RealTest is a stock backtesting and strategy development software similar to AmiBroker, still in Beta, used by and mentioned by Val a few times at https://www.elitetrader.com/et/threads/fully-automated-stocks-trading.346201/ I never used any of those tools but just couple days ago started using RealTest to test some ideas and it looks pretty useful. I always have some strategy mining ML stuff running in the background (for stock trading), so yes, but not looking at it as much anymore as I’ve got enough data, experience (it helped me learn how things work in the market) and ideas out of it, to now work without it. Now I’m focused more on statistical analysis and trying to figure out what may work before I implement and test it. Though now I also have so much discovery-type ML stuff automated that I can switch to using it when needing to optimize strategies, look for additional ideas, or just occasionally review what new it may come up with.
Just a quick update towards end-of-year, maybe I'll post another one later, or not. I usually feel like my account is fluctuating too much, and that I'm missing tons of opportunities, especially as I don't trade that much and have plenty of margin available. So just decided to take a closer look and run IB performance reports. Doesn't look too bad, but I know I could do 2x better if I was seriously trading, or had more stuff automated by now. During last 3 months I was recovering from September's drop and working towards getting a more reasonable ~4% rolling monthly return but I'm doing better at times, partially due to the bullish market. Looks like I'm still relying a lot on SPY/SPX, but couple days ago when SPX went down, my P&L was stable and potentially even went up. Don't know for sure due to my LEAP options often showing different/inaccurate prices day-to-day. While looking at the performance by underlying, index & index-related ETF options may be contributing less than 10% of profit, as I'm trading a lot of options on single names, without any one contributing too much. No large losses anywhere, except for shorting DUST (bullish on gold + hoping for beta slippage on leveraged ETF like DUST), which I guess this is part of diversification but pisses me off because it started with fat finger trade and later I kept adding positions not realizing I've made a mistake with the initial trade. Now I can't easily get out of it, while this isn't a completely bad trade (just too much of it) and there is potential for profit if DUST would finally start seriously dropping. I still feel like I'm missing at least 50% of opportunities (trading 2-3 hours a day and mostly waiting for IB to display price charts for my option combos) and not using sufficient size for some great reward-to-risk trades. But I may get there with time. I usually have negative expectations which helps me plan for the worst, which then turns to occasional surprises that I'm doing well. Though I am still taking a bit too much risk at times (or so I'd like to imagine to keep things in check) and need to play more with single names to test more of the bearish traps. In the meantime I'm gathering many option-related ideas in PowerPoint where I'm saving my top trades, especially when noting surprising outcomes and option behavior that I may be able to reproduce/automate later. Though I'm still way behind on automation. I'm also looking at stocks, being motivated by Val's and Marsten's progress, but I'm concerned with losing focus from options. At the same time I'm using my own stock bot's alerts to take a look at options on single names, which does contribute to some profits. And all this helps in thinking of ideas on how to combine all the pieces together.
Dude, was wondering when you'd update us. Going to break down your post now! Have a great end of the year @guru
Congrats on a great year! Lots of souls been lost to the volatile market of 2020. Many unknown. I stand in silence for 10 seconds to thank them for handing over a lot of opportunities. Could have been me. But not this time. Val
Hello Guru, are you saying you lost money during September? I am very surprised, because in my previous post, I said that I thought you had already found the holy grail. I believe you made around $100k during the Feb Mar crash? So that's a holy grail scenario right there. September is a mere mild drop compared to Feb/Mar. So how could you lose in Sep when you made huge gains in Feb/Mar? Fortunately I have been dissecting some of you posts and working out your trades and I believe in the Feb/Mar crash your options spreads were set up early and sitting there for like a month decaying, and getting more vega and gamma positive? while you lost in Sep because your spreads were only recently put on and were vulnerable. Therefore they were not yet ready for any substantial drop in the SPX index whereas back in Feb/Mar you were welcoming that huge crash. I lost a lot in March. At one stage I was fearing the worst. Saw where I went wrong, read more of yours and other posters that I respect to regain some confidence and composure and then made some adjustments to my spreads. So September for me was fine and my PUT combos made money. Not sure how they would hold up if a fall the magnitude of Feb/Mar happened tho.
Hey, Well, in Feb I was acting on a hunch and was one of the first people stocking up on food and survival stuff after seeing reports of the virus in China . So by extension I’ve also bought puts and bearish combos on various stocks, some later making 1500% profit, though I’ve bet very small amounts here and there. And from beginning of the year I was also generally positioned somewhat neutral to bearish, so I wasn’t making money in bull market, gaining mostly during the crash. Additionally, I didn’t have my option trade idea generating system in place yet, just some theories and ideas on how to get great reward-to-risk, which turned out to work great, especially when purchased at low volatility and later benefiting from high VIX. Starting around March or April I had the first version of my internal software that comes up with complex option trade ideas and pretty much tells me what to buy in terms of good reward-to-risk ratio and with some built-in hedging, and especially how to trade more bullishly than I did previously. So at that point I started trading and benefitting from the bullish market, but such trading style creates higher risk that is difficult to hedge. Additionally, my system was a bit overfit, so not all my trades were technically optimal but benefitted from the bullish market. In July-August I started trading more seriously based on my system’s suggestions, which worked great and I’ve kept adding to winners aka martingaling or pyramiding, which has grown my profits exponentially but also creating bigger and bigger risk. I was still hedged very well, but hedging was limited by the already high VIX that wasn’t dropping with the bullish market, so my hedging was expensive but limited. Though all this still worked fine and I wouldn’t lose much in September if I got out by the end of the first day when the market dropped around 2%. My hedges did kick in and I’ve lost a bit but not as much as I would’ve without hedging. My issue was simply that I was waiting too long, like another couple days, while the market kept dropping while VIX no longer kept going higher, so my hedges were losing value together with the market dropping. I also had too many positions and simply didn’t know what to exit out of first, at what prices, and generally needing time to close positions. I also wrongly assumed that my hedges will protect me for a few more days, but that didn’t happen . By the 3rd day I finally said “fuck it” and clicked the “Close all positions” button and my broker got me out of everything I had with huge slippage losses, likely 10%+ of account lost just to slippage, often on illiquid options, which I could’ve kept without issues if I didn’t auto-close everything. But I also could’ve lost more if I simply kept waiting. The conclusion is that if I was automated then each of my positions would automatically be programmed for when to exit, and I wouldn’t need to worry much, and definitely wouldn’t lose as much. But, on another hand, I’m not sure whether I really need to categorize such loss as a large loss, because it depends on the context, the period measured, etc. I simply had extremely good month or two, and later lost much of that gain, which still comes out to a small gain over a few months. I simply made oversized gains but if I traded more reasonably then both my gains and my losses would be smaller. Leveraging it all up only makes both gains and losses appear larger, while the end result may be the same as when trading smaller. However, that experience itself has accidentally showed me that pyramiding has an amazing potential when you can add to winners while being able to limit losses, which now I have in the back of my mind as a future goal. Some of the option setups/profiles I’ve posted here are much different from the ones I’m actually trading. They’re still good and I’m just using them as examples and sometimes testing them out, but I’m trying to utilize more of the quicker 1-12 week trades that can generate profits fast under right conditions, while being hedged to a good degree. I also utilize unhedged option combos that have mathematically high reward-to-risk ratio, so even on a bullish position I wouldn’t lose much (say 30% of a trade but 100% loss is possible if the stock simply crashes) while gaining a lot (often 30%-50%, sometimes more than 100%) if the stock goes up. I also have bearish trades that can work well on the way down, but currently not finding many of these due to puts simply being expensive post-March. Actually my current goal is to find best reward-to-risk bearish option trades, and it ain’t easy, unless a stock drops more than 70%. So I’m still exposed to small drops in price, but not sufficiently strong to trigger sufficient hedging. And you really can’t have a cake and eat it too, so usually I just have to decide where to open the risk holes, both volatility-wise and price-wise. For example on some trades I may lose the most if a stock goes down between 20%-30%, but I’m fine otherwise. On other trades I may lose the most if the stock drops by up to 10%-20% and stays there for a while. So making the right choices does play a role, while bullish market definitely helps.
I thought I had your trades worked out but now Im not so sure. Sounds like the reason for your big loss in Sep was the ol' "holding too long" problem. Something that did not need to happen and the same with me. You must have been very stressed having to click the "close all positions" button ha ha. If I had cut my loss on the first day and called it a day, I would not have lost 7 times more than I had to. So bad I can't even look at those trades in my records until recently ugh... Anyway keep up the good work and look forward to more of your posts
You might've figured out the ones I've described here previously because they're theoretically sound and may qualify as "holy grail" in some sense. Though my system may calculate them little differently each time based on volatility at the time. While I'm too impatient, so I don't trade too many "slow" setups, as well as need to continue testing various ideas and trying to learn/understand/analyze everything and come up with more ideas for trading, so I often pick up other types of trades that are more risky though still having some edge. Basically any software product can be evolved/upgraded forever, and requires continual testing, improvements, and new features. So I treat my work not only as trading, but R&D. And now I have at around 10 favorite setups/strategies, with many more that look promising. So I guess I wouldn't call any specific trades being the Holy Grail but rather the whole system that comes up with various ideas and complex setups. While I can be quite a dumb trader and screw them up anyway
Here is a cool "escape route" strategy I'm looking at. Haven't used it for this trade, but have similar ones that, when used properly, provide for last minute escape from a crashing stock. Here is how it would've worked on BABA last Thursday Xmas eve (short trading day) when it crashed. A slightly bullish position with hedging that can temporarily provide an "escape route" in case the stock crashes: I often miss those exits and end up holding a (small) bag, but treating this process as R&D and taking notes of how to set these up and how/when to exit. While I'm currently using a bit of a reverse strategy that uses "traps": entering option positions at temporary discount while a stock is crashing. This usually generates quick profit after volatility settles down at specific level, and then I need to decide to sell, or take some risk and wait for potentially larger profit. A few more strategies with various traps and escape routes, and I'll have an outline of "Options - The Video Game"
I spent last couple days of 2020 trying to close most of my positions to take off some risk and generally review and clean up whatever I have. Though I didn't manage to close that much, leaving hundreds of slower moving long-term bets, some hedges and OTM options, and whatever I couldn't easily close. I'm also thinking about getting out of active trading for couple months to focus on other stuff, some unrelated to trading, though I want to do some trading-related coding as well. I feel like I can now do well from trading, but it takes too much time to review data and plan my trades (at nights), while I'm also being slowed down by IB/TWS interface and charts during the day when placing trades, and inability to easily enter and exit positions. Things that should take 30 minutes end up taking 2-3 hours with TWS, sometimes just waiting 5-15 minutes for a single combo price history chart. While I can do much better if I improve my system and automate more tasks, maybe create a GUI to trade options & combos faster and better on top of TWS. Though wanting is one thing, while after market closes I'm still finding myself spending hours on end looking at the data, reviewing past trades and ideas, coming up with new ones, etc. For now here is quick summary from December: