Kudos to MMs
- Thread starter nitro
- Start date
Ok here is what is happening, and while I am pretty certain that this is the crux of the problem, it doesn't mean I know how to solve it.
My models try to organize inputs into a generalized coordinate system. This is done in Physics all the time so that you are comparing units with the same corresponding units. So for example, natural units are always used. This is one reason Physics is so much easier than markets, as far as we know, these units are not variable in time,
http://www.newton.dep.anl.gov/askasci/phy05/phy05095.htm
making the equations and the outputs we get from them time invariant.
Planck units: http://en.wikipedia.org/wiki/Natural_units
My model has these conversion factors as well. Now, as the geometry of the "market space" changes, these conversion factors themselves can stretch and compact, and our model begins to lose predictability.
If the geometry of "market space" is Kahler,
http://en.wikipedia.org/wiki/Kähler_manifold
then this problem becomes even more complex, as the "ruler" would change drastically away from nearby points and our conversion factors would probably be off, and, even a small difference like going from e.g., 10 to say 10.35 could mean the difference between the model giving a "FV" for SPX like 1150 vs 1192. This smells an awful lot like my model is chaotic (small changes in inputs are magnified in the output), but I continue to plug forward.
I have made adjustments to ANFV to better deal with this, but I have no real theory as to when a constant should go from 10, to say 10.35, and if all this is doing is curve fitting, then it is garbage.
My models try to organize inputs into a generalized coordinate system. This is done in Physics all the time so that you are comparing units with the same corresponding units. So for example, natural units are always used. This is one reason Physics is so much easier than markets, as far as we know, these units are not variable in time,
http://www.newton.dep.anl.gov/askasci/phy05/phy05095.htm
making the equations and the outputs we get from them time invariant.
Planck units: http://en.wikipedia.org/wiki/Natural_units
My model has these conversion factors as well. Now, as the geometry of the "market space" changes, these conversion factors themselves can stretch and compact, and our model begins to lose predictability.
If the geometry of "market space" is Kahler,
http://en.wikipedia.org/wiki/Kähler_manifold
then this problem becomes even more complex, as the "ruler" would change drastically away from nearby points and our conversion factors would probably be off, and, even a small difference like going from e.g., 10 to say 10.35 could mean the difference between the model giving a "FV" for SPX like 1150 vs 1192. This smells an awful lot like my model is chaotic (small changes in inputs are magnified in the output), but I continue to plug forward.
I have made adjustments to ANFV to better deal with this, but I have no real theory as to when a constant should go from 10, to say 10.35, and if all this is doing is curve fitting, then it is garbage.
One interesting thing to do is to turn the problem on its head: Back out the metric tensor at each moment in time, and see how it evolves. This would give me a general theory as to how the metric space that governs the coefficients should evolve (this is computationally expensive).
I am pretty certain that all I would find out though is that in the absence of news, it is one function, and in the presence of news, it is another (plus the myriad other kinks that affect markets on short time frames like earnings etc). That means we are back to momentum trading again ,trying to guess on the local manifold.
I am pretty certain that all I would find out though is that in the absence of news, it is one function, and in the presence of news, it is another (plus the myriad other kinks that affect markets on short time frames like earnings etc). That means we are back to momentum trading again ,trying to guess on the local manifold.
While I think that strikes with high open interest do have an attractive force to them (never actually done the study - just feel), I think 1100 SPX is simply too far away to be attractive here. It doesn't make sense. The puts are already close to worthless whether it is 1100 or 1165 at expiration, and the ITM calls have been protected by nearer the money puts, like probably 1140 - 1150 puts to correspond with near term support.
on a cumulative market profile of the spx,it trades ranges within the larger chart, presently the range is 1040-1170,if u use this recent segment and range of the chart and the shape denoted in the blue box,it could easily return to 1099,the other marks on the chart are targets if we move out of this range
This was a month ago:
So how are those puts working out for you? I like Nitro, he is a nice guy, but this thread needs to be renamed Exercise in Futility or How to Martingale into a trend...
May I? Because with a Martingale system you only make decent money if you average in with a decent amount, compared to your account. Had the market gone in his way right away, he was only in position with 1 contract and the win would have been rather small compared to the account size. He needs to have a position with at least 3-5 contracts on to make it worthy...
Oh yeah, Wiki says:
Effect of variance
As with any betting system, it sometimes happens that one achieves a better result than the expected negative return, by temporarily avoiding a losing streak. Furthermore, a straight string of losses is the only sequence of outcomes that results in a loss of money, so even when a player has lost the majority of his bets, he can still be ahead overall, since he always wins 1 unit when a bet wins, regardless of how many previous losses.
http://en.wikipedia.org/wiki/Martingale_(betting_system)
So how are those puts working out for you? I like Nitro, he is a nice guy, but this thread needs to be renamed Exercise in Futility or How to Martingale into a trend...
May I? Because with a Martingale system you only make decent money if you average in with a decent amount, compared to your account. Had the market gone in his way right away, he was only in position with 1 contract and the win would have been rather small compared to the account size. He needs to have a position with at least 3-5 contracts on to make it worthy...
Oh yeah, Wiki says:
Effect of variance
As with any betting system, it sometimes happens that one achieves a better result than the expected negative return, by temporarily avoiding a losing streak. Furthermore, a straight string of losses is the only sequence of outcomes that results in a loss of money, so even when a player has lost the majority of his bets, he can still be ahead overall, since he always wins 1 unit when a bet wins, regardless of how many previous losses.
http://en.wikipedia.org/wiki/Martingale_(betting_system)