vastly inferior performance in positions in options versus positions in shares.

rtw

rtw

regards to everyone,



this matter should be interesting for all the knowledgeable and theoretically inclined et members who make the most valuable contributions to these fora.


for a number of months now i have been contributing to the development of a system to trade options automated. this system is now in the testing phase and i have been carrying out tests with parallel simultaneous positions in 100 shares and 1 options contract (long 100 shares and 1 call or short 100 shares and long 1 put). the following are the results that the automated strategy i have been evaluating generated on my simulated account with ib over a 7 day period:


https://cdn1.imggmi.com/uploads/2019/9/13/6b32549d633b068c8dbabf3a85223424-full.jpg

https://cdn1.imggmi.com/uploads/2019/9/13/1964d79f94edc7289328baf7914cec63-full.jpg

https://cdn1.imggmi.com/uploads/2019/9/13/9ae9abcad49a097795ca8dfd9ead1cca-full.jpg

https://cdn1.imggmi.com/uploads/2019/9/13/7b2e338043fdb66c94c2088e8017b908-full.jpg



as anyone can see, my strategies were competitive or modestly profitable when traded in positions in 100 shares but the positions in options generated brutal losses. these positions were opened and closed simultaneously with market orders for both kinds of instruments. all options contracts traded were in the money and around +/-80 deltas at the time the positions were opened.


¿what would the options experts in this forum opine about this very significant discrepancy? ¿how would you call this kind of divergence, is it something you have experienced previously? ¿is this inevitable or would it be possible to avoid this kind of under-performance?


very well, thanks, regards to all.
 
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Without the dates of entry and exit, this study of yours is useless. There is no way to check if you are even trading with the trend and not against it. There is a good chance that you are taking positions opposite the trend of the said stocks. In that case, you losing your monies is very much guaranteed. Trading options directionally has low win rates, think 30-40% but, it goes lower if you are trading against the trend!
 
https://cdn1.imggmi.com/uploads/2019/9/13/7b2e338043fdb66c94c2088e8017b908-full.jpg Partial quote
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WELL I don't have an opinion on your higher option commissions, than stocks; that may not be accurate @ end of OCT anyway.LOL-LOL

Long story short options don't pay dividends, IBKR got out of option market making business + not as liquid business as stocks+ could list another 7 reasons...………………………………………………………….. Your post, again follows this.
QUOTE
as anyone can see, my strategies were competitive or modestly profitable when traded in positions in 100 shares but the positions in options generated brutal losses. these positions were opened and closed simultaneously with market orders for both kinds of instruments. all options contracts traded were in the money and around +/-80 deltas at the time the positions were opened.


¿what would the options experts in this forum opine about this very significant discrepancy? ¿how would you call this kind of divergence, is it something you have experienced previously? ¿is this inevitable or would it be possible to avoid this kind of under-performance?


very well, thanks, regards to all.[/QUOTE]
 
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Without knowing more did you calculate an implied carry in the stock. Visible carry in options - implied carry in stock. If I hold a stock for a year and it does nothing - no dividends nothing - I have lost the implied carry.
 
I'm unsure on a lot of your terminology, and have zero idea of what your hold times were, but it *appears* that you bought and sold a lot of ITM supra-straddles (a $50 put against a $49 call) on the day of expiration, and then wondered about the whack on value that they lost through theta and paying/selling at market.

I'm sorry but, there's no wonder there. No question at all. That one should have been played out from the sidelines, first.
 
tommcginnis said:
I'm unsure on a lot of your terminology, and have zero idea of what your hold times were, but it *appears* that you bought and sold a lot of ITM supra-straddles (a $50 put against a $49 call) on the day of expiration, and then wondered about the whack on value that they lost through theta and paying/selling at market.

I'm sorry but, there's no wonder there. No question at all. That one should have been played out from the sidelines, first.
More...


At least now it seems clear that he may need to do the opposite of what he's done :)
 
ETJ said:
Without knowing more did you calculate an implied carry in the stock. Visible carry in options - implied carry in stock. If I hold a stock for a year and it does nothing - no dividends nothing - I have lost the implied carry.
More...
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That;
+ get another plan/ETFs or another stock...……………………………………………………………………...
 
First thing to do is correct your testing results so you know if anything is accurate :)

1-Why do you have a "Net" of "0" in the stock position but have a "Net" of "1" or more in options? If stock and option trades are taken at the same time then "Net" should be "0" for both if all trades are closed at the same time.

2-How can commissions in many of your options trades be "0.00" ?

3-How can you have total options trades much higher than the total commissions of your stock trades? Even if stock trade had a total commission of $1/RT your stock commission should be higher if you took the same # of trades in stocks as you did in options.

4-Your loss on spreads will definitely be more on the option trades especially given the # of trades taken.

5-Of your stock trades, 3 out of 4 were losses (-99, -5200, -4900, +4900) so why do you say your strategy is "modestly profitable" ?

***Not enough information for proper analysis.
 
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