The ACD Method

Yeah, I've had the same idea. I've been keeping 5-day numberlines for a while and it's been in the back of my mind all along that I should chart it. Nice job!

By the way is anyone using a different ruleset for assigning daily numbers (+2, -3, or whatever) than what is listed in the book? I've been thinking of making some modifications to Fishers rules and have recently started running two number lines at the same time to see how they compare. Just wondering if anyone else went down that road...
 
Quote from kinggyppo:

guessing she had to be long vol at some point she did well into the credit crisis
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Surprisingly, and if I'm understanding right, she only sold deep otm premium:eek:
 
Quote from kinggyppo:

guessing she had to be long vol at some point she did well into the credit crisis, look at bill miller, steady as a rock till 2008 then averaged in had some monster drawdowns...I would imagine quite a few people blew out with that kind of vol. There is a guy who posts here under the handle dmo who had a video showing how the vix futures stopped going up around 70 vol or so, I will look for the link when I get a minute.
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ok so I thought this thread was enlightening, esoteric option stuff and not ACD, don't want to go off topic so last post about this.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=169349&perpage=40&pagenumber=1
 
One post, two topics. I don't know how the regular posters find the time to post. I've been trading professionally for 20 years. I'm busy during the day. If the markets are dead, I have time but no topic. I have noticed that slow days=less posting rather than more. Hats off to those of you that contribute here regularly and make this thread so valuable. This thread is great and I have learned a ton from it.

Regarding the "Karen" video from TOS. That was pretty disappointing for its 24 minute length. I was hoping for some real nuts and bolts about her approach. The only glimpse was selling 5 delta options with less than 56 days to expiration. Those strangles don't yield much so to generate those returns, there would have to be some decent leverage employed. Using some crude pricing sheets, those SPX strangles MIGHT be $8-10 of premium and I am guessing that is at higher vols a la vix in the 40s. Maybe I am missing something so I'd love to hear a different take. I am assuming that the "5% chance of going in the money" she refers to is the 5 delta we learned about from Natenberg.

Looking at the worst case in fall of 2008, there is almost no way to have avoided significant drawdowns and or margin calls without some extraordinary timing or dynamic hedging skills. Simply be fortunate enough to close out your exposure at the right time? Pre-hedge a 25%, 10 day drop while the vix goes from 35 to 70? The 5 delta put is now 60 delta and probably trading for $70. I'm not doubting her success, I would just like to know how she managed that scenario being short lottery ticket options. Unfortunately, the video doesn't really ask those kinds of questions.

A friend who managed risk at a well known online brokerage described that time frame as one of harvesting the premium sellers. Liquidating client accounts daily until the field was empty of premium selling accounts and lying fallow.
 
Quote from dv4632:

Yeah, I've had the same idea. I've been keeping 5-day numberlines for a while and it's been in the back of my mind all along that I should chart it. Nice job!

By the way is anyone using a different ruleset for assigning daily numbers (+2, -3, or whatever) than what is listed in the book? I've been thinking of making some modifications to Fishers rules and have recently started running two number lines at the same time to see how they compare. Just wondering if anyone else went down that road...
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So obviously I don't post much in the thread, but have been following it for some time.

I have been looking at the #line daily values a bit. I have changed the points given based on where price closes. I am watching the book based # lines and this modified scoring to see if there is an actionable difference.

Here are some assumptions. Will see if they prove to be true or not.

1) The scoring is used to determine and track if there was a bias for the day so any close inside the OR is given a zero (no bias). The thinking is that regardless of what happened, if it closes near where it opened then it is a neutral day.

2) Bullish or bearish bias is more quantifiable than "up" or "down". How much "up" or how much "down" should be considered, given that ACD is based on a percentage of ATR.

3) More points should be given if an A/C level made and price continues beyond said level versus making a level and retracing to near/inside the OR.

Basically more points are awarded for moving to AND beyond A/C levels vs. moving to and retracing from A/C levels.

As an example, say price confirms an A Up (assuming no C or failed C):

close inside OR = 0
close below OR = 0 ( -1? )
close above OR but below A Up = 1
close above A Up = 2

I suppose you can assign any number (10, 100, half points, etc) , so long as it is consistently applied. Don't know if there will be a difference, guess I just like tinkering.
 
Interesting month of May. Weakness has showing up in the numberlines since mid-April. That weakness finally started to resolve itself out in the past few weeks. Now the numberlines in most of the market are still very weak and it will take some time to work that off.

I think we are coming into a near term bounce...the technical targets down here are the Monthly A down at 1260ish in the ES and that is also unch on the year. We could plow through those levels but they should act as a key area that will need to hold. One of the reasons I think we will at least have some sort of bounce is that the market is not oversold at this point but there are huge divergences in the numberlines in the short term. We need lots of power to plow through those levels and dont know if we have that.

I think this summer we will be in for some back and filling action in equities...we will need this to work off these numberlines. Vol can stay bid here for a bit too, so will prob need to adjust trading based off of that.

The Euro has been leading these markets in terms of price action...there was a pretty big reversal day on Friday and that is a very crowded trade. Just something to keep in the back of ones mind!
 

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Quote from medicsix:

So obviously I don't post much in the thread, but have been following it for some time.

I have been looking at the #line daily values a bit. I have changed the points given based on where price closes. I am watching the book based # lines and this modified scoring to see if there is an actionable difference.

Here are some assumptions. Will see if they prove to be true or not.

1) The scoring is used to determine and track if there was a bias for the day so any close inside the OR is given a zero (no bias). The thinking is that regardless of what happened, if it closes near where it opened then it is a neutral day.

2) Bullish or bearish bias is more quantifiable than "up" or "down". How much "up" or how much "down" should be considered, given that ACD is based on a percentage of ATR.

3) More points should be given if an A/C level made and price continues beyond said level versus making a level and retracing to near/inside the OR.

Basically more points are awarded for moving to AND beyond A/C levels vs. moving to and retracing from A/C levels.

As an example, say price confirms an A Up (assuming no C or failed C):

close inside OR = 0
close below OR = 0 ( -1? )
close above OR but below A Up = 1
close above A Up = 2

I suppose you can assign any number (10, 100, half points, etc) , so long as it is consistently applied. Don't know if there will be a difference, guess I just like tinkering.
More...

Interesting stuff medic...I think there is some good rationale in giving different scores based off of the close position. Let me know how these play out.

One thing I've noticed over time is that, its all about knowing when to use what tools. I think the 30 day numberlines are a great tool right now because, we know that once numberlines go beyond a certain level it is a price move that has been confirmed by time. When large moves happen very fast the numberlines matter less and you need to look at the a levels. Regardless of what you are using it is important to use all of the tools in your toolbox.
 
Quote from OneFive:

One post, two topics. I don't know how the regular posters find the time to post. I've been trading professionally for 20 years. I'm busy during the day. If the markets are dead, I have time but no topic. I have noticed that slow days=less posting rather than more. Hats off to those of you that contribute here regularly and make this thread so valuable. This thread is great and I have learned a ton from it.

Regarding the "Karen" video from TOS. That was pretty disappointing for its 24 minute length. I was hoping for some real nuts and bolts about her approach. The only glimpse was selling 5 delta options with less than 56 days to expiration. Those strangles don't yield much so to generate those returns, there would have to be some decent leverage employed. Using some crude pricing sheets, those SPX strangles MIGHT be $8-10 of premium and I am guessing that is at higher vols a la vix in the 40s. Maybe I am missing something so I'd love to hear a different take. I am assuming that the "5% chance of going in the money" she refers to is the 5 delta we learned about from Natenberg.

Looking at the worst case in fall of 2008, there is almost no way to have avoided significant drawdowns and or margin calls without some extraordinary timing or dynamic hedging skills. Simply be fortunate enough to close out your exposure at the right time? Pre-hedge a 25%, 10 day drop while the vix goes from 35 to 70? The 5 delta put is now 60 delta and probably trading for $70. I'm not doubting her success, I would just like to know how she managed that scenario being short lottery ticket options. Unfortunately, the video doesn't really ask those kinds of questions.

A friend who managed risk at a well known online brokerage described that time frame as one of harvesting the premium sellers. Liquidating client accounts daily until the field was empty of premium selling accounts and lying fallow.
More...

Thanks for posting. Do you trade at a firm? What exactly are you trading...maybe you could share a bit with everyone here.
 
Quote from Shanb:

Interesting month of May. Weakness has showing up in the numberlines since mid-April. That weakness finally started to resolve itself out in the past few weeks. Now the numberlines in most of the market are still very weak and it will take some time to work that off.

I think we are coming into a near term bounce...the technical targets down here are the Monthly A down at 1260ish in the ES and that is also unch on the year. We could plow through those levels but they should act as a key area that will need to hold. One of the reasons I think we will at least have some sort of bounce is that the market is not oversold at this point but there are huge divergences in the numberlines in the short term. We need lots of power to plow through those levels and dont know if we have that.

I think this summer we will be in for some back and filling action in equities...we will need this to work off these numberlines. Vol can stay bid here for a bit too, so will prob need to adjust trading based off of that.

The Euro has been leading these markets in terms of price action...there was a pretty big reversal day on Friday and that is a very crowded trade. Just something to keep in the back of ones mind!
More...

thanks for the chart, es almost at 1260, what really bothers me is that there are no threads on et calling for a crash, now that is spooky!:p
 
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