What is the edge in your trade?

[CharlesS]

How is this a kind of hedge? Because if the long trade idea fails, the opposite of it must work? I don't get it.

"a kind of" hedge, but not a "riskless" hedge -- not all hedges, perhaps none, are
"riskless" (on a long enough timeline ...)

N.B. a "riskless" hedge has its own cost, e.g a long put isn't free.

 

[REDP1800]

what i learned about elite trader while actual trading.
1. # detesterio is a fraud and has no clue. every trade I made hit the tape they were all real.
2. I trade counter trend all the time and do well
3. i forced a trade because i was challenged and I did just fine and I am happy with how it turned out
4. detesterio has no clue about trading if he thinks that small trade was going to "blow me up in AH"
5. I traded into the frd minues today from the long side and it was my best trade of the day
6. people on this site at least a majority of them do not trade and never have trader
7.MACD counter trend trading is fine if you know what you are doing
8. the trades were 100 % real and as i was trading i was taking screen shots and posting
9. overnight. you are a loser and always will be. instead of trying to learn you bitch about it being in the wrong section? maybe trading is the wrong section for you
10. i have traded for over 10 years and sometimes you just have to make do with what the mkt gives you and you work with it the best you can
11. I don't see anyone jumping up to a trading challenge within minutes and acually making real trades
12. detestero has no way of knowing if my orders hit the tape? because they did and he is full of shit so just know that.
13. contracts is nothing when trading
14. that will be the first and last time i ever think about doing any live trading with the negative assholes on this site. i was having fun with it. i was never scared or worried or i would have jumped out. i know what the fuck i am doing.
15 take care losers. you wouldn't know a good thing when it actual presents itself for free
94,000 losing and non traders on this site cannot be wrong and that is why peopel come her and charge 7k to show you how to spread trade. what a joke.
16. Have a nice life.
17. make sure you check the time and sales and match them idiots

 

[maxinger]

what i learned about elite trader while actual trading.
1. # detesterio is a fraud and has no clue. every trade I made hit the tape they were all real.
2. I trade counter trend all the time and do well
3. i forced a trade because i was challenged and I did just fine and I am happy with how it turned out
4. detesterio has no clue about trading if he thinks that small trade was going to "blow me up in AH"
5. I traded into the frd minues today from the long side and it was my best trade of the day
6. people on this site at least a majority of them do not trade and never have trader
7.MACD counter trend trading is fine if you know what you are doing
8. the trades were 100 % real and as i was trading i was taking screen shots and posting
9. overnight. you are a loser and always will be. instead of trying to learn you bitch about it being in the wrong section? maybe trading is the wrong section for you
10. i have traded for over 10 years and sometimes you just have to make do with what the mkt gives you and you work with it the best you can
11. I don't see anyone jumping up to a trading challenge within minutes and acually making real trades
12. detestero has no way of knowing if my orders hit the tape? because they did and he is full of shit so just know that.
13. contracts is nothing when trading
14. that will be the first and last time i ever think about doing any live trading with the negative assholes on this site. i was having fun with it. i was never scared or worried or i would have jumped out. i know what the fuck i am doing.
15 take care losers. you wouldn't know a good thing when it actual presents itself for free
94,000 losing and non traders on this site cannot be wrong and that is why peopel come her and charge 7k to show you how to spread trade. what a joke.
16. Have a nice life.
17. make sure you check the time and sales and match them idiots

seems like you have discovered something about # detesterio

 

[REDP1800]

here are just some of the trades i did today. if i am sitting in this chair i sure as hell better be trading and making a living

 

[destriero]

lol I believe you. Nobody would fake trading one lots having traded for as long as you have. Wow. Chin-up. Perhaps you’ll reincarnate as someone successful.

1) One lots.
2) There is no 2.

 

[REDP1800]

later. I scalp 100's a day and that is how I am consistently profitable. I pay less than 20 cents a side in commissions without being a member.
i still pay full fees with cme and nfa.

 

[destriero]

lol that’s not a bad rate for your micros! Round 2 tomorrow night? I can’t wait! Will you be blessing us with another pic of your spreadsheet?

 

[oldmonk]

What an absolute trainwreck of a thread. Started out with a perfectly legitimate question, but degenerated into this crap from REDP and co. Where are all the elite traders? The content on this forum keeps getting worse everyday.

 

[Seaweed]

So the scale and the potential stop-n-reverse followup are really part of a single trade.

I think there is a huge problem with your assessment. When the full stop is hit, its absolutely shit timing to reverse the position. If we refer back to the pic, posted here again, we see that the stop is at 2915. The initial long is at 2928, and the high is lets say 2930. If price trades down to 2915, hence 15 points from the high, it is likely to retrace this move somewhat before going lower again, if it even does.

So entering short once the stop for the longs is hit is in my opinion terrible timing. Too often you see price test the high again before dropping further. In this case, if price traded down to 2915, I would say its more likely to go up towards 2930 again before dropping another 15 points without any retrace. Heck, you can even see the range on the left between about 2916 and 2920. Hitting 2915 would be a dip below this range, and then price could have easily shot back up after rejecting the break of the range. (if you're into that sort of analysis)

Either way, shorting after a 15 point drop is not adding to the probability of this trade.

 

[destriero]

Someone posed an interesting question in another thread :
" I haven't seen anyone as yet explain to me in layman's terms what their edge is conceptually. "
which got me thinking "What is the edge in my trades?". I must admit, it really made me focus.

During certain months of the year I trade a lot of earnings calendars on various stocks, and it's been working out pretty good for around 3 years. So, what is my edge in this? It's theta decay. And here's how I like to see it:

Imagine I give you an ice cube and I have two cubes myself, all cubes being the same shape and size and we're in a room where the temp is constant throughout. I bet you money that your one will melt to completion much faster than my two.

Scenario 1) You put yours on a plate and I put mine on two separate plates separated by at least a foot. Result - all three cubes melt in the same time. No win for me.
Scenario 2) You put yours on a plate and I put mine two on top of each other. Result - voila! Yours melts faster than my combined two, cos they are keeping each other cooler.

Have I created an edge? I think so.

So, applying this to calendars : I give you $100 (an ice cube) and I have $200 (two cubes). You buy a Put priced at $1 expiring in 7 days. I can either buy two of these (place my cubes in two plates), OR, I choose to buy a Put which expires in 14 days time but which is priced at $2. All other things being constant, we all know which Put will melt away faster.

So, for calendars, I can see easily what my edge is. But for many other trades, it's a little more complicated. Sometimes, my edge comes from volatility, and sometimes it comes from the delta (for directional trades). Sometimes, I enter a trade thinking it's going to be winner because of theta, but volatility becomes the hero.
Sometimes, I cannot even easily explain where the edge comes from.

So, isn't all edge for retail traders coming from theta/volatility/delta? (Barring insider information, or ability to purchase options at a lower than market value due to some technical advantage etc etc.)

Just curious to see what others think.

None of what you've mentioned are edges. It's vanilla-structuring.

Think of it this way. The vol-market in the 25D call is 30x32. You buy the call at 30.3%. What's your edge? You have an edge on delta, gamma, theta and vega. You have an edge on all, i.e., your delta figure is 25.8 vs. 25 at mid.

Say you're long vol from 30.3 and you miss a hedge figure and you go into the weekend long. On Monday you need vol to rise to say 32.2% to breakeven on vol (assumes unch). Synthetic vol = time. Synthetic time = vol.

Greeks are not an edge. Structuring can be an edge, but related to the vol-surface, and I doubt you have the slightest clue what you're doing there.

OPTIONS ARE VOLATILITY. In OTC markets the options are quoted in vol. The edge is reflected in the vol-figure you trade. Not theta. Sure, you can solve for the edge with the theta figure, but that's obviously not what you meant.


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Dudes, this is an options thread. The OP clearly mentioned calendars/optionality in his opening post. Get with the program.