Using a hedge instead of a stop

Quote from bhardy307:

The difficulty I have with many of you who reply is that your response is incredibly condescending. I'm sorry, but I have great difficulty taking advice from such individuals.

You've made my point with your last paragraph. If you are what you say you are, then you should have great humility. Otherwise, you will eventually lose what you have. In that case, what value is your advice.

Unfortunately, many of you behave like you have real attitude problem. I am actively trying to learn by being active on this forum, by being open and honest with you and with myself.

Please take any further condescending nonesense and stuff it!
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There are a lot of valuable information that can save you a lot of time and monies in some of ET people that response & reply to you.

If you continue to bahave like what you are doing now, good luck and I hope I still can see you around in two years time.
 
nothing wrong with a bucket shop when you are learning. They allow the little guy to get started with a low initial deposit. If you can break even at a bucket shop you can make a small profit when you move up. It's just we all went through and still go through bright ideas that seem to beat old problems that have existed since the beginning of time. Thinking up new ideas is good because it furthers your understanding of just how serious and insurmountable the problems really are. You had your say and others pointed out the error of your ways. That's how it always goes. Don't take it personally. Many hedges have a brief period in their existence which offer true arbitrage opportunites and a few traders make money by indentifying those rare moments. That's why I say you are on the right track. Just don't get stuck thinking you have come up with something new. And don't confuse a profitable tool with a crutch which masks the true problem.
 
Quote from galvinlee888:

There are a lot of valuable information that can save you a lot of time and monies in some of ET people that response & reply to you.

If you continue to bahave like what you are doing now, good luck and I hope I still can see you around in two years time.
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95% of you are failures or will be failures. Will I be one of them? Maybe. However, I will NOT simply take advice blindly from any of you. I will think and argue and debate until I reach the conclusion myself. Blindly following advice from unknown posters on ET doesn't get me anywhere.

Fine. Throw whatever you can at me. There is a good chance I will still follow that advice. Not because a few of you say, no, it is a bad idea, but because I have listened and considered everything that everyone has said and finally concluded on my own.
 
Quote from oldtime:

nothing wrong with a bucket shop when you are learning. They allow the little guy to get started with a low initial deposit. If you can break even at a bucket shop you can make a small profit when you move up. It's just we all went through and still go through bright ideas that seem to beat old problems that have existed since the beginning of time. Thinking up new ideas is good because it furthers your understanding of just how serious and insurmountable the problems really are. You had your say and others pointed out the error of your ways. That's how it always goes. Don't take it personally. Many hedges have a brief period in their existence which offer true arbitrage opportunites and a few traders make money by indentifying those rare moments. That's why I say you are on the right track. Just don't get stuck thinking you have come up with something new. And don't confuse a profitable tool with a crutch which masks the true problem.
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Yes, thank-you. I don't claim to have a new bright idea. I was simply thinking outloud.
 
Here is something constructive in line with your original premise:

1. Start with two closely correlated instruments: One future and one Equity.

ie. YM / DIA or 6E / XDE or ES / Spy etc.

2. Normalize the instruments and calc the drift.
ie. ES 1245 Spy 125 = ES is trading 1 strike (- 5 point) under.
1 ES = 5 Spy

3. Build out a table of their option chains.
Calculate Buying normalized correlated option pairs. Cost to Buy ES calls and Sell Spy calls, vice versa and again for puts for each on their normalized strike pairs. You should have 4 combo prices for each strike pair. ie. C1265/C127 Buy 1 ES opt, sell 5 spy opt, Sell 1 ES opt, buy 5 spy opt and again for puts.

4. This options table will identify correlated and hedged option pairs that can generate a credit as well as the instant cost/loss to unwind. Ideally you want to book a credit to open, hold and unwind for a credit. This is a cross exchange arbitrage play with risk in unwinding the position to realize the credit.

This is one form of hedging for booking a credit to enter a trade and mitigate the 50x leveraged monster from wiping you out.


Quote from bhardy307:

There is no edge by using "hedge".

I acknowledged this many many posts ago, but you and others keep pushing this same issue. I realized this soon after I opened this thread.

I repeat: it is nothing but a different way of handling a stop or limit.

This difference may be an advantage for certain personalities, but I realize it isn't an edge.


Also, your concept of scale is incorrect.

The approach that you use with 1 million is completely different from the approach one uses with $4000. Why? Because, $4000 is quickly replaceable. $1 million, for most, is not replaceable.
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Quote from PocketChange:

Here is something constructive in line with your original premise:

1. Start with two closely correlated instruments: One future and one Equity.

ie. YM / DIA or 6E / XDE or ES / Spy etc.

2. Normalize the instruments and calc the drift.
ie. ES 1245 Spy 125 = ES is trading 1 strike (- 5 point) under.
1 ES = 5 Spy

3. Build out a table of their option chains.
Calculate Buying normalized correlated option pairs. Cost to Buy ES calls and Sell Spy calls, vice versa and again for puts for each on their normalized strike pairs. You should have 4 combo prices for each strike pair. ie. C1265/C127 Buy 1 ES opt, sell 5 spy opt, Sell 1 ES opt, buy 5 spy opt and again for puts.

4. This options table will identify correlated and hedged option pairs that can generate a credit as well as the instant cost/loss to unwind. Ideally you want to book a credit to open, hold and unwind for a credit. This is a cross exchange arbitrage play with risk in unwinding the position to realize the credit.

This is one form of hedging for booking a credit to enter a trade and mitigate the 50x leveraged monster from wiping you out.
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Thanks, but that went right over my head. I need to spend time learning about options before i can understand this.
 
Quote from bhardy307:

95% of you are failures or will be failures. Will I be one of them? Maybe. However, I will NOT simply take advice blindly from any of you. I will think and argue and debate until I reach the conclusion myself. Blindly following advice from unknown posters on ET doesn't get me anywhere.

Fine. Throw whatever you can at me. There is a good chance I will still follow that advice. Not because a few of you say, no, it is a bad idea, but because I have listened and considered everything that everyone has said and finally concluded on my own.
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Go ahead and proceed with your good work and what you think is correct :D
 
Quote from galvinlee888:

Go ahead and proceed with your good work and what you think is correct :D
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You too. 5 years from now, I am sure we will be trading with aproximately the same size account. :D
 
Quote from bhardy307:

You too. 5 years from now, I am sure we will be trading with aproximately the same size account. :D
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I been already survive for more than 7 years since I tarde with my own with average 20% return every year without any super risk trade. My return is quite consistent with only a small drawdown around 3% in one of the bad years.

If you can make 4K up to approximate my current account, you will be my mentor and you are better than Buffet or anyone that I know even in the world greatest trading firm.

I admit I will not be able to make 4K back to my current acount size if I loss all of them, this is why i always practice a caution good risk management. (Thanks to my early "training")

Good luck for your search and all the best (My English is not good but I said it in sincere)
 
Quote from galvinlee888:

I been already survive for more than 7 years since I tarde with my own with average 20% return every year without any super risk trade. My return is quite consistent with only a small drawdown around 3% in one of the bad years.

If you can make 4K up to approximate my current account, you will be my mentor and you are better than Buffet or anyone that I know even in the world greatest trading firm.

I admit I will not be able to make 4K back to my current acount size if I loss all of them, this is why i always practice a caution good risk management. (Thanks to my early "training")

Good luck for your search and all the best (My English is not good but I said it in sincere)
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I understand. I'm just being playful.

... but we are talking apples and oranges here. Your trading style naturally is quite different from what I must do. If the best return I hope to achieve is 20% on $4000, I am investing far more effort than I am receiving benefit.

Realize that when I was trading with a Swifttrade offshoot, the expectation was 20% in a MONTH, with a $50 daily stop and a $300 monthly stop.

If I am trading XAU/USD, $4000 scales to $4000/$2 * current price of XAU. Currently: $3,490,000. If you treat the $4000 as something which is very replaceable, big wins ( big losses ), are VERY realistic. Do I trade this way? No. However, relatively speaking, I likely take significantly more risk than you do.

I think the trick to realize here is that large returns can't be compounded. if you get a large win, don't trade it. Withdraw it and INVEST it.
 
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