Purely Mechanical Option Trading
- Thread starter jeffalvinson
- Start date
That is exactly what I said I would do in my first two posts and I will.
The formula's were originally designed for OEX options.
My reference to "decades of data" was with respect to OEX options, which is what I traded for many years until the late summer of 2007, when the "new world order of volatility" took over. Adjustments have had to be made to accomodate the SPY options, but the basic formula logic within the programs is still intact, so hopefully the "decades" comment will remain relevant.
The VIX (volatility index) was flat for years (with respect to its 200 day moving average) with a range of 12-15 and an average of roughly 13. The past several months the VIX has been uptrending with the average now being 23 (76% increase).
That significant jump in the VIX will frequently trigger a
-25% to -30% stop on the OEX options, where as the mild mannered SPY options are more forgiving. That was the reason for the switch to SPY options. Now that I've switched, I don't think that I would ever go back.
I don't fault your skepticism. I am my own worst critic.
I have seen too many systems fall apart when they are relatively new (like this one).
Well I am not trying to be anything but realistic. You stated that one of the programs uses a database with decades of data points.
The VIX index did spend the 2005 and 2005 below 15 itâs hardly been the normal range going back decades.
One of the issues I have with what you post is you imply that the greatest influence on the price of an option is something other then the price of the underlying. The high low and close have NO bearing on where the options will be priced the next day. Price of the underlying, implied volatility and days till expiration are the biggest factors. In your last post you imply itâs the elevated vix that causes bigger swings in the S and P. In reality the relationship is reversed. Itâs the bigger swings in the S and P 500 which has caused the VIXâs value to increase.
I am always open to new ideas and I have been in the business of options for a couple decades, never on the retail side, or in sales.
I am not being a skeptic per se, I am pointing out some facts about options and options pricing which you have made incorrect assumptions about.
I welcome civil discussion.
The VIX index did spend the 2005 and 2005 below 15 itâs hardly been the normal range going back decades.
One of the issues I have with what you post is you imply that the greatest influence on the price of an option is something other then the price of the underlying. The high low and close have NO bearing on where the options will be priced the next day. Price of the underlying, implied volatility and days till expiration are the biggest factors. In your last post you imply itâs the elevated vix that causes bigger swings in the S and P. In reality the relationship is reversed. Itâs the bigger swings in the S and P 500 which has caused the VIXâs value to increase.
I am always open to new ideas and I have been in the business of options for a couple decades, never on the retail side, or in sales.
I am not being a skeptic per se, I am pointing out some facts about options and options pricing which you have made incorrect assumptions about.
I welcome civil discussion.
Dipper,
I have not responded to a single one of your questions or comments (until now) because I only respond to individuals who act in a civil and respectful manner.
I am older person with high blood pressure and heart arrhythmia and cannot afford to be stressed, so I have had you blocked on the "Ignore" feature (really nice feature ET!).
I thought having a thread would be fun and helpful to others
and good conversation with fellow traders of a like mind, but you are quickly changing my mind.
The reason why you can't believe someone can have success with the retail buying of option premium is because you have probably never given retail trading a fair shot (put in the time).
You sound like someone with a "lot of book knowledge" but zero actual trading experience on the retail end.
I had a forced retirement (health issues) about 10 years ago and seriously needed the ability to bring in at least a supplemental income. I have spent 12-14 hours a day for the last 10 years developing systems, testing and trading out of necessity. Hopefully this relatively new system will continue to work, but nothing is really time tested unless it works for years.
"All of these things that you are criticizing and making fun of,
have really worked in the real world of retail trading for me."
"But," I must say that without the unending help of a brillant systems architect (who is now a good friend), I couldn't have accomplished this current level of trading success."
Now I am putting you back on Ignore so I don't have to view your unfriendly posts.
Actually I think my posts have been pretty civil as compared to most of ET. As I said I was just pointing out actual facts on the pricing of options which you have grossly wrong. I never attacked you in anyway or speculated seriously on your background. The NASA thing was a friendly ribbing.
My experience in the options world goes back more then 2 decades where I have worked as a market maker on trading floors and ran the prop desks at a couple of big banks. So to counter your comment I would say that my experience is a little more then book knowledge and I have extensive trading and risk management experience.
The bottom line is this: The high, low, open and close of any given day be it yesterday or 20 years ago, has virtually NO bearing on the price of any options contract in the future.
The rest of your description about your 3 programs is so vague and so filled with double talk and amendments when its pointed out there are flaws its not worth addressing since youâre not willing to discuss them.
Nor do I expect any sort of real time posting of trades.
I did do a little ribbing but in the general context of ET I was very polite.
The way you changed from saying youâd post trades after a fill to a paragraph about how it ruins your fills is an example of the inconsistencies you post. Only after I pointed out that you said you would post real trades did you then go back and dismiss your comments about fill and claim you would.
I am always open for civil discussion about your topic if others want to join in. Just because you dont like my comments does not mean they are unfreindly, they're meant to provoke thought from the rest of the people here as to the validity of your claims
My experience in the options world goes back more then 2 decades where I have worked as a market maker on trading floors and ran the prop desks at a couple of big banks. So to counter your comment I would say that my experience is a little more then book knowledge and I have extensive trading and risk management experience.
The bottom line is this: The high, low, open and close of any given day be it yesterday or 20 years ago, has virtually NO bearing on the price of any options contract in the future.
The rest of your description about your 3 programs is so vague and so filled with double talk and amendments when its pointed out there are flaws its not worth addressing since youâre not willing to discuss them.
Nor do I expect any sort of real time posting of trades.
I did do a little ribbing but in the general context of ET I was very polite.
The way you changed from saying youâd post trades after a fill to a paragraph about how it ruins your fills is an example of the inconsistencies you post. Only after I pointed out that you said you would post real trades did you then go back and dismiss your comments about fill and claim you would.
I am always open for civil discussion about your topic if others want to join in. Just because you dont like my comments does not mean they are unfreindly, they're meant to provoke thought from the rest of the people here as to the validity of your claims