Quick Trade - Options Buying Methodology

Quote from atticus:

What's your C2 handle?
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Practically we changed the name of this very 1st system with C2 almost every two weeks. The last time was after reading your post above.

We would like to prove several options-based systems/ideas, but there are certain limitations with C2 (or Covestor), such as options on futures is not available (for Crude Oil!).

Each real-money account would probably require say $100,000 per system in order to prove the performance of a particular system. We don't like to set up too many separate accounts at the same time (including too many log-on screens) for all the systems/ideas that we really want to test concurrently. Finally we realised C2 is a good platform for our planned experiments.

BTW, wish you do well with your software business.

http://www.elitetrader.com/vb/showthread.php?s=&postid=3401123#post3401123

Quote from atticus:

The question is whether I have created a piece of software that is 100% objective and consistently profitable, which I have. You are absolutely right I will not accept your conditions because it is childish and off point. If you can’t afford to outlay a few hundred dollars to test a multi-million dollar piece of software then that is your loss. I think your testing the software would have been a benefit for you seeing that a regional $250M hedge fund has been testing it for the last 60 days with such outstanding returns he ordered a copy for each of his 12 traders. He told me he paid for all 10 copies of the software the 2nd week he tested it.
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Quote from OddTrader:

Practically we changed the name of this very 1st system with C2 almost every two weeks. The last time was after reading your post above.

We would like to try several options-based systems/ideas, but there are certain limitations with C2 (or Covestor), such as options on futures is not available (for Crude Oil!).

Each real-money account would probably require say $100,000 per system in order to prove the performance of a particular system. We don't like to set up too many separate accounts at the same time (including too many log-on screens) for all the systems/ideas that we really want to test concurrently. Finally we realised C2 is a good platform for our planned experiments.

BTW, wish you do well with your software business.

http://www.elitetrader.com/vb/showthread.php?s=&postid=3401123#post3401123
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That's an email I received from proflogic. I know because I posted it. So your C2 account blew-up?
 
Quote from atticus:

So your C2 account blew-up?
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Haven't started yet till today with the first signal.

All the changed names were with the same system numbered 68597112.
 
Quote from OddTrader:

We would like to prove several options-based systems/ideas, but there are certain limitations with C2 (or Covestor), such as options on futures is not available (for Crude Oil!).

Each real-money account would probably require say $100,000 per system in order to prove the performance of a particular system. We don't like to set up too many separate accounts at the same time (including too many log-on screens) for all the systems/ideas that we really want to test concurrently. Finally we realised C2 is a good platform for our planned experiments.
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C2 is particularly good for some others reasons.

For this first system (Long-Call/Put SPY Options), sometimes it does not trade at all for several weeks. The capital allocated to this system will be sitting there by doing nothing while awaiting next signal, probably suddenly getting one.

For another upcoming system, it's for hedging. That means its prupose is not targeting to make good profit. It's designed to minimise its costs while providing an effective hedge. The returns (if anything of positive %) on capital allocated to this kind of systems (in order for us to prove its viability) would be very minimal.

I think C2 can be a very useful platform for the above development projects.
 
Found another buying long options thread.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=125048&highlight=option*

Quote from Div_Arb:


Part of becoming a successful trader is not what you do, it's what you don't do. If I were you, and my models said "short" one day ahead of GOOG earnings, i probably would have held off a day or two to see how the market responded.

You live you learn, and learning to trade is very expensive. Unfortunately, there is no way around this.
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Quote from riskfreetrading:

Having said the above, making big money in options is indeed true but only for a tiny minority. I have read the threads of some of the pros here. Most of the money made is not really in taking big gambles, but in being smart in spreading/hedging/avoiding traps, in addition to being a top trader in traditional sense.
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Sometimes a trader using buying long options strategy has to prepare some occassional (painful?) disappointments of "Losing money when the market actually goes in his favour".

This kind of unusual losses is mainly due to decrease of implied volatility caused by steady slow movement of underlying market prices, besides general/common expectation of market participants, according to my own understanding and experience, and guess.

You may refer to the charts on page 2-5 of Caplan's book "The New Options Advantage" for more details.
 
Quote from OddTrader:

Sometimes a trader using buying long options strategy has to prepare some occassional (painful?) disappointments of "Losing money when the market actually goes in his favour".

This kind of unusual losses is mainly due to decrease of implied volatility caused by steady slow movement of underlying market prices, besides general/common expectation of market participants, according to my own understanding and experience, and guess.

You may refer to the charts on page 2-5 of Caplan's book "The New Options Advantage" for more details.
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Perhaps don't forget that on page 203: It is Absolutely Necessary to have an "Edge".

"You can't win without an edge, ...
Incidentally, if you don't know what your edge is, you don't have one. --- The New Market Wizards, page 463"

"Make sure you have the edge. Know what your edge is. Have risk control. ...
Good money management alone is not going to increase your edge at all. By Monroe Trout --- The New market Wizards, page 175"
 
Quote from OddTrader:

Sometimes a trader using buying long options strategy has to prepare some occassional (painful?) disappointments of "Losing money when the market actually goes in his favour".

This kind of unusual losses is mainly due to decrease of implied volatility caused by steady slow movement of underlying market prices, besides general/common expectation of market participants, according to my own understanding and experience, and guess.

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Baird (Option Market Making):

"Paradoxicallly, sudden sharp futures price change (up or down) may occur in conjunction with falling implied volitilities. ... Although the options traders were correct about price movement, they were whipsawed by the market's changing estimate of volitility. page 46"

Apparently buying long options in the long run is safer than selling short options:
"One exaggerated example of the possibility for a trader to be correct about the direction of the market but still lose money in (selling?) options because of an implied volitility change occurred in the stock market crash of October 1987, when short out-of-money call options rose in price after the 500-point drop in the market, reflecting a market-implied volitility level of well over 100! page 46"

Therefore Quick Trade :D :
"A smart strategy seeks to avoid catastrophic risk at all times, to profit by real or implied volatility explosions, and to limit time decay loss. page 167"
 
Quote from OddTrader:

Now starting an experiment with SPY (SPDR).

http://www.nasdaq.com/symbol/spy/option-chain

Will buy Call or Put options on weekly basis for Long-only positions.

There will be sometimes no signals/trades for many weeks.

My signal for this week is Long.

Just bought (using the well-known C2 platform :) as a tracking system) a Jan21 SPY 126 Call @ $2.44.

Plan to close this trade next week.
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Closed (today 1/3/12 11:21) @$3.55 for profit +$109 (as recorded on C2).
 
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