Grind it baby...........Capital Allocation

[ducati998]

Expectancy .......................................................57%
Profitability .......................................................22.14%
Capital Turn .....................................................1.0
Time ..................................................................1 year
Leverage ..........................................................20

Risk Management
1......Diversification
2......Modified stoploss

Starting Capital $100,000.00......................................Diversification
# of positions ...............................................................100 directional "options" of 1yr expiry.
Wins................................................................................57
Losses...........................................................................43


Exit Criteria....................................................................@ 22% profit in stock price
Modified Stoploss........................................................Exit at 6mths for those trading below entry

Outcome.
Losses assume 100%................................................$43,000.00
Wins @ 22% .................................................................$12,540.00
Leveraged Return.........................................................$250,800.00
Net profit.........................................................................$207,800.00
% Return on Capital.....................................................108%

 

[RUDEBOY]

Hello Ducatti. Portfolio?....Diversification?....Risk management? Would you say of a ten stock portfolio, that, all ten have to be 'in the market'? Would you agree that the idea of a diversed portfolio is to give a trader a more personalised option of which stock(s) is/are the best to trade at any given moment and that actually having all of the stocks on the market, just for the hell of it, has absolutely nothing to do with risk management? Portfolio diversification should not be a form of risk/money management. Any thoughts? Rude.

The other thing is, when you state 'capital turn', does that mean 'turnover of capital'? Rude.

Expectancy? Do you put 100% capital into each trade? If you do, do you have 100% capital turnover on each trade duration. Rude.

Finally! Where did you get the figures from, right at the beginning? Rude.

Ducatti, i use PVT, i trade at least once a day and i utilize 100% capital on each trade.......i never get it wrong! How can you beat me? Think about this one.....it's one of your own trick questions? Rude!

 

[ducati998]

RUDEBOY

Would you say of a ten stock portfolio, that, all ten have to be 'in the market'? Would you agree that the idea of a diversed portfolio is to give a trader a more personalised option of which stock(s) is/are the best to trade at any given moment and that actually having all of the stocks on the market, just for the hell of it, has absolutely nothing to do with risk management? Portfolio diversification should not be a form of risk/money management. Any thoughts? Rude.

Diversification is a valid, and effective form of risk management.
You do not need to be fully invested at any given point.
The idea is to place your funds in your best ideas. If your best ideas do not result in 100% allocation of funds .................so be it.

Diversification does tend to reduce returns somewhat for exactly this reason, you may not be able to achieve full diversification with 100% utilisation of capital.

The other thing is, when you state 'capital turn', does that mean 'turnover of capital'? Rude

Yes.

Expectancy? Do you put 100% capital into each trade? If you do, do you have 100% capital turnover on each trade duration. Rude.

If your expectancy was 100%............then why would you not?
If you place 100% of capital in a trade, then you will have capital turn of 1.0 (100%)
If you have 100 trades in a year, your capital turn is then 100 (total capital used 100 times)

Finally! Where did you get the figures from, right at the beginning? Rude.

Technicals
65% * 22.14% = 14.39%
Fundamentals
49% * 39.64% = 19.42%

I assume you mean these figures...................
They are from Hey Techies..............Reality

Ducatti, i use PVT, i trade at least once a day and i utilize 100% capital on each trade.......i never get it wrong! How can you beat me? Think about this one.....it's one of your own trick questions? Rude!

Depends on the profitability of each trade.
Cheers d998

 

[RUDEBOY]

Hello Ducs, can you just clarify what you mean by expectancy? Sorry about this! I just hope you are not trying to prove something that doesn't need proving? It may be worth highlighting, but that's about it. Percentages and ratios work differently for different people. I will never have a 100% perfect view of the market, i realise that (i do have my doubts), but that is up to myself to adapt and overcome. FA is not as easy as you portray it (as opposed to TA), and your comparisons may not really mean anything when all is said and done. Again, i appologise for my ignorance, but, do you use futures or what? Leverage is another variable in the whole equation between the different instruments. Rude.

 

[RUDEBOY]

If two or more people using FA had to deal with the same 10 stocks.....you know what's comming.....would thier results all be the same, in fact, would they go about the whole scenario the same way as each other? Rude.

 

[RUDEBOY]

Do changes in circumstances effect profitabilty? Rude. May i add, whilst the trade is in progress.

What is the REAL point of the markets? Rude.

Is there one? Rude.

Has the real point been lost forever?

Us humans are not happy with making money, we have to deliberate which is the right way to go about it! When all said and done does it matter? Trading and making money may have a fine dividing line, but to turn profit into loss, for what ever reason, must be the most absurd. If it works.......?Rude. (It's hard enough getting it to work, never mind.......).

Personal efficiency......not market efficiency......now i see! Rude.

Ducatti, we can only account for ourselves on the markets! Rude.

Ducs, there's a time and a place for FA! Do you know? Rude.

I 'play' the markets, i am not a 'player'? I know what i am! Rude.

 

[RUDEBOY]

Sorry, Frugi. In the future i will make a concious effort! RUDEBOY.

 

[ducati998]

RUDEBOY

can you just clarify what you mean by expectancy? Sorry about this! I just hope you are not trying to prove something that doesn't need proving? It may be worth highlighting, but that's about it. Percentages and ratios work differently for different people.

Expectancy .............given a # of trades, lets say 35, how many based on your personal records, do you expect to win, and to lose?

Expectancy................................................. 100%
Trades..........................................................35
Win................................................................35
Lose.............................................................0

Expectancy...................................................47%
Trades..........................................................35
Wins.............................................................16.45
Lose.............................................................18.55

your comparisons may not really mean anything when all is said and done.

Which is why we are going to test the results that have just been generated on a very limited amount of data...................just to see what happens.

FA is not as easy as you portray it (as opposed to TA),

Oh, but it is.
Technicals, as theory, can be learnt in an afternoon. Their successful application may take years, if ever.
Fundamentals theory, may take you a year or so, but their application, is almost instant.

If two or more people using FA had to deal with the same 10 stocks.....you know what's comming.....would thier results all be the same, in fact, would they go about the whole scenario the same way as each other? Rude

Rude You are finally asking the right questions. This is precisely the information that came out in the stats from the previous thread.

That is................We had I believe 6 different Fundamental investors, all using (apart from 1) a value investing strategy, all with completely different stock selections, yet all generating consistently high expectancy, profitability, & a very variable capital turn This capital turn ratio was acceptable only because LION raised it with a high volume of trades. However in the fullness of time, it should have risen.

The Fundamental strategy that posted low results was a growth stock strategy which I have always felt to be much more speculative in its calculations

but, do you use futures or what? Leverage is another variable in the whole equation between the different instruments.

I do not personally use futures. I will use Options in preference, they provide greater flexibility.
I will use leverage, in the form of borrowed money.

Do changes in circumstances effect profitabilty? Rude. May i add, whilst the trade is in progress

Your question needs to be reworded. Changes in the Market? In the business? In my personal circumstances?

Us humans are not happy with making money, we have to deliberate which is the right way to go about it! When all said and done does it matter? Trading and making money may have a fine dividing line, but to turn profit into loss, for what ever reason, must be the most absurd. If it works.......?Rude. (It's hard enough getting it to work, never mind.......).

And that is more or less the question that I was exploring.
My personal feeling is that as a methodology Fundamentals are consistently stronger than Technicals.
Technicals can be profitable, but that is despite the methodology, and wholly reliant on the practitioner

cheers d998

 

[ducati998]

Symbol Last Trade Change Volume Related Information
SO ....................Jul 22 .....................35.34.................. +0.46.............. +1.32% ...............1,702,700
ABS.................. Jul 22 .....................20.99 .................+0.28 ...............+1.35%................ 2,372,900
MWV................ Jul 22..................... 28.55.................. +0.62 ...............+2.22% ................1,397,500
DTE................ Jul 22...................... 47.59.................. +0.45............... +0.95% ..................400,600
KO ................Jul 22........................ 44.03.................. +0.08................ +0.18% ..............7,180,800
DD ...............Jul 22........................ 44.20 ...................+0.06 ................+0.14% .............3,377,000
KSE.............. Jul 22 .......................39.92................... +0.29................ +0.73% ...............376,900
ED................ Jul 22....................... 47.87 ...................+0.35 ................+0.74%................ 688,400
VZ................ Jul 22........................ 34.17.................... -0.01................ -0.03% ...............6,738,400
RAI.............. Jul 22........................ 83.92................... +0.93............... +1.12%................. 336,200


There we go, in summary form now, makes it easier.
So Week 1 results just one day this week.
Cheers d998

 

[roguetrader]

Close out position inDTE @ $47.32 for 11% profit in stock price.
Leveraged return via Option price 300% selling @ $0.60

$10,000 becomes $46,000.00
cheers d998

Totally lost me on that trade there Ducati

 

[SOCRATES]

And that is more or less the question that I was exploring.
My personal feeling is that as a methodology Fundamentals are consistently stronger than Technicals.
Technicals can be profitable, but that is despite the methodology, and wholly reliant on the practitioner

cheers d998

I cannot disagree with you and would go on to further say that fundamentals lead to acquisition of assets through diligent value investing, whereas technicals lead to the building of size through the unerring abilty to repeatedly deal skilfully and effectively.

Really effective strategies embrace both disciplines in harmony.

 

[ducati998]

roguetrader

Sorry my mistake, should have read $40,000 have corrected the mistake.
But, if you remember, each position was composed of Options positions so that any change in the stock price was leveraged in the returns.

Soccy..........baby
Careful, or we'll be accused of complicity.

cheers d998

 

[roguetrader]

roguetrader

Sorry my mistake, should have read $40,000 have corrected the mistake.
But, if you remember, each position was composed of Options positions so that any change in the stock price was leveraged in the returns.


cheers d998

Actually it wasn't that bit that puzzled me, I've lost the whole concept, the current bid on that option is $0.05, even the front month has only got an ask of $0.10

 

[frugi]

Duc,

The DTE Jan 06 55.00 call closed at 0.10 today AFAICS. Have I got the wrong symbol or bad data?

 

[ducati998]

roguetrader

View By Expiration: Aug 05 | Sep 05 | Oct 05 | Jan 06
CALL OPTIONS Expire at close Fri, Jan 20, 2006

Strike................ Symbol .............Last ....Chg............ Bid ...............Ask ..........Vol ............Open Int
45.00................. DTEAI.X ...........3.50.... 0.00 ..........3.10 ..............3.30 .........10.................. 46
50.00................. DTEAJ.X...........0.65.....0.10.......... 0.60.............. 0.70......... 10................. 129

It was the Jan 2006 contract. A strategy based on time value.
cheers d998

 

[ducati998]

All

It may very well be my mistake. I think I have looked at the wrong strike contract
cheers d998

 

[roguetrader]

7...DTE....................$42.72..........................$0.15.............................$55..................Jan 2006

Option symbol DTEAK

 

[ducati998]

All

Sorry chaps...........................
Cheers d998

These bloody technical stategies......................

 

[roguetrader]

All

Sorry chaps...........................
Cheers d998

These bloody technical stategies......................

Never mind it's a nice trending stock in a hot sector, maybe it'll go up another $5

 

[ducati998]

Weekly update;

Symbol...................... Last Trade ................................Change.................................. Volume
SO.......................... Jul 29 34.99................................ -0.15 -0.43%........................... 1,496,900
ABS........................ Jul 29 21.31................................ -0.04 -0.19% ...........................2,098,100
MWV...................... Jul 29 29.22................................ +0.02 +0.07%......................... 1,020,500
DTE........................ Jul 29 47.00............................... -0.75 -1.57%............................ 1,062,100
KO ..........................Jul 29 43.76............................... -0.63 -1.42%........................... 4,974,900
DD .........................Jul 29 42.68............................... +0.75 +1.79% ..........................7,865,200
KSE....................... Jul 29 40.69................................ +0.18 +0.44% ...........................490,600
ED......................... Jul 29 48.16................................ -0.38 -0.78% ..............................639,700
VZ.......................... Jul 29 34.23................................ -0.43 -1.24%........................... 8,661,100
RAI........................ Jul 29 83.31................................ -0.02 -0.02%.............................. 433,900