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OEX weekly options
- Thread starter kalikahuna
- Start date
Michael and TJ
Friday, November 26, 2010
BELIZE ALPS HEDGE FUND start up.
Falconview in trading room in Santa Elena Town, Green Parrot Valley.( photo ) The Little Switzerland of the Americas.
HEDGE FUND TRAINING YEAR HITS OBSTACLES!
During the past year, in particular the past eight months, we have succeeded in getting two internet ISP services, in our rural parts, thus giving us back- up redundancy. We also have two electrical supply systems, with a battery operated computer and a regular electrical main system. Consequently, we are now placed well to continue trading through thick and thin, in Foreign International Financial markets. Our specialty if it can be called that is, CREDIT SPREADS, in derivative cash index trading.
The trading up to a point went well. We learned and experimented and twice now, we reached the 56% return on investment target in four months each time, before getting wiped out in an adverse market reaction. So we have eight months active trading. We would have been over a 100% if we had stayed lucky. The next leg is to provide on the job learning, by diversifying to deal with adverse market reactions and program into the system, three months of expected losses in any given year. What we have learned is the essence of any such system, is managing and minimizing losses.
This third try, we are divesifying both to weekly and monthly CREDIT SPREADS, or in TIMED trades. Also diversifying by legging in at different levels. We have also added straight directional buying of options. How that will work out we don´t know yet. Be February or March before we have a clear idea on which of the four methodologies will work best.
The ultimate goal is to have a FAMILY HEDGE FUND, high risk, but high returns. With the intention of paying out a dividend of 15% base and an extra 5% if possible as a bonus dividend on an annual basis. Still a lot of work to go yet though. Making progress, but just not enough.
Unfortunately, academic and theoretical knowledge does not teach enough to make you successful. It can only be learned through future on the job participation. This takes time, roughly two years, on average.
FALCONVIEW
Green Parrot Valley
Belize
Friday, November 26, 2010
BELIZE ALPS HEDGE FUND start up.
Falconview in trading room in Santa Elena Town, Green Parrot Valley.( photo ) The Little Switzerland of the Americas.
HEDGE FUND TRAINING YEAR HITS OBSTACLES!
During the past year, in particular the past eight months, we have succeeded in getting two internet ISP services, in our rural parts, thus giving us back- up redundancy. We also have two electrical supply systems, with a battery operated computer and a regular electrical main system. Consequently, we are now placed well to continue trading through thick and thin, in Foreign International Financial markets. Our specialty if it can be called that is, CREDIT SPREADS, in derivative cash index trading.
The trading up to a point went well. We learned and experimented and twice now, we reached the 56% return on investment target in four months each time, before getting wiped out in an adverse market reaction. So we have eight months active trading. We would have been over a 100% if we had stayed lucky. The next leg is to provide on the job learning, by diversifying to deal with adverse market reactions and program into the system, three months of expected losses in any given year. What we have learned is the essence of any such system, is managing and minimizing losses.
This third try, we are divesifying both to weekly and monthly CREDIT SPREADS, or in TIMED trades. Also diversifying by legging in at different levels. We have also added straight directional buying of options. How that will work out we don´t know yet. Be February or March before we have a clear idea on which of the four methodologies will work best.
The ultimate goal is to have a FAMILY HEDGE FUND, high risk, but high returns. With the intention of paying out a dividend of 15% base and an extra 5% if possible as a bonus dividend on an annual basis. Still a lot of work to go yet though. Making progress, but just not enough.
Unfortunately, academic and theoretical knowledge does not teach enough to make you successful. It can only be learned through future on the job participation. This takes time, roughly two years, on average.
FALCONVIEW
Green Parrot Valley
Belize
Well, in my view, this is just foolish. Sorry to be so blunt, but you'll be very sorry if you lose your and your families money. And "over 100% if we had stayed lucky" is not what you want to stake your families future on. I haven't been reading your thread so I don't know exactly what you're doing. But I do know that trading 4 methods until Feb. or March to decide which is best is a recipe for disaster.
So do I have any suggestions or just criticism? Well, how about testing. You can get an good idea of what your spreads would have been worth in the past with only the Vix and the SP data. And you probably don't even need the vix if you are only trading weeklys. And daily data is available for free at Yahoo and others. If you backtest by hand you'll come up with improvements along the way. Then, after you have an idea of what your drawdown would have been in the past, you can decide what your position size should be. Don't forget that a 10% drawdown takes 11% to recover but a 50% drawdown requires 100% return to break even. Also, your biggest drawdown is always in the future. Then start slowly with paper trading or trading a very small amount at first. I can't because I'm in the U.S., but if I lived in Belize, I'd open a small account at one of the many spread betting sites in the U.K. You can trade to your heart's content for a few cents per point. If you can't make consistent money there, why would you want to risk $100/point?
So do I have any suggestions or just criticism? Well, how about testing. You can get an good idea of what your spreads would have been worth in the past with only the Vix and the SP data. And you probably don't even need the vix if you are only trading weeklys. And daily data is available for free at Yahoo and others. If you backtest by hand you'll come up with improvements along the way. Then, after you have an idea of what your drawdown would have been in the past, you can decide what your position size should be. Don't forget that a 10% drawdown takes 11% to recover but a 50% drawdown requires 100% return to break even. Also, your biggest drawdown is always in the future. Then start slowly with paper trading or trading a very small amount at first. I can't because I'm in the U.S., but if I lived in Belize, I'd open a small account at one of the many spread betting sites in the U.K. You can trade to your heart's content for a few cents per point. If you can't make consistent money there, why would you want to risk $100/point?
Tell me more about the UK spread betting setup please. Where and how it works if you would? It sounds like an interesting way to go.
donahuedc
I had a look. I´m not sure spread betting in the UK sense is the same as credit spreads? I took a look online,but it more seems to refer to directional trades and the standard emotional rules for betting direction. At least the site I went to.
There was some good learner sites. I enjoyed reading and refreshing my old lessons we tend to forget. Thankyou for the tip. I believe I´ll peruse those sites some more.
Cut your losses short and you don´t need indicators. It is either going up or down sort of thing, with a quick stop loss and betting size, according to amount of capital. Worthwhile reading.
I had a look. I´m not sure spread betting in the UK sense is the same as credit spreads? I took a look online,but it more seems to refer to directional trades and the standard emotional rules for betting direction. At least the site I went to.
There was some good learner sites. I enjoyed reading and refreshing my old lessons we tend to forget. Thankyou for the tip. I believe I´ll peruse those sites some more.
Cut your losses short and you don´t need indicators. It is either going up or down sort of thing, with a quick stop loss and betting size, according to amount of capital. Worthwhile reading.
You're right, spread betting isn't the same as options spreads. In this spread sense it means the spread between the bid and ask. I believe that that is where the site makes its money. Like a market maker. But they don't make money from commission. It is included in the spread. I'm not sure, but I expect you can trade options as well as the underlyings. If so, you can construct your credit spreads with options here just like you do in the 'real' market. But before you do, why don't you back test what you're doing and see if it would have made money in the past. The last 10 years or so have some remarkable variety from crashes to steady, quiet rises. And you may find that some types of spreads (and directional bets) work better in different types of markets. Hint: as markets rise, the vix decreases, and the likelihood of a fall in price and an increase in implied volatility increases. And vice versa. So you may decide to trade more than one type of spread at the same time and varying the amount of each type depending on your perception of what might happen next. Just don't make your system depend on what you know will happen with the benefit of hindsight. This is what I mean by coming up with good ideas by backtesting by hand.
Michael
I'm reviewing how I did credit spreads. I was compounding. A sort of all or nothing type mental attitude. After reading some of the English sites, I refreshed my memory and forgotten lessons. Those I´ve been ignoring.
BRAD has the best detail for monthly credit spread trading with 4 years of accumulated monthly win/loss data
In 2010 so far he has had three losing months. -22% in March, zero in April and zero in May. Overall for 12 months he is going to make money for the year. His total return is 49.5% and he hasn´t finished November and December yet. His losses are -22% So far he is up 27.5%
2009 was a good year for him. He made 92% and no losses.
2008 He had three losing months again. For a total loss of -56.5%.
His gains were 126.5 % and subtract the losing three months, he ended up with 70% He claims only earning 33% simple profit for 2008 so I must be missing something here?
2007 He had two losing months. One zero and one for a loss of 5%. His gain was 78.5% for the year.
2006 He had two losing months again. One for -7% and one for zero. So he ended up earning 61%
----------------------------------------------------
I´ve been giving this some thought. I had allocated my funds, so that I only traded with about 25% and got that 25% wiped out both times in eight months. Of course I did not have his system of minimizing the losses. Which I will certainly practice now in the future, now I have a rough idea of what he is doing. Thanks to your persistance. So until I actually trade this new system of BRADS that minimizes losses, I won´t know where I´m at on monthly trading. However I have a better idea on the weekly credit spread trading. The weeklies I have one good trade. But have recently added another trade. It lost this morning. Due to Thanksgiving weekend, but I got out with a minimal loss. About 26% of margin.
The question of how much of an account to trade is the question. I´m sort of settling on 5%. ( new idea - I was using about 40% to 50% ) Now this would be allocated for margin. So the trade would be 5% of the margin available. This will reduce the earnings a heck of a lot. However, I shouldn´t get wiped out anymore.
The PRESUMPTION is: that I will get losses in the monthly credit spread trading. I´m figuring on 3 months a year losses and going the route of minimizing losses by rolling over. Between using only 5% of available margin each month and the ability to minimize and take a loss, that should cover it. I certainly HOPE SO! It certainly is not as romantic and wonderful as compounding everything as you go along. Too bad you can´t identify the losing months before they arrive. Otherwise you could bet the whole shebang on winning months. Therein lies GREED and the fault with trading.
Of my two weekly trades in credit spreads. One so far twice has proved a winner, at break even costs when threatened. So we will leave that one alone. It seems to be working okay. The new credit spread trade is a bit iffy. I think I can clean that one up a bit. But even so, it is possible even with an opening gap and jump to quickly close it out and take a smaller loss than the whole enchilada. I think on that one I´m going to cut that trade size in half. I´m trading 40% of margin on my good weekly credit spread. There is another way of minimizing the loss on that one. On the second credit spread, I think I can improve my predictablity curve on that one, but even so, will cut the size of the trade to 20% of margin invested since it is somewhat a bit more risky. Actually I took a quick loss this morning, MONDAy,but could have held it, the trade deviation is still good, but I´m out of the trade anyway with a loss, I believe can be handled overall. Last week´s directional trade profit offset that one.
THE WHOLE THING IS PREDICATED ON EXPECTING LOSSES AND MINIMIZING THEM. An old lesson and idea, but one I have not been practicing of late, but will pay more attention to. I think I´ll concentrate more on planning on losses and accepting them in the system. Getting there, but it has been expensive in TIME.
I'm reviewing how I did credit spreads. I was compounding. A sort of all or nothing type mental attitude. After reading some of the English sites, I refreshed my memory and forgotten lessons. Those I´ve been ignoring.
BRAD has the best detail for monthly credit spread trading with 4 years of accumulated monthly win/loss data
In 2010 so far he has had three losing months. -22% in March, zero in April and zero in May. Overall for 12 months he is going to make money for the year. His total return is 49.5% and he hasn´t finished November and December yet. His losses are -22% So far he is up 27.5%
2009 was a good year for him. He made 92% and no losses.
2008 He had three losing months again. For a total loss of -56.5%.
His gains were 126.5 % and subtract the losing three months, he ended up with 70% He claims only earning 33% simple profit for 2008 so I must be missing something here?
2007 He had two losing months. One zero and one for a loss of 5%. His gain was 78.5% for the year.
2006 He had two losing months again. One for -7% and one for zero. So he ended up earning 61%
----------------------------------------------------
I´ve been giving this some thought. I had allocated my funds, so that I only traded with about 25% and got that 25% wiped out both times in eight months. Of course I did not have his system of minimizing the losses. Which I will certainly practice now in the future, now I have a rough idea of what he is doing. Thanks to your persistance. So until I actually trade this new system of BRADS that minimizes losses, I won´t know where I´m at on monthly trading. However I have a better idea on the weekly credit spread trading. The weeklies I have one good trade. But have recently added another trade. It lost this morning. Due to Thanksgiving weekend, but I got out with a minimal loss. About 26% of margin.
The question of how much of an account to trade is the question. I´m sort of settling on 5%. ( new idea - I was using about 40% to 50% ) Now this would be allocated for margin. So the trade would be 5% of the margin available. This will reduce the earnings a heck of a lot. However, I shouldn´t get wiped out anymore.
The PRESUMPTION is: that I will get losses in the monthly credit spread trading. I´m figuring on 3 months a year losses and going the route of minimizing losses by rolling over. Between using only 5% of available margin each month and the ability to minimize and take a loss, that should cover it. I certainly HOPE SO! It certainly is not as romantic and wonderful as compounding everything as you go along. Too bad you can´t identify the losing months before they arrive. Otherwise you could bet the whole shebang on winning months. Therein lies GREED and the fault with trading.
Of my two weekly trades in credit spreads. One so far twice has proved a winner, at break even costs when threatened. So we will leave that one alone. It seems to be working okay. The new credit spread trade is a bit iffy. I think I can clean that one up a bit. But even so, it is possible even with an opening gap and jump to quickly close it out and take a smaller loss than the whole enchilada. I think on that one I´m going to cut that trade size in half. I´m trading 40% of margin on my good weekly credit spread. There is another way of minimizing the loss on that one. On the second credit spread, I think I can improve my predictablity curve on that one, but even so, will cut the size of the trade to 20% of margin invested since it is somewhat a bit more risky. Actually I took a quick loss this morning, MONDAy,but could have held it, the trade deviation is still good, but I´m out of the trade anyway with a loss, I believe can be handled overall. Last week´s directional trade profit offset that one.
THE WHOLE THING IS PREDICATED ON EXPECTING LOSSES AND MINIMIZING THEM. An old lesson and idea, but one I have not been practicing of late, but will pay more attention to. I think I´ll concentrate more on planning on losses and accepting them in the system. Getting there, but it has been expensive in TIME.
[/QUOTE]
THE WHOLE THING IS PREDICATED ON EXPECTING LOSSES AND MINIMIZING THEM. An old lesson and idea, but one I have not been practicing of late, but will pay more attention to. I think I´ll concentrate more on planning on losses and accepting them in the system. Getting there, but it has been expensive in TIME. [/B][/QUOTE]
precisely. BTW, when markets top out they tend to be more volatile, similar to what we are seeing now. Sensing it coming, and I could have been incorrect, I stopped the weekly flies and weekly trading. All work is long term at this point.
Keep up the good work.
THE WHOLE THING IS PREDICATED ON EXPECTING LOSSES AND MINIMIZING THEM. An old lesson and idea, but one I have not been practicing of late, but will pay more attention to. I think I´ll concentrate more on planning on losses and accepting them in the system. Getting there, but it has been expensive in TIME. [/B][/QUOTE]
precisely. BTW, when markets top out they tend to be more volatile, similar to what we are seeing now. Sensing it coming, and I could have been incorrect, I stopped the weekly flies and weekly trading. All work is long term at this point.
Keep up the good work.