My option trades

[falconview]

Appreciate both comments from Kinggyppo and from Scott and mo.

The nuances of anything is what make it work. The tricks so to speak. The idea of going an extra strike out the money is a good one I can appreciate, though I may not understand it. Well will watch and see what happens.

The sudden drop mid morning is making me antsy. I was playing with real money in CALLS, a la Jeff and his averaging down. My own lessons in stocks decades ago, was NEVER to average down. Think I got stuck in 5 stocks left over for over nine years, before I averaged my way out, to a small profit.

Ended up by buying some puts. 3 PUTS to balance the 3 CALLS I am holding. See how it goes? I´ve got a couple of weeks I can play with it. But I cannot lose anymore money, or will have hit my level when I´m out of here.

 

[falconview]

So on the Reverse Iron Condor

One should be two, or even three strikes, OTM, from the par ATM, to make it work?

 

[falconview]

I´m nervous about an April 2% to 10% market correction.

 

[falconview]

Sorry Jeff

I blew right through my index number, I was supposed to follow your method and double up CALLS, a la averaging down. Couldn´t do it. Ended up buying PUTS instead and will play the trend and the trend ending for PUTS, and THEN maybe buy some more CALLS, or something? See what this market does? Usually on something like this I lose on the CALLS in this case, but make on the PUTS. Overall losing.

 

[scottandmo]

Quote from falconview:

So on the Reverse Iron Condor

One should be two, or even three strikes, OTM, from the par ATM, to make it work?

Yes, premiums start to converge at further OTM, For example. XYZ at $100. Calls at 100 and 105 will have larger premium difference (say $7.5 and $4, diff of $3.5), but calls at 110 and 115 will have smaller premium difference (say $2.5 and $1, diff of $1.5). Basically further OTM is less likely and therefore more profitable.

If you expect a big move but don't know which way, then you can buy spreads far OTM on both sides and if it does move big then the profit of one of them covers the premium of the other plus some. That is a reverse iron condor. Conversly, it should be easy to interpret the reason for purchasing an iron condor.

 

[jeffalvinson]

My new system is basically turning to shit!
I just completed by first 10 actual cash trades.
I have separated those 10 trades from the prior back-tested trades and entered them on a new attached excel.

I can only say that having a bullishly biased mechanical trading system kills you during market transitions (like now).

Its kinda sad because the older system (which I recently abandoned) that I was using for the last four and half years didn't have a bias built into the programming and looking at its performance during this downturn...its doing really well.

I am a little discouraged at this point and need to re-think the old and new mechanical trading systems.

 

[atticus]

Quote from jeffalvinson:

My new system is basically turning to shit!
I just completed by first 10 actual cash trades.
I have separated those 10 trades from the prior back-tested trades and entered them on a new attached excel.

I can only say that having a bullishly biased mechanical trading system kills you during market transitions (like now).

Its kinda sad because the older system (which I recently abandoned) that I was using for the last four and half years didn't have a bias built into the programming and looking at its performance during this downturn...its doing really well.

I am a little discouraged at this point and need to re-think the old and new mechanical trading systems.

If it's any comfort, none of us bought the hit-rate. Odd that it went from 90% wins to utter d-shit. Never use anything w/o a forward test with real-money. Of course, nobody is going to sell anything that works.

 

[newwurldmn]

Quote from jeffalvinson:

My new system is basically turning to shit!
I just completed by first 10 actual cash trades.
I have separated those 10 trades from the prior back-tested trades and entered them on a new attached excel.

I can only say that having a bullishly biased mechanical trading system kills you during market transitions (like now).

Its kinda sad because the older system (which I recently abandoned) that I was using for the last four and half years didn't have a bias built into the programming and looking at its performance during this downturn...its doing really well.

I am a little discouraged at this point and need to re-think the old and new mechanical trading systems.

I think you are quick to judge. But the back tested results were too good to be true.

Anyway, I admire your intellectual honesty.

 

[jeffalvinson]

Quote from atticus:

If it's any comfort, none of us bought the hit-rate. Odd that it went from 90% wins to utter d-shit. Never use anything w/o a forward test with real-money. Of course, nobody is going to sell anything that works.

atticus,

Your right as usual.
I didn't even buy the hit-rate on the new system!
As an example of paper back-testing vs reality:
My old system had a paper back-tested hit rate of 92% from
July 1, 2006 to June 30, 2007.
However, when we started to do the actual forward tested real-money trades it proved out to be 75%.
A difference of 17% from back-tested to forward tested real-money trades! and as every year from July 2007 to March 2012 moved forward, the actual results slowly declined to 70%.


Jeff

 

[jeffalvinson]

Quote from newwurldmn:

I think you are quick to judge. But the back tested results were too good to be true.

Anyway, I admire your intellectual honesty.

"Thank you, I appreciate that, it made me feel a little better."

I think you were the one to mention that the back-tested results had not seen enough different trends in a larger time span. That was an understatement.