My trading system

[chaselancaster]

Some good stuff here inbetween the nonsense. I would be interested to know what is so good about BeginnerJoe's exit strategy that he thinks he can get superior results given some good entries ? Is it a strategy or are you just/do you just think you are better at holding in there when in a trade ?

 

[counter_violent]

Some good stuff here inbetween the nonsense.

There was a time when the majority thought the earth was flat.
There was a time when the majority thought JS was a decent chap.

One persons nonsense is another's truth.

Given that only the very few make any money out of the markets, perhaps it would be wise to spend time looking for answers where others are not.

Have a very nice day !

 

[BeginnerJoe]

Some good stuff here inbetween the nonsense. I would be interested to know what is so good about BeginnerJoe's exit strategy that he thinks he can get superior results given some good entries ? Is it a strategy or are you just/do you just think you are better at holding in there when in a trade ?

I think I know why I am holding.

Ahhh, nothing doing. My long broke even from PNT - pre-news tension.

 

[bbmac]

Mate, I am very concerned about getting paid - it is what I do it for ! You cannot avoid losing trades - they will happen, and getting paid is far from inevitable as many will no doubt testify. With the kind of approach/thinking you detail in your post the greater probability is that you will not see those '..superior results..' and I doubt you have an edge, but good luck in your quest anyway.

I think you are too concerned about getting paid. So long as you avoid losing, getting paid is inevitable. It's neither the function of the entry nor the function of the exit alone. Apart from sizing, trade and risk management are non-critical for my strategy. The superior results will come from a superior understanding of the market for what it is. Anyone seeing my views about the market would no doubt consider those to be strange. There lies my edge.

My short in EURUSD has been knocked out at +17 pips. I am now long. The price is curling up very nicel presumably to resume the up trend. Let's see how it runs.

 

[D70]

Flipping a coin has significantly less than 50% chance of winning. You are not pricing in the fact that the big players and insiders are there to make money from you. Heads or tails, they are taking your money, unless they are busy taking someone else's money.

T2W mod. Can you please delete all posts not related to the OP.
The bickering between BeginnerJoe and others is pathetic.

9 pages = 8 pages of kock off and 1 page of potentially interesting options strategy.

BeginnerJoe: put your toys back in your pram please and take your nonsense elsewhere.
BBMAC: Dont rise to it. You're better than that. Seriously.

Dimtrade: Please continue.

.

 

[bbmac]

I apologise to the OP and other interested parties to the thread for contributing in throwing it off subject.

G/L

T2W mod. Can you please delete all posts not related to the OP.
The bickering between BeginnerJoe and others is pathetic.

9 pages = 8 pages of kock off and 1 page of potentially interesting options strategy.

BeginnerJoe: put your toys back in your pram please and take your nonsense elsewhere.
BBMAC: Dont rise to it. You're better than that. Seriously.

Dimtrade: Please continue.

.

 

[NVP]

Good man. Now care to tell me your strike rate ? I am trying to get a mental map of the pecking order. I know the hare's rate is below 50%. So is he bring up the rear ?

BJ...you get to hung up on strike rate ....chill

 

[Shakone]

I use implied volatility, but to be honest it does not really matter too much as the system allows for the big margin of error. For example at the moment DAX is at 7200 my bet is that it won't go higher than 7700 in the next month or so. This trade is considered higher risk than normal as DAX has recently touched 7400 area, but should be a good indicator of the logic behind trade selection.

What kind of risk reward do you get on such a trade?

You mentioned that you can close things well in advance if it looks like it is going wrong. Where would the Dax have to get to for this (I assume it also depends on the time left too)

 

[NVP]

I agree, it is pretty simple to design an indicator with 90% strike rate, for example 200 days or any number of days moving average. When the price goes below buy and sell when it recovers, the strike rate is phenomenal on indices, the drawdowns too.
The problem with most indicators is that they either do not work or can not be traded profitably with the acceptable level of risk. As I mentioned before, the markets are fairly efficient so while there are some patterns that can be exploited these are quickly discovered and eliminated.

the problem with most established indicators is that traders have not got the first idea how to use them ........

 

[NVP]

I am only missing high probability entry. I have no need for anything else. I will find what I look for eventually by myself. It would save me some time if someone with more experience but non-optimal results wants to team up. So I bring to the table superior results for people who are unable to convert their good entry to good profits. The hare needn't apply because I know his entry is too weak. Coin tossing is no less lulzy than most other entry methods.

Thats quite a chunk to be missing Bj.....

 

[the hare]

Thats quite a chunk to be missing Bj.....

I'd argue its the least important chunk. I've never seen a high probability entry that gave a positive expectancy with a random exit.

That's all I'm saying as in the majority view, I'm already probably in contravention of the sites new constitution (posting rubbish, not being nice to others, trolling, abusing staff etc etc etc)

 

[Shakone]

This is exactly why I said I was not interested in your strategy in its entirely, and I said so for a reason. Generally I can get a feel for people's technique very quickly and know which part of it might be interesting. For my technique, the getting paid part is effortless. But let's not get into that since we are not working on a deal.

Have you looked into bbmac's thread in which he gives a ton of info on entries and S+R? Of course, his entries may well have changed since then, but it might be a starting point for you.

 

[BeginnerJoe]

Have you looked into bbmac's thread in which he gives a ton of info on entries and S+R? Of course, his entries may well have changed since then, but it might be a starting point for you.

Thanks for the suggestion, I may take a look if I run out of things to do. The reason why all this got started was to do with BB 90% claim and not because of my being desperate. What I look for will come to me sooner or later. I selectively throw out a partnership deal occasionally both as a test of the water (for the perceived interesting technique) and for a minor chance someone might take it on. I would lose as much as I would gain in such a deal. So my interest is neutral.

 

[counter_violent]

I'd argue its the least important chunk. I've never seen a high probability entry that gave a positive expectancy with a random exit.

That's all I'm saying as in the majority view, I'm already probably in contravention of the sites new constitution (posting rubbish, not being nice to others, trolling, abusing staff etc etc etc)

You 2 eh !

 

[BeginnerJoe]

You 2 eh !

Do I smell rebellion ? I fancy myself of having a cat-like nose.

 

[counter_violent]

Do I smell rebellion ? I fancy myself of having a cat-like nose.

Most cats i've ever seen seem to stick their noses in some pretty awful places.:whistling

As for rebellion, you lot have got away with saying pretty much what you like when you like. Did you want change?

I'm just the facilitator.

 

[the hare]

I'm just the facilitator.

I thought the official line is that you are a member too

If I recall correctly I was lobbying your CEO to introduce two different user identities for mods, so we know which capacity you are posting in

Someone should write this stuff down so everyone sings from the same hymn sheet

 

[rsh01]

Hi Dimtrad,

Interesting to read, I am looking at similar strategy for similar reasons.

40-70 days till expiry far out of the money options.

Do you adjust IV to this time period?

Usual spread generates around $120 in premium with maximum downside of $1000.

so the max downside is the spread between the strikes, yes? do you vary the width of the strikes, say depending on strength of conviction of trade?

For example, when S&P has reached 1460 I thought that on the balance of probabilities it is unlikely go much higher up,

The balance of probabilities being what exactly? Fundamentals eg the economy is ****ed? And you look for 'fairly strong' trending markets....to sell highs......what about considering selling put spreads in strong uptrend market pullbacks?

Also...
Do you use any of the other greeks/stats in management/entry/exit decisions? eg do you care that IV is >30% when selling ES put spreads?
Who is your broker?
What is % of trades you have had to roll/close out? Have you considered selling naked puts?

Thanks for posting.

(The mods should delete the middle bunch of irrelevant posts, complete waste of time, oh but a mod was contributing and actively encouraging them, wonder how that fits into steves manifesto, jesus h).

 

[Dimtrad]

What kind of risk reward do you get on such a trade?

You mentioned that you can close things well in advance if it looks like it is going wrong. Where would the Dax have to get to for this (I assume it also depends on the time left too)

The initial risk/reward when I enter the trade is around 1:10, so for $100 in premium I am initially risking the maximum drawdown of $1000. It is not easy to answer on where DAX has to be for me to close the trade and the loss that I will be taking as it depends on the amount of time that is left and implied volatility of the options. To keep things simple I have an exit rule of closing the spread at market when the price reaches the strike price of the sold option. For example DAX is at 7300 and I sold options 7700/7800 for lets say 90 euro. Therefore my total risk is 100*5=500 EUR, I will close the spread if DAX hits 7700, at this time I would expect the spread to be worth somewhere between 200-350 EUR.
What I found is that DAX is probably not the best index to sell options on as it has a nasty option of rallying hard and long and the margin requirements are pretty high. The only reason I trade it is to add some diversification to the portfolio, returns may be not as high as with interest rate instruments but increased account stability pays off.
Depending on the account size the initial position can be entered in multiples, for example instead of taking one spread worth 90 EUR I would enter 4 or 5 spreads getting 280-400 EUR in premium. As I mentioned before I would immediately put a limit order to close the spread at 50% of the premium. If it gets hit in the first two weeks - good, if not then I will wait for the spread to decay all the way down to 10 EUR and close it then.

 

[Dimtrad]

Hi Rsh01,

1) Do you adjust IV to this time period?

No, not at all.
For some strange reason people always want to have a precise set of rules and indicators to trade something that is imprecise to begin with. There are plenty of posts on this an other forums where you can find someone posting an extremely precise rules for trading their system, for example "you have to use 14 periods exponential moving average and apply it to 4h charts only". Very often if you scroll to the end of the post the same people post that their systems has failed along with the sizable chunk of their trading capital.
It is my intention to have a system which allows as much leeway as possible, I am a sloppy trader so I need a "sloppy" system.

2) so the max downside is the spread between the strikes, yes? do you vary the width of the strikes, say depending on strength of conviction of trade?

Yes and yes I do vary the width of the strikes. For every trade there is usually a sweet spot where you can achieve a nice balance between risk/premium and margin which is what I am trying to do by varying width of the spread. The rule of thumb is 1:10 (premium:risk) I would place trades in the 1:6 all the way up to 1:16 range.

3) The balance of probabilities being what exactly? Fundamentals eg the economy is ****ed? And you look for 'fairly strong' trending markets....to sell highs......what about considering selling put spreads in strong uptrend market pullbacks?

Again, there are no precise rules, I am looking for where market won't go and then sell spreads in that area. Selling put spreads on market pullbacks is a valid strategy. Lets take Wheat as an example - it was in a strong uptrend but at the moment I won't sell put spreads regardless of the premium, on the other hand I would happily sell call spreads in the 990-1000 area.
And yes, I look at a variety of factors to come up with my balance of probabilities idea. I usually spend around 30m to 1 hour a day reading market news and other market related articles to get a feel for what is going on.

4) Do you use any of the other greeks/stats in management/entry/exit decisions? eg do you care that IV is >30% when selling ES put spreads?

No, I don't use greeks to guide my decisions, the premium and margin incorporate all this information, therefore as long as risk/reward/margin equation holds I am happy.
At the same time I won't be using this strategy at the time of severe market distress (IV>30%) as the risks would be to great. There are other strategies that are highly profitable when IV is high so I will move my capital to trade them.

5) Who is your broker?
Interactive Brokers - in my opinion they are the best, I also have accounts with OptionsXpress, TOS and another not well known broker but don't trade through (OX and TOS) as they are far behind when it comes to the trading choices.

6) What is % of trades you have had to roll/close out? Have you considered selling naked puts?
80-90% of trades work out ok and do not require any adjustments the rest would require some sort of adjustment.
I do consider selling naked puts, however it requires minimum account size of around 100-250k to be successful. At the end of the day annual return is pretty much the same 20-40% for conservative accounts 40% and higher for aggressive traders