I doubt he made it up or changed it or pretended he had done it... unlike some others in this thread.
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My option trades
- Thread starter ryanpatrick
- Start date
I doubt he made it up or changed it or pretended he had done it... unlike some others in this thread.
Quote from Don Bright:
To Falconview, Atticus please back me up on this attempt.
Try to think of the market staying in a trading range until the next expiration. Say, between 1370 and 1440 on the SPX. Or use GE as an example, between $18.00 and $22.00.
Don't worry if GE goes to 19 or 21, or anything. Pretend you sold the $22 calls and the $18 puts. As long as GE stays within the range you think makes sense, I know I would, then your options will expire worthless.
Take a bigger snapshot, forget deltas for a bit on this strangle. Just watch Theta time decay come in. Your broker should have bell curve graphs to show you all this, based on stock price movement, and days until expiration.
Try that.
Atticus? Make sense.?
Don
Still no free lunch. If the underlying leaves the range, your options get destroyed. Its all good until that insurance policy you sold takes a claim. In some situations, your stop loss is basically unlimited on an overnight hold.
Your claim is that the options market is inefficient and constantly overprices the inherent risk/reward. This is highly debateable, not nearly as cut and dried as you are trying to claim. In fact, the biggest weapon a buyer of options has is to be highly selective in terms of their purchase and price. The fact that 80% of options expire worthless is irrelevant to the selective buyer.
Quote from Nine_Ender:
Still no free lunch. If the underlying leaves the range, your options get destroyed. Its all good until that insurance policy you sold takes a claim. In some situations, your stop loss is basically unlimited on an overnight hold.
Your claim is that the options market is inefficient and constantly overprices the inherent risk/reward. This is highly debateable, not nearly as cut and dried as you are trying to claim. In fact, the biggest weapon a buyer of options has is to be highly selective in terms of their purchase and price. The fact that 80% of options expire worthless is irrelevant to the selective buyer.
Not at all, simply using time decay to allow the options to go down so that even if we get near one of the strikes, the options will likely still add up to less than we sold them for. As expiry gets nearer, and price were to be within a dollar or so, we would likely still make money.
I understand your rationale, it's the same thing we've heard for decades. Your risk is limited. I say, yes, it's "limited to everything you paid for your options." It's just a numbers game, nothing to get worked up over.
If GE were to get to about 21.75 or so, say with a week to go, the puts are worthless the calls are cheap. If it goes above $22, puts are worthless, calls are at Parity. On the downside, same thing. Calls and puts both deteriorate. No one is talking about free lunch, we just focus on risk reward. And when you buy calls, as each day goes buy, even if the stock moves your way, you can still lose everything you invested.
As I said, I understand and appreciate you liking to take a shot by buying calls instead of underlying, no problem there. When you do have a winner, then you risk early exercise or dividend exercise as well. Then you have the underlying shares and have to fund account to cover those shares anyway.
edit: And, to your point that the market is inefficient, no way. All conversions are priced within a couple of pennies of fair value (time to expiry and current interest rates, there are no "real" overvalued options, maybe high priced, but not "overvalued." )
All the best,
Don
Quote from Don Bright:
To Falconview, Atticus please back me up on this attempt.
Try to think of the market staying in a trading range until the next expiration. Say, between 1370 and 1440 on the SPX. Or use GE as an example, between $18.00 and $22.00.
Don't worry if GE goes to 19 or 21, or anything. Pretend you sold the $22 calls and the $18 puts. As long as GE stays within the range you think makes sense, I know I would, then your options will expire worthless.
Take a bigger snapshot, forget deltas for a bit on this strangle. Just watch Theta time decay come in. Your broker should have bell curve graphs to show you all this, based on stock price movement, and days until expiration.
Try that.
Atticus? Make sense.?
Don
Yah, sure. Reduce var-risk by buying deep otm wings to reduce outlier risk and margin. Most flies are straddle proxies.
I have a friend that does all my programming for me. The last trading program he built me was completed in June 2007 and we have traded it from July 2007 to early March 2012.
Since that time the reliability has slowly degraded in performance and as a result of that, he has created a totally new trading program that he sent me last week.
He has back tested the new program starting from September 2011 to March 8, 2012 and then decided to send it to his buddy
Jeff (me) so I can test it further with real trades (isn't that kind of him?, I can be the human Guinea Pig!).
-----------------------------------------------------------------------------------
I have already posted the first trade on page 131 of this thread:
03-15-12 08:58 AM
Also bought SPY April 140 calls at 2.14 this morning.
Looking for 2.68 (+25%), but if it goes the wrong way then
Buy No. 2 at 1.60 and sell all at 2.30.
Stop: 1.45
and then posted the result on page 144 of this thread.
03-19-12 10:05 AM
I managed to close both of these trades today at +25%
above my total debit cost on each.
-----------------------------------------------------------------------------------
If you look at the attached Excel spreadsheet, you will see my
programmer friend's back test of his new system trapped between the yellow bar at the top of the page and all the way down to the second yellow bar below 3/8/2012.
Below the second yellow bar is my actual first trade that I posted
signal date 3/14/2012 (which is actually entered on 3/15/2012 because the signal is created at night after the close).
Signal date 3/19/2012 is the trade I opened today (which I already posted today).
Look everyone, no one (including myself) expects my actual real time trading results to match those back tested results that he recorded from September 1, 2011 to March 8, 2012,
but I just thought it would be fun to periodically keep posting all new trades real time and the spreadsheet and we will see how close we come and what goes right or wrong with the new system along the way.
Jeff
Since that time the reliability has slowly degraded in performance and as a result of that, he has created a totally new trading program that he sent me last week.
He has back tested the new program starting from September 2011 to March 8, 2012 and then decided to send it to his buddy
Jeff (me) so I can test it further with real trades (isn't that kind of him?, I can be the human Guinea Pig!).
-----------------------------------------------------------------------------------
I have already posted the first trade on page 131 of this thread:
03-15-12 08:58 AM
Also bought SPY April 140 calls at 2.14 this morning.
Looking for 2.68 (+25%), but if it goes the wrong way then
Buy No. 2 at 1.60 and sell all at 2.30.
Stop: 1.45
and then posted the result on page 144 of this thread.
03-19-12 10:05 AM
I managed to close both of these trades today at +25%
above my total debit cost on each.
-----------------------------------------------------------------------------------
If you look at the attached Excel spreadsheet, you will see my
programmer friend's back test of his new system trapped between the yellow bar at the top of the page and all the way down to the second yellow bar below 3/8/2012.
Below the second yellow bar is my actual first trade that I posted
signal date 3/14/2012 (which is actually entered on 3/15/2012 because the signal is created at night after the close).
Signal date 3/19/2012 is the trade I opened today (which I already posted today).
Look everyone, no one (including myself) expects my actual real time trading results to match those back tested results that he recorded from September 1, 2011 to March 8, 2012,
but I just thought it would be fun to periodically keep posting all new trades real time and the spreadsheet and we will see how close we come and what goes right or wrong with the new system along the way.
Jeff
Attachments
AAPL defies gravity, Sir Isaac Newton got it wrong. :eek:
Quote from Nine_Ender:
Still no free lunch. If the underlying leaves the range, your options get destroyed. Its all good until that insurance policy you sold takes a claim. In some situations, your stop loss is basically unlimited on an overnight hold.
Your claim is that the options market is inefficient and constantly overprices the inherent risk/reward. This is highly debateable, not nearly as cut and dried as you are trying to claim. In fact, the biggest weapon a buyer of options has is to be highly selective in terms of their purchase and price. The fact that 80% of options expire worthless is irrelevant to the selective buyer.
WTF is with you and the free lunch?! Don is telling a neophyte to pick an expected range on the underlying and sell a combo outside of that range. I suggested adding the deep wings to fly it off and reduce haircut.
So the buyer has to be highly selective in your highly sophisticated argument? Unfortunately, that implies that the seller can be indiscriminate by your fcuked-sideways logic.
Really? A strangle isn't a free lunch? Om nom nom. Thanks Captain Obvious!
If I had a time machine I would search out your mommie and hand her some RU-486. Only then would I go after Hitler.
Quote from jeffalvinson:
I have a friend that does all my programming for me. The last trading program he built me was completed in June 2007 and we have traded it from July 2007 to early March 2012.
Since that time the reliability has slowly degraded in performance and as a result of that, he has created a totally new trading program that he sent me last week.
He has back tested the new program starting from September 2011 to March 8, 2012 and then decided to send it to his buddy
Jeff (me) so I can test it further with real trades (isn't that kind of him?, I can be the human Guinea Pig!).
-----------------------------------------------------------------------------------
I have already posted the first trade on page 131 of this thread:
03-15-12 08:58 AM
Also bought SPY April 140 calls at 2.14 this morning.
Looking for 2.68 (+25%), but if it goes the wrong way then
Buy No. 2 at 1.60 and sell all at 2.30.
Stop: 1.45
and then posted the result on page 144 of this thread.
03-19-12 10:05 AM
I managed to close both of these trades today at +25%
above my total debit cost on each.
-----------------------------------------------------------------------------------
If you look at the attached Excel spreadsheet, you will see my
programmer friend's back test of his new system trapped between the yellow bar at the top of the page and all the way down to the second yellow bar below 3/8/2012.
Below the second yellow bar is my actual first trade that I posted
signal date 3/14/2012 (which is actually entered on 3/15/2012 because the signal is created at night after the close).
Signal date 3/19/2012 is the trade I opened today (which I already posted today).
Look everyone, no one (including myself) expects my actual real time trading results to match those back tested results that he recorded from September 1, 2011 to March 8, 2012,
but I just thought it would be fun to periodically keep posting all new trades real time and the spreadsheet and we will see how close we come and what goes right or wrong with the new system along the way.
Jeff
51 trades and not a single loser? Seems highly unlikely I would think. You sure there isn't something wrong with your model?