Open Orders Please Help!!

Originally posted by jpomerenke
hi
Ive been learning the OO technique and i have read thru all of "Dons Openings" but there are a few holes that i just cant find here..

first of all:
How do you find the fair value percent?? ...at programtrading .com it says that fridays fair value was .85...so how do i put that into percent compared to the S&P...or is that the percen??

Whats a good envolope to start with...1% on both sides?

and what exactly is the beta of a stock and how do i find this??

i think this is all the questions i have...they prolly all are easy questions, but thanks in advance
cheers
joey:D
More...

1. Fair value is located at www.programtrading.com . It is not a percent, it is an amount over the spot price.

2. You add the .85 to the spot price. Divide that number by the spot to get a percentage up or down.

3. Then apply that percentage to your group of stocks. 1 percent up is a FV of $101 on a previous day's close of $100 .
4. 1 percent on each side is fine. Approximately a $100 bid, and a $102 offer.

Beta is simply the amount of movement your stock "should" move in relationship to the overall market. A higher beta would apply to "tech stocks" and a lower beta would apply to the "supertanker stocks" that don't move much. You can find betas on most data providers or even Yahoo.finance.

You apply a beta to the envelope for higher beta stocks (instead of 1.0, you may use 1.5, a wider envelope).

I'm sorry if I missed something.

Don
 
I did double check your post and, of course, the error is where you are using betas in the beginning calculation. You caught me, I didn't read the whole post in detail....and I apologize. I hope the above post answers the origina question.

Don
 
lol...how many mistakes did I make ?!

I thought the mistake that I made was in using the closing price from yesterday ($61 in the example) instead of the FV of GM calculated to be $61.27.

I wrote the following:
4] Enter the buy/sell orders

We enter LOO not MOO!! as follows:

buy $60.6937 ($61-$0.31)

sell $61.3063 ($31+$0.31)
More...


Instead it should be:

buy $60.96 ($61.27-$0.31)

sell $61.58 ($61.27+0.31)

-----------------------------------------------------------------------
And now you tell me that I did the Beta wrong?!? Awww man!

ok what exactly did I calc wrong? and what should it have been?
 
Originally posted by Babak
Don, I really don't want to enter into an argument with the master of obfuscation. But it seems inevitable (sigh).

jpomerenke started this thread with specific questions regarding the opening order strategy (a strategy which you introduced to this board via your OO thread).

Did you read his post?

His questions were really simple and I'm sure that with the vast knowledge that you possess about the market and the OO strategy in particular, it would have only taken a few minutes to answer them. Yet you and others who are familiar with the OO strategy ignored his posted question. I then replied to him with an attempt at explaining the OO strategy (to my imperfect understanding of it).

In my post, I again asked others to reply and comment on my answer to make sure that it was correct.

Did you read my post?

Again, you and others didn't respond to the thread. The exception being a few pm's I got pointing out a simple error in my original post. Something which proves you didn't even bother to read my post (as the simple error would have been obvious to your trained and expert eyes).

Then I posted on your OO thread and asked that you or others please reply to jpomerenke and my posts. In reply, you posted a general overview of the OO strategy and how it is 'based on being on the same side of the specialist'.

This is not what we were talking about. The originator of the thread and myself were talking about specifics of the strategy.

Then you posted some more info (20buy/20 sells, trying to get 3-4 filled, etc.) which had nothing to do with the thread. For reasons only known to you, you were engaged in a totally different conversation than that on the thread.

For whatever reason, you have decided to release info on OO in a Chinese-torture drip method. Hey! You don't owe us anything and don't have to give us your 'secrets' ($$ reserve those for your seminars $$) but for the love of all Holy and Sacred, when you reply in sweeping generalities to a specific question, don't turn around and claim that you were being specific !

My post was/is the only one on ET (atleast to my knowledge) that attempts to include the whole strategy in one post. Not trying to posture by saying that, in fact, the only reason I replied was to learn more about this strategy (damn! I'm selfish) and point out that this is not a printing press as you constantly imply but a discretionary trading style, much like, say playing break outs, which requires a high level of trading skill and experience.
More...

It seems common on message boards of all types that there are questions asked which could be answered if the questioner took the time to read over previous posts and do some research. Considering the volume of message traffic on OO one would guess that the answers have already been discussed.

- AnonBT
 
Originally posted by Don Bright
I did double check your post and, of course, the error is where you are using betas in the beginning calculation.
More...

Don, I've gone over the calc and can't find why you would think the Beta was applied incorrectly? could you please tell me what, specifically, you think is wrong with it? Thanks.
 
Originally posted by Babak


I'll illustrate what I mean by using an example:

[data is fictitious]

GM closed yesterday at $61
Beta of GM is 1.13
FV is $1.25
SP cash closed yesterday at 1160.70
SP future is at 1166.50
Envelope is set to 1%

1] FV=$1.25 and to get % we calculate as follows:

FV+SP cash close (yesterday) = 1161.95

SP future - SP cash = change

1166.50 - 1161.95 = 4.55
More...

On this example with the 1165.5 (S&P Futures) and 1161.95 (SP Cash, actually S&P Cash and fair value, or is is supposed to be just S&P cash only.
 
Originally posted by Babak


Don, I've gone over the calc and can't find why you would think the Beta was applied incorrectly? could you please tell me what, specifically, you think is wrong with it? Thanks.
More...

You're doing fine, all I do differently is apply the beta to the adjusted stock price instead of the adjustment to the stock price (minor difference). Many traders don't even bother with beta, and just widen their envelope instead.

1] instead of Beta use ATR...OK
2] use large caps, or mid caps or a mix
I use only S&P 500 stocks.
3] how and when to vary the envelope %
This can be important. Whenever the futures are going to open 5 + points away from FV, either way, I go to a higher number on the "most likely side". i.e. today futures are opening down 10 points or so, so I will use a 1.2 buy side and a .08 sell side. On a 'normal" day, lower to .7 or .8.
4] the mix of sectors/industries to use
Up to you , I have a couple of brokers, banks, retail, tech, etc. Keep track of which stocks act well and get rid of those that don't. A bit of "trial and error."
5] which stocks to flat outright, NOT use
Careful with MRK and VIA.B.
6] how to manage the trade and exit once filled
This is where the "art" comes in. If you get more than 3 or 4, then you should place "winnig stop" orders in (for the slingshot effect), while you're tape reading for the rest.

As I said before, all the basics of exits apply the same to opening orders as any other posiiton during the day. Look for group, market, prem, and all the rest. Watch for "shake outs" for example, GE is good at opening down a dollar, going down another 20 cents or so and then rebounding with the market to higher levels....don't let it "shake you out."

Practice, is of course, key to this. Build up to a number of stocks where you get 3-5 fills daily....

Good Luck....

Don
 
Originally posted by Babak
3] Apply the envelope of 1% to the FV of GM

1% envelope = 0.005 on each side so:

0.005 x 61.268827 = 0.3063

4] Enter the buy/sell orders

We enter LOO not MOO!! as follows:

buy $60.6937

sell $61.3063
More...

Isn't a 1% envelope 1% on each side and not .005 on each side?
 
You must log in or register to reply here.
Back
Top