Starting out - What tools?
- Thread starter Halcyon
- Start date
We also had two systems that were in the market. We also traded the same systems on all commodites, though optimized for their respective parameters.
We found that we also had to break the orders between several brokers, as the vultures in the pit would notice a large order and drive the markets up/down accordingly.
No options stuff - just straight futures. Interesting that one can trade options mechanically - I would guess that would be arb type stuff, and I gotta believe that the opportunities there are far between...
nitro
Straight arbs are now a scratch trade at the end of the day, a lot of other opportunities though.
Biggest problem in the option markets is the noncompetitive rulemaking, i.e., manual intervention, etc..
Contrary to popular belief, we have found that systems designed for a specific opportunity, in a specific market perform better than systems that can be cross traded.
Interesting again. I have been out of the "system building/100% mechanical trading" for a while. We believed that the best thing was to never look at the data. That we should, _IDEALLY_ figure out from first principles what should work, write the system, and trade it. Needless to say, that dillusion died fast. We finally decided to "punish" ourselves everytime we ran an optimization, or in more broad terms, (re)looked at the data. This was in order to prevent us from us from curve fitting. In the end, we took the approach that unless the system could trade several markets with five to ten rules (and walk-forward) we scraped it. We then also hit on the idea of having more than one system in the market at the same time in order to smooth out the equity curve.
We did well. I do not know how they are doing now. It is interesting that you tailor each system for a corresponding underlying.
I have always been fascinated with options. I "dabble" in them now, but mostly when I wouldn't mind owning a stock at some price I write the put. Not very complicated, but it is an extra source of income.
I am looking into arbitraging long put butterflies and long call butterflies against each other. I know it's naive, but I gotta start somewhere
I talked to Shelly Natenberg and he seemed to think that the best option traders are the ones that are also the best "underlying" traders as well.
nitro
doji,
Thx for the suggestion. I am _CURRENTLY_ an equities scalper. I do fine and will do better as I learn to increase size. Commissions is everything to me. I do not see how I could modify what I do now with three times the commission (to put on the equivalent underlying long/short) in addition to the fact that option spreads are much worse than the underlying, to say nothing of their liquidity.
Perhaps you mean as a swing trade, or in addition to writing the puts? I know very little about swing trading (really, I don't understand it) and I know even less about option positions except how a MM would use options to hedge themselves on the floor. But to speculate or trade on...
nitro
Originally posted by nitro
Interesting again. I have been out of the "system building/100% mechanical trading" for a while. We believed that the best thing was to never look at the data. That we should, _IDEALLY_ figure out from first principles what should work, write the system, and trade it. Needless to say, that dillusion died fast. We finally decided to "punish" ourselves everytime we ran an optimization, or in more broad terms, (re)looked at the data. This was in order to prevent us from us from curve fitting. In the end, we took the approach that unless the system could trade several markets with five to ten rules (and walk-forward) we scraped it. We then also hit on the idea of having more than one system in the market at the same time in order to smooth out the equity curve.
We did well. I do not know how they are doing now. It is interesting that you tailor each system for a corresponding underlying.
I have always been fascinated with options. I "dabble" in them now, but mostly when I wouldn't mind owning a stock at some price I write the put. Not very complicated, but it is an extra source of income.
I am looking into arbitraging long put butterflies and long call butterflies against each other. I know it's naive, but I gotta start somewhere
I talked to Shelly Natenberg and he seemed to think that the best option traders are the ones that are also the best "underlying" traders as well.
nitro
Arbing those butterflies might work, never tried that, but everything we make money on no one has ever heard of or popular belief is it can not be done.
The biggest problem is identifying and hitting the leg(s) that make the trade work, and hitting them before they go away and then putting on the other legs. The manual intervention rules have handicapped the upstairs trader in that regard; more risk to exotic arbs when you miss a leg, the spread will kill you taking off your opening legs to flatten out if you misidentify the order of execution. Retail commissions are going to hurt.
I think the best off floor option traders are the ones with the biggest balls.