging.
I have not yet figured anyway, to even trade the E Mini, not being able to forecast anything on it so far. I think you got me interested and will see if I can find this thing on some charting programs with capability for trend lines and other indicators. Not sure how to do that?
The RR is trading direction, unlike an atm straddle. You would be trading synthetic underlying if trading a same-strike RR:
Long ESM1 at 1293.00 = long ESM1 1290C, short ESM1 1290P... the only greek sensitivity is delta. They are equivalent, so simply buy the futures.
The risk-reversal gets its name from the arbitrage:
Short ESM1
Long ESM1 1290C
Short ESM1 1290P
The above is a long reversal or short conversion, but that's not relevant to the discussion. Realize that the difference between the reversal and the split-strike variety is the distance between the strikes.
The split-strike has multiple greeks in play, but it's foremost a trade on direction, then a play on volatility. Long or short, you would only choose a RR based upon the shape of the vol-surface. For example, you would want to be long the RR if otm call vols(itm put vols) were very cheap relative to otm puts(itm calls).
A bear RR in index is a somewhat tougher choice as there remains a premium in the down and out strikes. It's "-skewed" as the skew occurs under the market. If you short the RR (longP, shortC) you must fight the headwind of skew and sticky delta (Derman) which causes otm strike volatilities to converge to current atm volatilities.
You would only choose a RR if you were considering a unimodal delta position (does not flip sign), such as vertical or outright futures.
Long ESM1 at 1293.00 = long ESM1 1290C, short ESM1 1290P... the only greek sensitivity is delta. They are equivalent, so simply buy the futures.
The risk-reversal gets its name from the arbitrage:
Short ESM1
Long ESM1 1290C
Short ESM1 1290P
The above is a long reversal or short conversion, but that's not relevant to the discussion. Realize that the difference between the reversal and the split-strike variety is the distance between the strikes.
The split-strike has multiple greeks in play, but it's foremost a trade on direction, then a play on volatility. Long or short, you would only choose a RR based upon the shape of the vol-surface. For example, you would want to be long the RR if otm call vols(itm put vols) were very cheap relative to otm puts(itm calls).
A bear RR in index is a somewhat tougher choice as there remains a premium in the down and out strikes. It's "-skewed" as the skew occurs under the market. If you short the RR (longP, shortC) you must fight the headwind of skew and sticky delta (Derman) which causes otm strike volatilities to converge to current atm volatilities.
You would only choose a RR if you were considering a unimodal delta position (does not flip sign), such as vertical or outright futures.
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