A Non-Correlated Strategy Trading Journal That Shows Profit

Discussion in 'Journals' started by raVar, Oct 27, 2019.

  1. raVar


    As I was saying, in the post RIGHT above this one.

    I am well aware, of all of the above. As I already stated I am well aware of what this is doing on a Gamma basis. I don't think either of us have said it (though you alluded to it) I honestly don't think there is a worse use of BP ... one could probably imagine, as what I am illustrating above. As I stated above (knowing someone wouldn't read it, but saying it anyway, so it was said ahead of time), I fully understand the Gamma / Vol on Index Options. And the 'juice'. You can't pull out the juice, when you need to, as you need to. It's why I already stated that I wasn't going to cover IVR yet. Of course ... it's nowhere near efficient enough use of Capital. Especially if you're going to go ahead and define the risk. As well as already mentioning that this is nowhere near the strategies that we run in Private Prop (We prefer more arb), and mentioning already in this thread what we are doing here, is by no means new, revolutionary, special or honestly ... even "smart".

    Of course, naturally if someone was going to run something even remotely similar to this? You could either fund it up to $250,000 ... then run undefined, better priced vol in specific locations, either in something like SPX where you can downsize, have better liquidity, or in specific higher priced names like GOOG, NFLX, the usuals that you can pull better juice out of. While simultaneously, keeping to the Non-Correlated topic, specifically looking for areas to be long Gamma, and using the capital efficiently to do so. And when the account grows over time, I'll probably switch to the Micros', and may do that very thing.

    However, as I already stated I'm simultaneously trying to illustrate Options, to people who are brand new. Heck, I worry I've lost a few of them, just with the statements I made above. I wouldn't be surprised to hear someone say, with even those statements: "I'm lost". That's what I am trying to avoid. As I already stated. They tend to go glassy eyed, and sorta check out. In the past, I have gotten through to a few of them this way, and they went on to understand more difficult concepts.

    And I have found over the years, that if you're going to illustrate Options? As we were saying earlier in the thread with BlueWaterSailor (he made the same intelligent observation) ... it's best to define the risk, and start them there, because newcomers get crazy with becoming addicted to thinking they are just "grabbing credit risk free" (aka OptionSellers) anytime they have BP to sell, and they get themselves in trouble. Fast. People finally do learn Options, and they get ... weird. Nutty almost. I've seen it happen a thousand times.

    As well? You have the problem, that if you are going to convey a topic? You can't really explain that topic fully, at first (there's actually a proof on that). Usually, when you convey information (this is done all the time, from what they teach grade-schoolers, and then what they teach High-School kids, and then what you learn in College) ... by default, some of what you explain, will be a little off. It has to be. Thus, why I already stated, when discussing distributions that "Well, that's not exactly the case, but we'll get to that later"

    At the same time, if it's one thing I've learned? You can't get new aspiring traders to let go of the idea, of having outright, trading it directionally. God, much less spreads, or pairs (" ...but I could make "more" if I just bought one of them! I'm losing on the other side, why would I do that?"). Heck, if I wanted to ... we could start discussing directional NON-Option Future Fly's on Tightly correlated instruments or term-structure. But that's not going to help anyone as it's more advanced, and I already know it. So it'd just be a vainglorious attempt to demonstrate what I know. Which is pointless. So I'm dealing with that. Most new traders can only think in terms of "Up / Down" ... Directional Outrights (Yes, that "green" and "red" was intentional ... sigh)

    Simultaneously trying to break ones who have said they have a hard time with options, to understand basic concepts

    Simultaneously trying to not discourage someone who doesn't have $75,000 or $250,000 to throw around. Also, on that score, I get sick of hearing people whine that if they have limited capital there is nothing they can do. Bologna. Especially in today's day and age.

    So doing all of that? Trying to appease each one of those variables, you end up with something that can work, with an inefficient use of purchasing power and capital.

    The biggest risk is in the beginning, because naturally, I'm flirting with a bad MAE. Meh. Naturally, a bad MAE aside in even a year, with regular Capital Contributions previously mentioned, and the probabilities? The risk is worth it, given the place I'm eventually trying to get them to.

    All trading is discomfort, and gambles, so it's best to get people used to that right up front.
    Last edited: Nov 1, 2019
    #51     Nov 1, 2019
  2. themickey


    I know nothing about options, but having technical types discussions is better than no discussion.
    Saying that, if an OP begins a technical topic then blocks legitimate criticism, well that is poor form, however it is a a common thing on ET for protesters to be a little too offensively rude at times. It's a fine line between tolerance and putting up with provocative nutcase replies. Anyhow I'm out of my depth with options but still enjoy a technical discussion.
    #52     Nov 1, 2019
    raVar likes this.
  3. raVar



    I'll answer points I've already covered three times. No problem, and continue the conversation. Despite covering the points previously. I'm not going to block the poster above. He never got rude, and he DID bring up legitimate points. Perhaps points that had already been covered? But they were legitimate points.

    The second anyone starts with nonsense that has nothing to do with the topic at hand? How many times I kiss my wife in a week, or what businesses I ran in the past to help traders? I'll usually give it one pass.

    Meh, who are we kidding. No I don't.


    I don't believe there is any such thing as "clout" on a Trading Forum ... of all places. No one should believe anyone. About anything. Myself included. I don't believe in Guru's. At all. We're all one step away from disaster, or a Brain Stroke away from doing something idiotic. Again, that includes myself. The only thing that is worth anything are ideas that are conveyed by ...

    1) Good teaching. There are no boring subjects. Only boring teachers

    2) Concepts clearly conveyed in a progressive manner ... such that THE STUDENT can explain them. Not the teacher. The teacher should already know the concept. But if they student can't explain it (or the listener to the topic), because the teacher got too technical up front ... then we might as well be speaking to a wall. It's only after the beginning concepts ... LATER ... you can progress people to more advanced topics. How many times were we taught things in 7th Grade Math class, and the teacher said in 9th Grade: "Hey, remember how we said that you will NEVER SEE XYZ in Mathematics ... how we said that two years ago? Well, we knew then, that wasn't the case. But you could not handle it then. So now, let's explain that topic"

    I remember learning about how the Proton and Neutron was the smallest part of the Atom in 5th grade. Then, in 9th Grade, them telling us: "Nah, when we were teaching you that we knew that wasn't the case. So let's progress now to Quantum Probability Fields ... leptons and gluons". It's just the nature of teaching ANY subject. You can't start off with the more advanced topics that yield better results. It's too advanced for beginners.

    Glad you're enjoying the discussion. :D
    Last edited: Nov 1, 2019
    #53     Nov 1, 2019
    comagnum and themickey like this.
  4. destriero


    Yeah, reading the guy talk about gamma is like watching Fifty Shades of Grey with your 10yo. Hypothetically. Never seen it.

    Ravar's last was 3844 characters. Accomplishing nothing.

    Bro, there are some professionals here. Every one of them knew you were out of your depth from your first post on this thread. You really need to up your game.

    Ravar, you don't trade on the "institutional" side, so you started this cluster f with total bullshit. It's clear that you don't have anything but the most basic knowledge about options.
    Last edited: Nov 1, 2019
    #54     Nov 1, 2019
    Wheezooo, Magic and Stamamarti like this.
  5. Wheezooo


    I think rude and abrupt might be the single most highly correlated indicator to positive p+l
    #55     Nov 1, 2019
  6. So you're saying I just buy 2 sigma options and I'm a winner ? :wtf: I'm gonna try this.

    Talk to me about Iron Condors ...
    #56     Nov 2, 2019
    raVar likes this.
  7. raVar


    LOL ... ok, that was sorta funny ...
    #57     Nov 2, 2019
  8. ironchef


    Not to worry, in this case Parrondo's paradox will give you positive returns. :D
    #58     Nov 4, 2019
    raVar likes this.
  9. raVar


    Honestly, that's the reason this particular approach was settled on. That's it, almost exactly. As inefficient use of Capital it is, the non-correlation benefit of what each seeks to do, cancels out some of the negative portions of each strategy.

    Enough ... to be able to help it crawl along in the beginning.

    As always, to see how we are doing on each process? Check out the tabs in the spreadsheet below. Thoughts, questions ... comments? Post 'em below!

    Simple Longer-Term Hypothetical Non-Correlative Strategy Processes: https://www.elitetrader.com/et/thre...ournal-that-shows-profit.337303/#post-4951437
    Spreadsheet: That keeps track of each trade, each process, and then everything together ...
    Last edited: Nov 4, 2019
    #59     Nov 4, 2019
  10. raVar


    So we're peaking this morning higher on the Q's. With the correlation to the SPY's, the SPY position is running up nicely ...

    Q's spread looks to be pricing right at the moment, maybe down a buck or two. Still well within our probabilities.

    Remember, for new folks? As I have stated about a million times before, but other option traders seem to be skipping this part I am watching a few more things that what I mention here.

    But for yourself? Just keep an eye on the Delta's, and the Probability of Touching. Those two numbers do not move in lock-step.

    But for a beginner (man that gets annoying having to reiterate that every time) ... those are two things you want to keep an eye on. The Delta's move up? The Probability of Touching moves up? That's bad for us.

    They move down? That's good for us.

    Right now, the QQQ 202 Calls for this Friday are showing .20 Delta's and 39.3% Probability of Touching. Still more than enough room.

    Generally, if the move looks like it has a 70% or even NEAR 70% Probability of Touching? I'll probably defend that position, which I'd cover in later posts.

    As always, to see how we are doing on each process? Check out the tabs in the spreadsheet below. Thoughts, questions ... comments? Post 'em below!

    Simple Longer-Term Hypothetical Non-Correlative Strategy Processes: https://www.elitetrader.com/et/thre...ournal-that-shows-profit.337303/#post-4951437
    Spreadsheet: That keeps track of each trade, each process, and then everything together ...
    #60     Nov 4, 2019