Stay the course. Nothing to do. Volatility appears to be fractal at this point, where price action is at least self-similar or perhaps self-affine on multiple scales (time frames).
You know, I am beginning to question inflation in the US. Is CPI the result of speculators driving up prices, only because the demand for hedges in a devaluing dollar seeks to maintain wealth? I just don't think in the US at least, that it is a naturally occurring phenomena. One begins to question all of this self-reflecting mirrors going on. There is no objective reality when it comes to inflation here, only self-perpetuated "inflation." It is not demand driven, but "powers that be" trying to maintain the status quo on their wealth.
I'd note that you'd have made a lot of money if you did exactly the opposite of what your model was telling you.
Holy fuck Nitro! After 30 months and 5+ versions your "theory" is STILL fundamentally flawed and what's more important, unprofitable. I wonder how many more months need to pass when you finally give up? You are like an alchemist from medieval times, trying to create something out of bullcrap. I mean your stamina is adorable and I am sure you are a nice guy, but man, this futility has to stop sometime!!!! Your theory has no predictive value whatsoever, the sooner you move on the better you are.... Remember, I am on your side....
Forced to hedge long calls at 1263. We wait to 1242 area which is next major support. Some say 1250 ish area, and there is some support there, but I think it is an illusion.
Trading has become eratic, fearful, greedy, all mixed in a stew. We are in emotion regime for sure. Complexity (dimensional freedom) measures are probably going through the roof and trending higher, compared to what we have been. I wonder how (ultra) high frequency systems are doing in this environment, really interested.
Trending markets are dominated by one, maybe two probability distributions. Choppy sideways markets by how many? Violent moves are easy to trade, just trade momentum, and the loses are easily overwhelmed by the length of the counter thrust after a SAR. Multiple systems in the same market can probably also capture the dynamics, perhaps each tailored to a probability distribution. The possibilities are mind boggling when genetic algorithms that output the weight vector (or mixture) are optimizing in realtime. This is on the high frequency. Back to reality (for me anyway.) Nothing in my model seems to see the transitions from one regime to another (there is no transition matrix). I thought it would be self-correcting based on how it works, but it does not appear to be the case. I am missing some theory. I need to look to see if there is a possibility of using such a matrix. One thing is for sure, whatever method is used, it has to be unsupervised because I don't have historical data for much of the inputs to the model, and therefore there can be no training phase. I way prefer this method anyway (bias). I wonder how many successful systems are one or the other (supervised vs unsupervised), or maybe some mixture of the two.
My summary (I hope I got it right): 1a. Buy 1 ATM call ~1302, <1% "stop" 2a. Stopped out <1296, Sell OTM Calls (~2x??) 1b, 2b repeated ~1272 (1265 stopped out) The rationed short calls essentially pay for the ATM call and the position is ~free. The danger is only if OTM calls go ITM. But you will deal with it later, if needed. This is not that bad considering that two entries were stopped out.
Almost exactly correct. The second stop (of the 1272 trade) was at 1263. You also understand the use of hedging by selling ratio'ed OTM calls to complete a spread, and you also understand the risk that if those calls start to come ITM, the "rationess" of them is a problem. You could just exit the long calls instead of hedging a bad trade, but the hedges allow for more complex choices if and when the market rights itself. The only thing is, you are betting that your initial direction is wrong (in this case that the market continues to sell off), so that you can buy back those ratiod calls cheap, and now you have OTM long naked options with some delta that if the market moves higher as expected, can go ITM again. That is why it is so key to do this (sell ratio'ed calls) at key support (resistance) points, because if those points are broken, odds are huge that we continue in that direction. We give the trade some breathing room by acknowledging the stop to the trade as nearly "certain" that it is not just an intra-day break. The initial use of long options limits our risk further. We will repeat this again near 1242, not only going with ITM 75 delta options, but buying back both the hedges to 1302 and 1272 trades (short calls). We have lost about 16 SPX points on these two tries. We are going for the gusto. The only thing that worries me here is, what happens if we don't go back to 1242? At what point do we buy back the ratio'ed hedges if things start moving in our direction, albeit without any deltas? The thinking (hope) is that usually these sorts of trades find their "bottom" at key points, but that is only statistics, not law. People will notice that there is a great deal of trading knowledge in this execution that has nothing to do with FV. In fact, using that knowledge alone would have made money on these movements by SAR the position. Perhaps, but I have done this long enough to know that in a slightly different regime, this may not have worked. The system IS "FV" and parameter (as of now), coupled with the way a knowledgeable trader would execute his trades to minimize risk and maximize gain, regardless of what system he is trading. It is imperative that we build theory, not look at individual results to build our domain expertise. Bridge players know exactly what I am talking about. On the other hand, if there is no theory of markets as I understand and FV attempts, this method is doomed.