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

[rtw]

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!

no. this is wrong.

i can't share the profit - loss returns trade by trade but that's only because i haven't found a way to make stupid ib and tws provide this information.

the fact that the very same trades in shares are competitive or modestly profitable should give more than enough information about how well my strategies are following the trends i'm trying to profit from.

 

[rtw]

I see that your buy & sell prices are almost identical, so you’re trading around the same price with tiny profits.
I’ve described similar problem at https://www.elitetrader.com/et/thre...egy-for-high-probability-stock-trades.333697/

not necessarily. these four symbols i have been using to evaluate the automated options trading system are cheap and this means their movements are small in terms of dollars and cents. however, the buy and sell prices in the images are averages over thousands of shares, and that is because stupid ib and tws will only present this information aggregated like this. the prices for these symbols could have moved 3% above and below their average in a 7 day period but the fact that the information is aggregated and averaged over the entire period results in this apparent minuscule price action.

 

[rtw]

Do you understand options synthetics? Long a 80 delta call is same as long stock and long 20 delta put. Is that what you want?

Also high delta options have wider spreads and more slippage.

i have been working on a system to trade calls and puts directionally in place of positions in shares. calls and puts cost much less than 10% of what a position in shares would cost but their returns can be comparably far superior.


all the trades this automated system has executed have consisted of single positions, nothing synthetic:

- for downtrends, short 100 shares and long 1 -80 delta put.

- for uptrends, long 100 shares and long 1 80 delta call.


as for you referring to these divergences i have documented as slippage, the difference is of thousands of dollars over a 7 day period for the very same trades in what should be equivalent instruments and is also far greater than the entire value of the bid - ask spread for these options instruments (i'm already buying at the ask and selling at the bid because the system uses market orders). i don't think such a brutal divergence can be called slippage or explained by slippage alone.

 

[Bum]

Your Quote:
"the fact that the very same trades in shares are competitive or modestly profitable should give more than enough information about how well my strategies are following the trends i'm trying to profit from."[/QUOTE]

....................................................

Even though I think your results are inaccurate, I did a quick summary of your reports.
Options = loss of $3,560
Stocks = loss of $5,300

Please explain the "modestly profitable" part you see. Where do you see stock results better than options?

Sorry, why am I seeing different results than you?

 

[rtw]

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.

no. these are simply the results that ib and tws report for the trades that the system executed just as tws reports them.

i'm not familiar with the concept of of implied carry related to these two kinds of instruments and haven't considered it, ¿would you mind sharing some sources so that i could read on these concepts? thanks.

 

[rtw]

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.

yes, i'm sorry, the data i have shared is not ideal but it's the best i have.

i agree, there are multiple errors with the reported commissions. that's just tws, it is a pretty awful platform, i only use it because ib's api is the best and that's the api with which it has been possible to develop this automated system.

another situation that adds to this mess is that if i happened to fail to liquidate an in the money option on simulator before expiration, stupid ib will do a simulated assignment, execution and put the corresponding amount of shares in my account on tws. this did happen over the week when i saved this information.

the trades in stocks were indeed profitable in the cases you mention. the difference between the average buying and selling prices was positive enough to guarantee this, even if stupid tws reports an uneven number of shares bought and sold over this 7 day period.


once again, the cumulative losses from executing the very same trades in options were in the range of thousands of usd for every symbol i have presented while the performance of those same trades in shares was minimal losses or modest profits. that's what i want to understand and solve. these instruments are very cheap, the entire bid - ask spread for these options is small, less than 40 usd in all cases. so it is not possible to explain such a massive divergence in results when the spread - slippage could only account for 20 to 50% of the losses reported in options trades even in the worst case scenario.

 

[destriero]

i have been working on a system to trade calls and puts directionally in place of positions in shares. calls and puts cost much less than 10% of what a position in shares would cost but their returns can be comparably far superior.


all the trades this automated system has executed have consisted of single positions, nothing synthetic:

- for downtrends, short 100 shares and long 1 -80 delta put.

- for uptrends, long 100 shares and long 1 80 delta call.


as for you referring to these divergences i have documented as slippage, the difference is of thousands of dollars over a 7 day period for the very same trades in what should be equivalent instruments and is also far greater than the entire value of the bid - ask spread for these options instruments (i'm already buying at the ask and selling at the bid because the system uses market orders). i don't think such a brutal divergence can be called slippage or explained by slippage alone.

The NBBO spread on the 80D option is going to be 10x greater than shares, optimistically. You really needed to test this? Find another profession.

 

[rtw]

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.

mr. Mcginnis,


thanks for your reply. you are one of the et members who know what they are talking about.

these are trades that were spread over a 7 day period, the fact that stupid ib and tws only provide aggregated and averaged results is what generates this illusion of all positions having been opened frantically on expiration date.

as soon as i have a chance i will get the trade lists for these strategies from the platform i have been using to generate entry and exit orders for better illustration of how the strategies performed in shares and how big the under-performance in options is.

 

[ETJ]

Implied carry - let's say I want to compare the performance of two "relatively" identical positions. One the cash underlying and the other is a derivative. Let's also assume there are no dividends involved - the cash would receive a dividend if it held through the correct period and the options would reflect the dividend, but no dividend to keep it simple.

100 shares of a $100 stock carried for one year vs.
2 $100 calls with a one-year expiration. Both 100 delta positions.

Comparing performance - let's say one year out the stock is still at $100 - have I lost money?
In the options, you would see a loss and most would consider the stock unchanged without a loss, but you can't carry a $100 position for free.

Part of the ATM option value comes from volatility and part from the carry equation. For a "fair" comparision you would need to apply a carrying cost to the cash stock. If you want to use the rate imbedded in the option just for illustration purposes - use that.

If you're going to do a fair comparison of performance you can't carry stock for free.

 

[qlai]

The NBBO spread on the 80D option is going to be 10x greater than shares, optimistically.

Wanted to add my $0.02 regarding Sim. It's very difficult to simulate fills on illiquid instruments. Assuming that you will be filled at NBBO for more size than displayed may not be realistic. There was a guy here who described paper trading his options system and he actually looked at TnS to see how much volume traded at the time and at what prices.