sounds interesting, PM me with details of the cooperation. I'm programmer (C++) and administrator of local and remote servers (Linux & Wincrap), incl. vps and dedicated servers.
simulations without historic implied volatilities or historic options prices. So you are saying that this is completely made up results. I built a simulation that produced 10x returns with no drawdowns. I received 50MM seed capital to start trading it.
The simulations are statistically accurate, ie. the results are significant. no DD? hmm. suspicious imo... but what happened further?
Ok, I admit I didn't count in the transaction costs yet, and that indeed could cause a problem. OTOH, if the strat would be applied by someone who has nearly nil transaction costs, then the number is indeed realistic.
Seriously, unless this has been forward tested the results are purely hypothetical and to proceed forward in cash expecting a 500% return is naive. Backtesting is fine for proof of concept, however, one needs to forward test prior to risking $1/â¬1 of capital. Initially in Sim to iron out mechanics, then in a small cash account using live data, not historical or optimized subjective inputs. I don't trade options and am not that knowledgable on the finer nuances, however, I do value and respect SLE and Atticus's opinion, experience and knowledge in the matter. From what I read on your numerous posts and responses. I am far from convinced that your results are significant as highly experienced option traders pointed out certain flaw's in your logic which you immediately dismissed. Until this has been actually traded and a track record produced proofing your 500% claim I highly doubt you will find a financial backer. To approach friends and family for funding prior to the above is totally irresponsible. For reference the outcome and to serve as a warning for overly eager and unprepared traders, not to disparage GMST as he openly exposed his shortcomings and mistakes. Takes a big man to admit failure... Give him Kudo's for that. http://www.elitetrader.com/vb/showthread.php?s=&threadid=239446&perpage=40&pagenumber=1 My guess that was a tongue in cheek comment.
I had stated that low vola options give a higher payout than high vola options _for the same pricedelta% of the underlying_ . This indeed holds true, but then sle and atticus pointed out that I rather should make the calculation for 1SD. And using that the result was no more favoring low vola generally, instead the result was this: - high vola call options give slightly more profit over low vola call options but at the same time - low vola put options give slightly more profit over high vola put options http://www.elitetrader.com/vb/showthread.php?s=&postid=3678632 I would not say I was proved (proven?) wrong with such results. Nevertheless the discussion was challenging and in the end gave valuable results and insights for the benefit of both sides, imo.
Not saying you are proven wrong, just pointing out that a discrepancy exists and until forward tested you should proceed cautiously and not rely on unproven methods. Additionally you would be well advised to carefully consider the input from experienced traders. This is an extremely bold statement to make without actually doing it. Hindsight is 20/20, what counts is the hard right edge. Wish you success, just suggesting caution and an open mind to those who have traveled this road much longer than you.
Simulations are pretty pointless. I get the sense you are taking some model and applying it to some underlying (possibly made up) time series. Is this true? Options don't trade to the black scholes model in many cases . And once an option goes away from ATM it becomes path dependent. SO without a proper historical backtest with real historic prices and proper signals (using point in time information) results are meaningless. Even with a proper backtest results are very weak, but without results are really just conjecture.
Statistically there is only a small chance your system will work in real trading over any significant period of time. There is a very high probablility it will fail, or suffer an unrecoverable drawdown. That, alas, is the fate of most systems... You would probably be much better off to see if you could invest in a proven system, such as this. Maybe Jeff will let you buy in?: http://www.elitetrader.com/vb/showthread.php?s=&threadid=250584