Rubber duck debugging

Discussion in 'Options' started by Aquarians, Jul 25, 2021.

  1. Following on my "historical options data" thread ( ), I went medieval on the data I have and gave up trying to "correct" it, rather just drop anything that's bad behaved.

    The marketdata I paid for has about 10,000 underliers. After decimation, the universe of acceptable ones was reduced to ... 3%. 300 out of 10,000. Maybe I'm too drastic but then please, clean up the data yourselves. The combinations of unforeseen crap that gets thrown at you is only as creative as it is limitless. For instance I should have made a picture and put it here (especially since it happens on multiple underliers). You know how out-of-the money options are decreasing in price, since (obviously) they value less and less. Well if the number 42 is in The Hitchhiker's Guide to the Galaxy by Douglas Adams, the "Answer to the Ultimate Question of Life, the Universe, and Everything", in my marketdata this number gets changed to 5. Everyone knows that in real life out of the money options, where there is still liquidity, will quote the minimum acceptable price tick for the exchange: $0.01. Well not in my data. They quote ... 5. Option prices converge to ... 5. On a lot of underliers! W
    ! T! F!
  2. So anywayz, even correcting for aberrant market data, trading strategy research matches and exceeds it's predecessor and dependable - market data. In "the combinations of unforeseen crap that gets thrown at you is only as creative as it is limitless".

    I long time renounced to binary logic when it comes to finance / trading. Binary logic is "if you do some thing one way and it doesn't work, do it the opposite way and it should work". Well with trading if you buy you lose money. But if you do the opposite and sell, you lose money.

    So dropping off the expectancy of binary logic is a necessary step towards mentally preparing for what lays ahead of you when you test a hypothesis. Of course, you expect your hypothesis (trading strategy) to be profitable, or else you wouldn't bother. Conversely it may happen that it's a massive failure, but failures are expected and they do happen and you just pick yourself up and carry on, right?

    Well: third option. It neither works nor loses. Are you prepared for that?