Yeah, I got that, see my edit. I wouldn't characterize the system as uniquely robust without at least 10% in each position. As you can see the DD has been very low.
Would you please post your backtest, and whatever complete information from those years that you have? All in the interest of how to research and verify trading ideas, of course. I won't really accept no for an answer. Not doing so will be proof you haven't completed enough due diligence, or about actually completing a backtest. If you had, you would have posted. Also, if the results were good you would be doing much more than small positions, which would imply you are committing money to a two week old system, but stranger things have happened.
It would depend on what the basis of the math is. As it is used in this thread, it is not a quantitative model, but event driven, which I have seen done. This is not quite technical analysis. A little fundamental analysis, but not quant because there are no calculations of fair values nor any estimate of net asset value from the balance sheet. As I say, it's event driven, and slightly based on fundamental analysis because it is linked to the decisions of Standard and Poors in what securities are recommended in the underlying index. That part is slightly dependent on fundamental analysis, but you are not actually doing the fundamental analysis. You are taking the S&P's signal as a "triggering event." That's not quant or technical analysis. It is an event driven system.
You are not going to like my answer and really I do not care. I did go through the trades but did so at work and only did rough mental calculations. I pulled the charts up and compared the gains/losses in the 25 days and I liked what I saw. I used 25 actual days not trading days as I did not know, but it does not really matter as far as I could tell. While reading the news I saw this PCLN stock being added so I decided to go ahead and put the trade on. It is a small position and I still have plenty of time to research and plan. I am the type that likes to learn hands on. I do plan on doing more back testing... When I do a proper back test and record all the numbers I will post them here. I am sure when I do they will not be up to your satisfactory but I am doing this for myself and really do thank the OP for posting.
No, because he's not calculating their fair values, but using them as directional bets rather than as hedges, based on events. There are no mentions of greeks here, so believe me when I tell you that he doesn't use option volatility spreads to form his strategies. He uses them to hedge based on his idea of the market's direction, which does not imply any quantitative analysis oncesoever. <b> Calculating position sizes from delta ratios and gammas does not make a model quantitative, because it is not the basis of his trades. His basis is an addition or deletion to the S&P 500 index, thus having nothing at all to do with quantitative analysis, fundamental analysis, and even technical analysis.
Well, given that you're very new to ET, it is a perfect example of Caveat Emptor. Good luck. Your level of analysis is not sufficient to take any action at this point. Whatever work you think you did "while at work" and only doing "rough mental calculations" is in no way a reason to bet your money on anything. It's like playing a blackjack strategy simulator for 30 minutes, and deciding to go to the casino afterward.
I already knew it would be a waste of time from the start when he stated he would not verify or even be providing backtests to his ideas, so it was all for not from the start because the man/or woman is not interested in 3rd party verification, as any poster seeking approval would be. He's the epitome of irrational to expect people to follow him, because he lays out his ground rules only to say it's an art form. Just another charlatan, and appears to have already fooled one newbie.
Wow. I was just about ready to not look at this thread any more, but now, I will check back because I think we entered the cage.
bwolinsky i have been reading your posts carefully, in spite of the sound advice from the board to ignore you. i am pretty certain you have no actual trading experience and your knowledge seems to be heavily based on the CFA prep materials (would it surprise you to find out I know that? it shouldn't.) You still don't get it. I'll deal with the art question next, but I do not expect people to follow me and I don't need this board's approval. I am not starting a "Bwolinsky trading" forum to show everyone how smart I am and what great trades I make. I am not providing backtests because the point of this thread is to motivate people to do backtests, to discuss some of the issues that arise, and to support some good critical discussion. What I'm offering here is hopefully some insight into how to think about market related issues, and since I have done this for a long time and this has been my sole source of income for quite a while... I think I do understand a few things. Let's look at your posts. This post will be the "correcting bwolinsky post: First, English: I already knew it would be a waste of time from the start when he stated he would not verify or even be providing backtests to his ideas, so it was all for not from the start You mean "all for naught". There are no mentions of greeks here, so believe me when I tell you that he doesn't use option volatility spreads to form his strategies. He uses them to hedge based on his idea of the market's direction, which does not imply any quantitative analysis oncesoever. I'm hope you aren't a native English speaker. you mean "whatsoever". Why would there be mention of greeks in this thread? The purpose of this thread is not to show how smart I am but to discuss some fundamental concepts. For the record, we trade a program of delta neutral option spreads, constantly adjusting the hedges and position sizes to manage gamma exposure. Anyone who would think that these are a directional call has no clue about trading. They are a call on the direction of volatility, not the direction of price. And, btw... we're pretty damn good at hedging. We were basically short vol constantly for the last 2.5 years and still made money with this program. The basis of this is some modeling work we have done with multiple timeframe volatility expansion / mean reversion, so I would argue this is a quantitative approach. His basis is an addition or deletion to the S&P 500 index, thus having nothing at all to do with quantitative analysis, fundamental analysis, and even technical analysis. Do you think this is the only way I trade? I guess I wasn't clear but less than 5% of trading capital is deployed to this idea. slightly based on fundamental analysis because it is linked to the decisions of Standard and Poors in what securities are recommended in the underlying index. That part is slightly dependent on fundamental analysis, but you are not actually doing the fundamental analysis. I think you could be excused for a rookie mistake here if we hadn't already discussed this in the thread. you are too busy finding things to pick at and missing the important points. Yeah, I got that, see my edit. I wouldn't characterize the system as uniquely robust without at least 10% in each position. As you can see the DD has been very low. I hired interns for a few summers and this reminds me of a comment I would expect a smart college kid with no experience to make... if it came at the end of the summer there would be no chance he'd be getting any kind of offer. I think you're saying that because the drawdown has been low more than 10% of capital should be in each position, otherwise you "wouldn't characterize it as uniquely robust." Is that what you're saying? If so, I can't even begin to address your issues and complete lack of understanding. I won't really accept no for an answer. Not doing so will be proof you haven't completed enough due diligence, or about actually completing a backtest. If you had, you would have posted. Also, if the results were good you would be doing much more than small positions, which would imply you are committing money to a two week old system 1. Who the F*CK are you that anyone cares what you will or will not accept? What a little joke you are. 2. If the results are good I would still be doing small positions. Real traders know this, but you certainly didn't learn that from your books. Posting a system on Collective2 doesn't make you a trader dude. lol. So at 10% of equity you shorted PCLN at 166 now at 173.73 and bought SPY all on November 5th on the open at 105.66 now at 109.57. So .1*(166/173.73-1)+0.1*(109.57/105.66)= -.44494%+.37005%. Net off 7.489 basis points, or 0.0007489, or 0.07489%. On a $200,000 portfolio without transaction costs= ($149.77). WTF? Who writes "7.489 basis points, or 0.0007489, or 0.07489%"? Only someone very impressed with themselves. Quote from talontrading: I'm not too excited about relative returns. I think it's one of the great scams of the industry. "Well the bad news is we lost 18% of your money this year but the good news is we outperformed the S&P 500 by 25 basis points." Quote from bwolinsky: Perfect statement to prove you have no idea what you're talking about. About does it for me... I don't even understand your point, but my point was I have to make money to pay bills and salary. I don't make money from management fees which I can get by beating the SPY by 10 basis points. And bwolinsky, it might surprise you to learn that we're no slouches with them there numbers around here. We also run several arbitrage programs and do two separate pairs trading programs that do require some calculations. I believe even you would accept them as quantitative, though I will not be posting every trade to a discussion thread so people will think I am very smart like you do. I think you're a reasonably smart kid, but your attitude sucks and your lack of experience shows through. Good luck though... try not to be such a tool. ok... ok... one more... this one is great... sorry i pulled it from the BWOLINSKY GURU TRADING THREAD: It's not stupid all the time. If I see a piece of data that insiders know about that I won't know about till it's released, then it becomes a smart market. Till then, just as in the 2nd quarter of 2008, there was never any indication of poor economic data until after we had crashed. It's the investing public's fault that they hold professionals responsible for knowing key economic data before it is released. You can only do so much, and we were well off our highs before there was even a negative quarter in GDP. Dude?? Really??? Come on.... really?!? OMFG, didn't you get the memo? The market is the leading indicator dude! That's why people like you don't make money. Geeze. I hope you don't have "years of industry experience" as your thread claims (actually it's ok if you do because there are a lot of douchbags in the money management industry) but I do hope you "manage millions of dollars" as you also claim. The market needs traders like you to feed the rest of us so please, no matter what anyone says, keep trading and deploy more than 10% of your capital on each idea. It's a great plan!