Hi, dog, I couldn't modify my first response, because I was writing another post, but the answer to your question of whether I'm leveraged, you're not, and the S&P isn't either is relative to the amount of risk taken. I had more to say on that. You could only be able to see it on PTTQS at C2, but on there I was leveraged at 4:1 the whole time, basically, but even at 1:1, the S&P drewdown 56%, and I only drewdown 37%, so even though I was leveraged, as long as the drawdown is less, you can compare them by making the drawdowns and the net profit percentages equivalent. In fact, if you wanted to compare them apples to apples, you would need to calculate my ratio of S&P drawdown to system drawdown as 0.56/0.37=1.5135. Then, based on that ratio, you compound my netprofits from c2 at 1.551*1.5135-1=1.347 or 134.7% net profit if you were attempting to match the S&P's drawdown. I've posted a variation of this comment on the internet in several places, but never in this thread, so I guess it helps to have a recurring theme where I get to display my trading system development techniques publicly. Now, that's not just for relative market returns. That is also a method you can use for system analysis, be it on c2 or covestor, at least. In the past the way I've demonstrated this technique is because I had a jealous vendor claiming his returns were greater on an absolute basis, through leverage, of course, even more than mine if you can believe. But he STFU after I demonstrated that while his absolute returns were a third better than mine, his drawdown was double mine, though. So all you had to do was take the ratio of his system dd to my system dd, and compound either the APR or Net Profit, whichever, and you'll find that my system still had higher risk adjusted returns. That's probably not the case anymore with a dd of 37%, and APR of 18%, but all I can say to them is I lived and traded through the worst financial crisis since the great depression, and if that doesn't comfort anybody considering working with me, then I don't know what else will. I have a real knock against recent systems coincidentally timed to start a little bit after march with the wind at their back. Unless they significantly outperform by a good 30% or 30,000 basis points, it's not really the system more than it is the market they are trading in. You still get yahoos just leveraging 100:1 drawing down 20%, and getting ten to 100 times their money on lucky bets. Now, I know you're looking at covestor, but sadly you won't be able to see quite the same level of ourperformance, and that is temporary, let me assure of you of that. I'll overtake it very easily. Till then, I'm sure it's been a very good exchange of information. Either way, I'm very confident in my research. I'm sure you and a lot of other people got that vibe to. So, yeah, you could say the S&P's not leveraged, but I was and I drewdown less than the S&P, so you've got to lever up to get the equivalent risk adjusted return. Does that make sense?
So, I was very pleased to find that my calls were within a tenth of a percent of an outright purchase of the underlying. I calculated how many shares I would have bought of QLD, and calculated the profit or loss I should say on the position and it was a little bit more than what I actually lost even buying the options and paying 6 cents more than I should have for the November 21,2009 $43 QQQQ calls. I paid 1.02, and had I waited somewhere around 0.96 on the open today, but, like I said, I didn't lose as much even then as if I had taken and bought QLD outright. It has to do with the asymetrical return profile of a call option that limits downside to zero and provides unlimited upside.
For cash cow we had a trade today at 10:30 am for SSO. Currently down about 0.64%. Will see if there is a surge upward for that trade tomorrow. Bloomberg's Market Focus for tomorrow states: <i>Highlights A gain for durable goods would underscore recovery for the manufacturing sector and could revive investor spirits. </i> And the Market Reflection states: <i>Highlights Thursday's third-quarter GDP report may make positive headlines but it probably won't do much to boost consumer morale. The Conference Board says consumers aren't paying attention to inventory restocking and aren't putting too much weight in one-time stimulus efforts. Instead they're worried about their jobs. The Conference Board's consumer confidence report moved decidedly backwards this month as more, the most since 1983, say jobs are currently hard to get. The news weighed on the stock market where the S&P continues to drift backward, down 0.3 percent on the day to end at 1,063. In good news, the dollar index firmed for a second day, up 0.2 percent at 76.20. </i> I'd bet a blowout durable goods order would move us higher. I thought the reaction to investor sentiment was pure panic selling once again. I've not seen any evidence that consumer confidence is a predictor of future economic progress in any study or in my own trading system development with as an indicator in any time frame. The GDP report underscores belief that as long as I don't get stopped out of QLD at 50.12 in PTQQS I won't have a problem making a profit on this current trade.
Well, stopped out at 50.12 on QLD for PTQQS, still long SSO in Cash Cow. Lucky me. I will say though that the previous stop levels for PTQQS would have let it run another 3% before stopping out, so I guess I saved myself that much. Can't seem to get anything going, but that's just the nature of systematic trading. It has spurts of growth followed by long periods of flat to down a little. Will see what happens tomorrow for GDP. Goldman's talking about it being below "their expectations", which were too high to begin with, so I don't think that opinion matters. From Bloomberg: Released on 10/29/2009 8:30:00 AM For Q3:09 Prior Consensus Consensus Range Real GDP - Q/Q change - SAAR -0.7 % 3.0 % 2.0 % to 4.0 % GDP price index - Q/Q change - SAAR 0.0 % 1.4 % 0.3 % to 2.3 % I would say anything positive would put us back up, and definitely any number above 3% would send us higher.
I held the calls, though, because the cost to trade the options for me was about 0.135 cents per option. So, anticipating a re-entry back into them, is not really an option for me because I would pay .405 to complete the round trip, and I don't believe that makes any sense. Tomorrow could be more of the same, but essentially I'm going to base my decision on what happens to GDP tomorrow, since I really wanted to be long going into that report. I think I'll start to use some discretion in my personal trading, but not with client money directly under management for PTQQS. I think the answer to my problem of figuring out when to let things run is a matter of tuning into the news and analyzing it. I also have my overbought and oversold thresholds to go off of. The trade in May where I bought QLD on 5/12/2009 at 34.42 and sold at 32.83 is what comes to mind for me. At the time the low on QLD was about $20, so it was pretty obvious that the trend had reversed. I could have held that through and made money after a week on it. As I was writing this, I had a brilliant thought. What if there was a secondary level of overbought and oversold thresholds only applicable in the case of a wash sale, that is, in the case of any trade we sell at a loss on. I added 7% to my APR by that thought, and it just demonstrates how experience can help a trader by implementing his thoughts into a hard-coded algorithm. Long + Short Starting Capital $100,000.00 Ending Capital $691,566.17 Net Profit $591,566.17 Net Profit % 591.57% Annualized Gain % 79.88% Exposure 27.73% Number of Trades 85 Avg Profit/Loss $6,959.60 Avg Profit/Loss % 2.56% Avg Bars Held 2.89 Winning Trades 62 Winning % 72.94% Sacrificed some of the win percentage gains from the last mod from 76% to 73%. Gross Profit $972,922.82 Avg Profit $15,692.30 Avg Profit % 4.98% Avg Bars Held 2.94 Max Consecutive 11 Losing Trades 23 Losing % 27.06% Gross Loss ($381,356.64) Avg Loss ($16,580.72) Avg Loss % -3.97% Avg Bars Held 2.78 Max Consecutive 2 Max Drawdown ($50,001.78) Max Drawdown Date 11/4/2008 Max Drawdown % -12.87% I'm extatic that I finally got the drawdown to be below 15%. I'd been worried about the level of risk for some time. Max Drawdown % Date 11/4/2008 Wealth-Lab Score 251.048 RAR 288.1152 Profit Factor 2.5512 Recovery Factor 11.8309 Payoff Ratio 1.2569 Sharpe Ratio 2.2488 Sharpe improved a staggering 10%. Ulcer Index 3.1484 WL Error Term 4.514 WL Reward Ratio 17.6965 Luck Coefficient 3.2332 Pessimistic Rate of Return 2.4475 Equity Drop Ratio 0.0223 So, what does this mean? It means I have another long signal for tomorrow, and with the vast improvement in APR, I think this particular mod will stick with me for some time.
I have long signals flashing as well. But then gain, I also had them flashing this morning. Thank God I was using extremely tight stops and saved myself much grief. Ha! So much for blindly following system alerts. This is an interesing place where IMO technicals and fundamentals are at war. From a technical perspective, I would be all in. But in looking at the overall fundamentals of where we are in this 'recovery', I'm hard pressed to get long with any confidence until we have another pullback with at least some bounce.