How do I make the most of this edge?

Discussion in 'Options' started by Sam Sanders, Dec 19, 2014.

  1. Do you know of a US citizen who has found a legal workaround to trade CFDs through IB? What's that look like (if you can share)?
     
    #11     Dec 20, 2014
  2. sorry, the only legal workaround that comes to my mind is opening an account through another person (eg a lawyer) or (forming a) company outside the US.
    I've heard of a guy who found an UK passport picture on Google and simply photoshopped his name inside. Would not recommend this, though.
     
    #12     Dec 20, 2014
  3. This depend on the equities, if this is a highly liquid options ( such as SPY, QQQ, GE, INTC and etc) with very small slipage, a deep in the money options will be the best, which will give you almost dollar to dollar leverage.
     
    #13     Dec 21, 2014
  4. Just trade the stocks. You can leverage 2:1 overnight at every broker.
    So a 50k account with 2:1 margin will yield 4k in 3-5 days. Remember that If your drawdowns are ok, that a lot of people would kill for this kind of performance. (Including funds)
    In the future you can always look around for more leverage or OPM
     
    #14     Dec 21, 2014
  5. newwurldmn

    newwurldmn

    The details of your strategy will determine if trading options will help or hurt you.

    Namely, what is the return distribution of the stocks you are trading (upside vs downside)?
    What is the implied vol of the stocks you are trading? Are you trading a basket or are you trading 1 underlying? Is it index or single stock?

    2% over a week with a stdev of 6% over a week prob means that you wouldn't make up your theta.
     
    #15     Dec 21, 2014
    blakpacman likes this.
  6. You are right, a 8% return in a month (2% a week) will make this guy much richer than Buffet or anyone else in the world in 20 years time even with a 10K account. I don't see he need any leverage from Options.
     
    #16     Dec 21, 2014
  7. I forgot, there are also a couple of prop firms who accept swing traders (leverage 10:1)
     
    #17     Dec 21, 2014
  8. surfer25

    surfer25

    I think 1245 gave you accurate answers. You will need underlyings with high option volume. I don't think it matters much which strikes you trade. What really matters is the spread, commissions and execution quality. BTW, 2% over a week or less is not a small edge, it is a huge edge. Check Krug's advice is correct except for that a 50K account would yield 2K per trade at 2:1 leverage. This doesn't necessarily translate into 8% a month because you don't say how often the opportunities arise or how much of your account it is prudent to put into each trade.
     
    #18     Jan 11, 2015

  9. So.....based on the parameters you described (2% 4-day drift rate and 6% sigma), a sample path of your strategy (assuming the full-account is invested) looks something like this over 1 year....

    upload_2015-1-21_11-54-54.png

    This is what you describe as a "small edge?"
     
    #19     Jan 21, 2015
  10. LOL
    To be honest, any strategy with this kind of return will not survive for more than 3 years, the market randomness will get him pretty soon.
     
    #20     Jan 21, 2015