Something I have learned is this...most successful traders have a handful of setups they are extremely good at...like 3,4...maybe 5. But they are extremely good at those specific setups...it is part of their personal edge that they have developed. They wait and wait and wait until the setup presents itself, then pounce like a tiger knowing the odds are in their favor. And they do this same thing over and over and over getting better and better. The turtles talked about how the vast majority of their time with Dennis was spent reading magazines and playing ping pong waiting for a breakout signal...trend trading is probably not for you lol. Patience is key. If you are one of those that needs to be active all of the time then consider shorter time frames if you haven't already.
I certainly agree with your assessment. And since you pointed out the theta curve to me earlier, and given that theta decay accelerates <45DTE, it now makes sense why the general recommendation for DTE is 45-60.
Oh, yeah. I understand the need for patience in this game. I've learned that trading MES. But if IV of 194 is an anomaly, rather than the norm (and I have no idea if it is), how many times could that show up in a year? Now, if it isn't an anomaly, and it happens, say, monthly, then I might could understand waiting around for it.
Such high IVs are very normal in the biotech and pharma sector (when waiting for FDA approval of their new medical drug products etc). Yes, I'm trading such highIVs, but I'm doing exactly the opposite: doing many of such trades using different tickers, and binding (investing) only a minimal money amount in the range of $125 to $250 with each trade and then also using many different tickers. Ie. doing diversification b/c such highIV trades are obviously dangerous. OTOH when traded as spread then one can reduce the risk significantly and also substantially. No, I'm not constantly looking at them. It's a very normal trade, I'm not doing daytrading or scalping, I'm quietly just waiting till my profit target gets hit and then it gets closed automatically b/c for each open position I already have such close orders opened. And: above I said I'm not doing daytrading, but that soon will change when my auto-trading program is finished that is still in development; will take about 2 months or so. Then I'll do daytrading with options Sounds crazy, but I'll try it out FYI: I'm a relatively newbie in options trading. Just trying to find my own "edge". Yes, not easy for someone in your position, b/c of such an information overload. But you have to go thru it I haven't studied that yet, but I usually believe only what I myself can confirm...
Okay. Thanks for the overview. I hope that all works out for you. Is that TDAmeritrade's API you are using?
Yea I know what you mean. Frequency must be taken into consideration for the very reason you stated. Some trade running a 100 day breakout signal with a 20% SL and do well...have to find something that fits your personality. Finding vol anomalies is a good one...but you need to be able to find it in many different tickers. With options you are kind of limited to very large, liquid companies but even still there are plenty for you to scan for your particular edge(s).
I've been digging into theta decay/curve to gain a better understanding. It appears the chart that was posted on page 2 represents an ATM curve. The credit spread I paper traded was at a 30 delta, so it was OTM. Even though an OTM theta curve is still nonlinear, I don't think it's as pronounced as the ATM curve. And from what I've read, the big theta drop off for OTM is from the 30 delta at inception down to a 15 delta, when it becomes far OTM. After that, theta decay is more gradual (or more linear?). Since it appears the market is up against some pretty good resistance this week... and since I believed the bulk of theta decay had already occurred in my spread (my spread delta was down around 13/14)... and since I had already captured 60% of my max credit... and since there was still a whole month left until expiry... it seemed prudent to bank that profit. Anyway, that was my logic for buying back the spread yesterday. Time will tell whether that logic was faulty. I'm just thinking out loud; still trying to put all this together in my head.
Nope, man, irrelevant what happens after the close. 60% of max is a good number. Just leave this trade behind you (after studying / researching / simulating / testing etc.) and find the next one to trade, IMHO A tip: for your profit, earned in few days, you can compute the annualized profit in percent, ie. by this you can "normalize" each trade result (ie. by using the same basis for all, for easy comparison), as follows: Code: plpct = ... (your PLpct that you made in nd days; this is different from your above 60%) nd = ... (the number of days your trade lasted) np = 365 / nd (number of such periods in year) plpct_ann = 100 * pow(1 + plpct / 100, np) - 100 Example for 15% in 30 days: plpct = 15 ; nd = 30 ; np = 365 / nd ; plpct_ann = 100 * pow(1 + plpct / 100, np) - 100 ; plpct_ann 447.63 %