Weekly results of a wanna B algo trader - 2011

Did some account management and added another 6k to my trading account. That brings my debt to 22k. Hoping to repay that by the end of the month. Just landed in Chicago (feeling sick as a dog) and just saw Wall Street 2 (Money never sleeps). That movie makes you think twice about leverage ;)
 
Good week (Up 3k8). Not sure what happened but my systems kept making money even though the market played the same movie over and over again. Bad news this week was that I went to the East Coast on Monday and brought the flu back, so my whole family is sick for the last three days. S21 sucks in this environment but it's fully loaded, so we'll see how this strategy performs. It's a 2011 newcomer, let's hope for some profits ;). S2 benefits from the delta gains in this environment, even though volatility hurts the holdings. S11 did ok but delta neutral it hard in this up market. S10 same story, both of these strategies were helped by the three day weekend. The most promising newcomer is still tracked under the S12 gambling strategy, it's the new pairs trading setup. I've entered four trades and at one point in time all four were green today. Unfortunately one turned back red but it's definitely worth watching the progress. Overall a good week, green for the year, ahead of the Risk Free Money and far behind the S&P 500 performance. After last week's deposit into my trading account I should be debt free again come Wednesday next week, so let's hope that this really happens ;)
For all the ones following this, have a good weekend and stay away from nasty germs !!!!



Here are the results in detail
S1:-1155
S2: 3316
S10: 1015
S12: 683
S11: 1192
S21:-511

Weekly Performance:
3818
S&P 500 Weekly Performance:
2810
Overall Performance since launch:
4540
S&P 500 Performance since launch:
14623
Risk Free Checking Account Performance since launch:
315
 
I've had my worst trading day since May 6th 2010 (aka Flash Crash).
It all started out very innocent and I made a couple of UI changes to incorporate a control that forces a confirmation click before orders get executed based on this thread
http://www.elitetrader.com/vb/showthread.php?threadid=215749

Then i tested it and had a little bug, so I ended up with some unwanted options. I closed the trade manually and somehow watched the S&P 500 futures drop and drop, so based on recent action I bought some and bought more. Before you knew it, I had 60 contracts in two different accounts (basically maxed out my buying power in both) and was 12 grand in the hole on this trade.

I'm not sure if some degenerated gambling instincts came to light today or what the issue was but 1. this is the reason I trade automated, and 2nd, I don't think I've ever had such a discipline problem.

Only good news is that I didn't barf the position out at the low point but watched it recover some. I still blew 1800 bucks today 600 in commission, about 900 in my discretionary trade gone bad, my automated systems would have done ok (-300) today considering the S&P took at beating as well.

Not sure what the message here is other than know your trading style. If you're an auto-trader who enjoys building algos and backtesting, don't think you can be cocky and kick butt at discretionary trading, just cause you did well automated in the past. Not sure if this goes the other way as well but I hope this was a one time lesson for me.
 
Quote from Engine99:

I've had my worst trading day since May 6th 2010 (aka Flash Crash).
It all started out very innocent and I made a couple of UI changes to incorporate a control that forces a confirmation click before orders get executed based on this thread
http://www.elitetrader.com/vb/showthread.php?threadid=215749

Then i tested it and had a little bug, so I ended up with some unwanted options. I closed the trade manually and somehow watched the S&P 500 futures drop and drop, so based on recent action I bought some and bought more. Before you knew it, I had 60 contracts in two different accounts (basically maxed out my buying power in both) and was 12 grand in the hole on this trade.

I'm not sure if some degenerated gambling instincts came to light today or what the issue was but 1. this is the reason I trade automated, and 2nd, I don't think I've ever had such a discipline problem.

Only good news is that I didn't barf the position out at the low point but watched it recover some. I still blew 1800 bucks today 600 in commission, about 900 in my discretionary trade gone bad, my automated systems would have done ok (-300) today considering the S&P took at beating as well.

Not sure what the message here is other than know your trading style. If you're an auto-trader who enjoys building algos and backtesting, don't think you can be cocky and kick butt at discretionary trading, just cause you did well automated in the past. Not sure if this goes the other way as well but I hope this was a one time lesson for me.
More...

I feel your pain. I just screwed my account last night by trading the DAX, which I rarely do, and then adding onto my losing positions and watching it go totally against me. I went absolutely crazy for around 30 mins, doing things I *never* do, and lost almost $2000 in a single trade. Trading every day appears to have me blow up once every 3 months or so, it's stupid and frustrating.
 
Engine,

With out needing to know all the details for all your models, would you say that a majority of all your positions are net short premium/short volatility? For example credit spreads/naked premium?

I wanted to comment for a while now about your benchmark performance comparisons. I think you should really add, whether publicly or privately, another performance metric; you should determine your edge as alpha vs similar strategies. For example if you have a self adjusting iron condor as a "system" then you should really compare your performance to an iron condor on the spx.

The reasoning is simple, because short premium strategies inherently produce long consecutive wins before large losses, if you indeed have an edge, you should out perform the same type of strategy.

Trader performance needs to seek alpha not baseline. And short volatility from when you started mid last year has performed nicely, but the question is, have you out performed an equivalent benchmark. As you know with options, not only are we specuilating on direction but we are speculating on IV as well. So doesnt it make sense to compare your performance to some sort of volatility indicator. Like the (Volatility Arbitrage index) Depending if you are net long or short volatiltiy you can compare it to the index. If you are not getting alpha vs the Vol Arb Index, then basically there is no edge.

What is your portfolio vega? This whole posts is only relevant if you are net short premium. If not then I think your doing fine, and perhaps this can help someone else. The results you achieved is no less than absolutely amazing, provided that your portfolio was delta and vega neutral, was it???
 
DG, great input, I need more of this !!!! ;)

The problem is I don't have historical data to compare that against.
e.g. right now if I beta weigh my portfolio (the majority of it) against the SPY, I have about 900 Deltas and about 3500 Vega compared to the spy (both long across all strategies).

Is there an easy way to compare that against the Volatility Arbitrage Index (or a call write or iron condor benchmark).
 
Quote from jedwards:

I feel your pain. I just screwed my account last night by trading the DAX, which I rarely do, and then adding onto my losing positions and watching it go totally against me. I went absolutely crazy for around 30 mins, doing things I *never* do, and lost almost $2000 in a single trade. Trading every day appears to have me blow up once every 3 months or so, it's stupid and frustrating.
More...

jed, good luck getting back on track. For me the "screwing around" as much fun as it was, wasn't any different than Vegas and the fun was over once I looked at my P&L. 12 grand is about 5% of my portfolio, but it's also a month worth of day job for 30 minutes of excitement. Worst of all I was backed into a corner, it's not fun if you're out of buying power and your only move left is to hope for a miracle (which eventually came). I have a feeling I'm cured screwing around for a while now, I hope you felt the same way in your case and are ready to move on.
 
Quote from Engine99:

DG, great input, I need more of this !!!! ;)

The problem is I don't have historical data to compare that against.
e.g. right now if I beta weigh my portfolio (the majority of it) against the SPY, I have about 900 Deltas and about 3500 Vega compared to the spy (both long across all strategies).

Is there an easy way to compare that against the Volatility Arbitrage Index (or a call write or iron condor benchmark).
More...

Let me get this right, you beta weighted your all your options systems against SPX and you came up with 3500 Vega. So you are currently a net purchaser of options, then correct? What about over the course of your trading???

If you have a call write system, which is the same as short puts, which is short volatility - it could be bench marked to the overall Vol Arb Index. Think of it this way, you want realized vol to be less than implied vol over the course of you holding the position. Very likely, in a moderately volatile month, you will make money with call write but so did any other strategy that sells implied and buys realized, so wheres is the alpha??? You have to be able to measure that you indeed did a lot better.

Lets look at your call write system, hypothetically if you sold 5% OTM puts on SPX, with the same amount of margin use, that you used on call writes, did you make significantly more money with your own system? Thats the million dollar question, because a simple 5% OTM put selling on SPX made money over the same time.
 
Quote from DGunz:

Let me get this right, you beta weighted your all your options systems against SPX and you came up with 3500 Vega. So you are currently a net purchaser of options, then correct? What about over the course of your trading???
More...

This is a little tricky to estimate, mainly mainly because the positions are in two accounts and only one allows me to beta weigh this quickly (and that account has a lot of net long options).

The second issue I have is the portfolio itself, at any point in time there's no pre-defined allocation between S2 (net long options) and delta neutral (S21, S11 and S10), so it depends on what trades qualify and how much buying power I've left. Overall the $$$ allocation for S21, 11 and 10 is predefined (so is the risk) and the trades are not hard to enter. I enter them at pre-defined times, e.g. S21 enters almost daily and always finds candidates.

S2 on the other hand may not find a candidate for a week or two a day, so that one is harder and because it's net long it's harder to get a fill as well.

If I'm net long or short depends on the strategy.
S10, S11 and S21 are short options and benefit from theta.
S2 is net long delta and vega and benefits much less from theta.

Hope that helps.
 
Sweet trading week (up 1k9). Especially Thursday and Friday kicked butt and did well while I'm at the beach in Cabo. Tue/Wed sucked big time though. I hope I found my sweet spot now. I've three core automated (non correlated strategies). S11, S10, S21 all are short volatility, benefit from theta and are somewhat delta neutral. S2 is long vega, delta and also benefits from theta. Those are two core strategies that somewhat hedge each other. S81 is brand new and is stock based. Until now I've tracked S81 under S12, but now that I've increased size it deserves it's own track record. I'd have a much better week without my gambling issue earlier in the week but I'm not complaining about it. It pays part of my trip to Cabo ;). S2 gained based on the volatility increase this week, S11 suffered quite a bit because of the delta move. Overall I'm still happy and excited that I didn't exit my compulsive S&P 500 emini trade at the worst time and that I finished another week in the green. Green for the year is also nice, I definitely needed a little confidence boost.The S&P 500 recovered some losses today but closed red for the week, still has a kick ass performance for the year though compared to my results.
I'm not traveling for work next week, I'm still in Mexico until Tuesday. For all the folks following this, I hope you did well. jed and DG, I especially appreciate your input, I was wondering if anyone is reading this ;). DG it sounds like I can learn from you, I've never looked at quantifying my edge by comparing it to similar strategies, I always looked at the "CNBC benchmark" aka the S&P 500 ;).
One more side note. I finished Adventures of a currency trader http://www.amazon.com/Adventures-Currency-Trader-Trading-Courage/dp/0470049480
and while the book was corny at times it is a fun read and taught me some stuff regarding discipline. Since I've still to learn in that department I'll probably go for another online poker challenge to practice that.


Here are the results in detail
S1:-2837
S2: 5659
S10: 2305
S12: 1126
S11: 496
S21:-444
S81: 175
Weekly Performance:
1940
S&P 500 Weekly Performance:
-4398
Overall Performance since launch:
6480
S&P 500 Performance since launch:
10225
Risk Free Checking Account Performance since launch:
352
 
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