Trading Long Straddles

[Riffraffpatrol]

Quote from TskTsk:

I just read review of one of his books on amazon, seems he doesnt present an actual, practical trading strategy but rather the framework to help people develop an edge on their own. again this adds a bit subjectivity to it, and personally im more of a math and statistics type of guy...what im interested in is what you said "success can still be achieved with no knowledge of TA", which i assume is less subjective. but how does one achieve this success? do you have an easily backtestable example? for example long ATM straddle 2hrs before weekly expiry on AAPL over the last year...would this in total give me profit? and so on.

Look--I'm not sure what review you are reading, but I couldn't disagree more with your assessment of Augen material.

Get "Trading Options at Expiration: Strategies and Models for Winning the Endgame" and "Day Trading Options: Profiting from Price Distortions in Very Brief Timeframes"...this is the best advice I can give you... If you are not convinced after reading these to pursue this further with hands on backtesting of your own, then it's probably not for you.

 

[TskTsk]

Quote from Riffraffpatrol:

Look--I'm not sure what review you are reading, but I couldn't disagree more with your assessment of Augen material.

Get "Trading Options at Expiration: Strategies and Models for Winning the Endgame" and "Day Trading Options: Profiting from Price Distortions in Very Brief Timeframes"...this is the best advice I can give you... If you are not convinced after reading these to pursue this further with hands on backtesting of your own, then it's probably not for you.

It's several reviews, on amazon...
http://www.amazon.com/Trading-Optio...dp_top_cm_cr_acr_txt?ie=UTF8&showViewpoints=1

Look at the top reviews, some quotes:
"not practical for the average option trader".
"will NOT give you any strategy you can USE"
"If you are looking for anything of practical value, look elsewhere."
"The problem is that all of the trades are just that - theoretical. They are all created based on old data. No insight is really given on how to make trades in real time. No information is given on safe stop levels "
"Not easy to apply for the average or even the advanced trader.High quality minute by minute option data is needed to construct volatilty decay curves.The data is often plagued by "noise" as a result of unwinding of large positions that tend to form spikes in the curves that makes quantitative application of the concepts difficult."

Also look at the Michael Orr review...he spesifically states that he built an excel model to backtest the concept but couldn't make it work.

 

[Riffraffpatrol]

Quote from TskTsk:

It's several reviews, on amazon...
http://www.amazon.com/Trading-Optio...dp_top_cm_cr_acr_txt?ie=UTF8&showViewpoints=1

Look at the top reviews, some quotes:
"not practical for the average option trader".
"will NOT give you any strategy you can USE"
"If you are looking for anything of practical value, look elsewhere."
"The problem is that all of the trades are just that - theoretical. They are all created based on old data. No insight is really given on how to make trades in real time. No information is given on safe stop levels "
"Not easy to apply for the average or even the advanced trader.High quality minute by minute option data is needed to construct volatilty decay curves.The data is often plagued by "noise" as a result of unwinding of large positions that tend to form spikes in the curves that makes quantitative application of the concepts difficult."

Also look at the Michael Orr review...he spesifically states that he built an excel model to backtest the concept but couldn't make it work.

Don't rely on others... do yourself justice: read them and formulate your own review. If not-- perhaps these will help:


--Ralph J. Acampora, CMT, Director of Technical Analysis Studies, New York Institute of Finance
_
“A fantastic, insightful book full of meticulously compiled statistics about anomalies that surround option expiration. Not only does Augen present a set of effective trading strategies to capitalize on these anomalies, he walks through the performance of each across several expirations. His advice is practical and readily applicable: He outlines common pitfalls, gives guidance on timing your executions, and even includes code that can be used to perform the same calculations he does in the text. A thoroughly enjoyable read that will give you a true edge in your option trading.”
--Alexis Goldstein, Vice President, Equity Derivatives Business Analyst
_
“Mr. Augen makes a careful and systematic study of option prices at expiration. His translation of price behavior into trading strategy is intriguing work, and the level of detail is impressive.”
--Dr. Robert Jennings, Professor of Finance, Indiana University Kelly School of Business
_
“This book fills a gap in the vast amount of literature on derivatives trading and stands out for being extremely well written, clear, concise, and very low on jargon--perfect for traders looking to evolve their equity option strategies.”
--Nazzaro Angelini, Principal, Spearpoint Capital
_
“Instead of considering macro-time strategies that take weeks to unfold, Jeff Augen is thinking micro here--hours or days--specifically the days or hours right before expiration, and harnessing grinding, remorseless options decay for profit. He builds a compelling case for the strategy here. The concept of using ratio spreads plus risk management for as brief a period as one day--open to close--to capture expiring premium is worth the price of admission alone. A superb follow-up to his first book. Must-read for the serious options student.”
--John A. Sarkett, Option Wizard software

 

[TskTsk]

Quote from Riffraffpatrol:

Don't rely on others... do yourself justice: read them and formulate your own review. If not-- perhaps these will help:


--Ralph J. Acampora, CMT, Director of Technical Analysis Studies, New York Institute of Finance
_
“A fantastic, insightful book full of meticulously compiled statistics about anomalies that surround option expiration. Not only does Augen present a set of effective trading strategies to capitalize on these anomalies, he walks through the performance of each across several expirations. His advice is practical and readily applicable: He outlines common pitfalls, gives guidance on timing your executions, and even includes code that can be used to perform the same calculations he does in the text. A thoroughly enjoyable read that will give you a true edge in your option trading.”
--Alexis Goldstein, Vice President, Equity Derivatives Business Analyst
_
“Mr. Augen makes a careful and systematic study of option prices at expiration. His translation of price behavior into trading strategy is intriguing work, and the level of detail is impressive.”
--Dr. Robert Jennings, Professor of Finance, Indiana University Kelly School of Business
_
“This book fills a gap in the vast amount of literature on derivatives trading and stands out for being extremely well written, clear, concise, and very low on jargon--perfect for traders looking to evolve their equity option strategies.”
--Nazzaro Angelini, Principal, Spearpoint Capital
_
“Instead of considering macro-time strategies that take weeks to unfold, Jeff Augen is thinking micro here--hours or days--specifically the days or hours right before expiration, and harnessing grinding, remorseless options decay for profit. He builds a compelling case for the strategy here. The concept of using ratio spreads plus risk management for as brief a period as one day--open to close--to capture expiring premium is worth the price of admission alone. A superb follow-up to his first book. Must-read for the serious options student.”
--John A. Sarkett, Option Wizard software

Hm, interesting...then I suppose you wouldn't mind sharing a spesific strategy or set of guidelines from his book (I assume you read it), that performs well without any use of TA. I have access to a decent database of historical data and it'd be interesting to test some of his strategies. Or maybe you have some statistics or backtest results from implementation of his strategies that you'd be willing to share?

 

[Riffraffpatrol]

Quote from TskTsk:

Hm, interesting...then I suppose you wouldn't mind sharing a spesific strategy or set of guidelines from his book (I assume you read it), that performs well without any use of TA. I have access to a decent database of historical data and it'd be interesting to test some of his strategies. Or maybe you have some statistics or backtest results from implementation of his strategies that you'd be willing to share?

Lol u r a piece of work.

Of course I've read them!

Look-- if u want to know more...pay your dues like I have... get his books and read them. Then put the time in and rack up the screen time for empirical first hand experience on how these perform.

I've spent enuff time on this subject here and have already shared plenty. Time for you to pony up and get to work if u wanna pursue this further. Good luck.

 

[mushinseeker]

Riffraffpatrol, using the same observed price decay, would you do the opposite and sell the front on Monday anchored with a back month for margin purposes and gamma protection and cover it when the decay slows down on thrusday?
This would present a better alternative for the trader type who prefers 15 winners overcoming 5 big losers (short juice) vs. 15 small losers being overcome by 5 big winners (long juice). I am of the former type.

 

[Riffraffpatrol]

Quote from MushinSeeker:

Riffraffpatrol, using the same observed price decay, would you do the opposite and sell the front on Monday anchored with a back month for margin purposes and gamma protection and cover it when the decay slows down on thrusday?
This would present a better alternative for the trader type who prefers 15 winners overcoming 5 big losers (short juice) vs. 15 small losers being overcome by 5 big winners (long juice). I am of the former type.

Augen gets into simllar strategy on the short side in his books.

Sounds decent...u have a handle on things relative to your style of trading.

 

[TskTsk]

Quote from Riffraffpatrol:

Lol u r a piece of work.

Of course I've read them!

Look-- if u want to know more...pay your dues like I have... get his books and read them. Then put the time in and rack up the screen time for empirical first hand experience on how these perform.

I've spent enuff time on this subject here and have already shared plenty. Time for you to pony up and get to work if u wanna pursue this further. Good luck.

Don't get me wrong, I love buying books as much as the next guy. But before I buy something, I usually want to see some results. Is that too much to ask? I want to see at least ONE person who has implemented his ideas and can PROVE that they work. You said yourself the strategies are straight-forward to implement, with little room for subjectivity, so it's not like there is room for "secrets" anywhere.

 

[traderlux]

Quote from TskTsk:

Don't get me wrong, I love buying books as much as the next guy. But before I buy something, I usually want to see some results. Is that too much to ask? I want to see at least ONE person who has implemented his ideas and can PROVE that they work. You said yourself the strategies are straight-forward to implement, with little room for subjectivity, and that they are all explained in his book, so it's not like there is room for "secrets" anywhere.

tsk,
i have several of augens books and they are not easy reads, however the guy is good when it comes to end of life option trading.
i have been to several webinars where he has presented and he continually refines his ideas.
he has published a number of articles for SFO magazine which you can get for free on-line if you register.
also he completely blows away conventional t/a and uses tick charts and some other phase indicators he has developed.

regards

 

[sle]

Quote from TskTsk:
.such subjective things can be difficult to run statistics on because its hard to quantify

Actually, there is a fair number of reliable statistical studies you can do to detect short-date opportunities (not really intra-day, but e.g. pre-expiration or pre-event). The key difference is not to get hung up on a small subset of names, but scan across a large universe of stocks.