Watch HowardCohodas Trade Index Options Credit Spreads

[Jack o'Clubs]

googling to find something for Arabian, honest.

 

[DashRiprock]

for me its as easy as this:

1) the options are correctly priced, so he is not trading arbitrage

2) he doesnt look at the probability of the long strike, so he cannot be trading skew

so his profits have to be made up from a combination of

3) theta, gamma, vega, maybe delta

and he doesnt say how he forecasts any of them so to know which way to bet. he just always goes +theta/-gamma/-vega with deltas in small change probably. no discretion in the trade at all.

thats all there is to it really. oh maybe as well the probability talk instead of volatility talk shows he "taught" himself and made up ansewers as he went along instead of learning from someone else or a proper options book.

 

[HowardCohodas]

Wow - it got hot on here over the weekend. I have only two points to add, namely for Howard:

1) The downside risk that everybody keeps talking to you about. You should probably take a look at the history of Victor Niederhoffer. He was am empiricist with regards to trading options and made the fatal assumption that because a market had not behaved in a certain way in the past, it would not do something unexpected in the future. He specialised in options and he got crucified. My point here Howard is that your reliance on back-test and past performance does not adequately outline risk of ruin.

2) Recent volatility on indices - this volatility increase is tiny and is normal for a trend testing for value. Your live results are still based on US equity markets that have been trending for that period due to the Bernanke Put. Be mindful that when the market changes and starts to shake people out, your strat will probably show very different behaviour.

Link to an interesting article - http://www.gladwell.com/2002/2002_04_29_a_blowingup.htm

Hubris is an unkind mentor.

Is my quality assurance program sufficiently effective to identify systemic changes in the market with sufficient warning to prevent serious damage? Will I listen and withdraw from or modify my strategy?

Little or none of the criticism here has dealt with the quality assurance part of my strategy. The fundamental issues here are:

1. Will it respond in sufficient time to prevent serious damage to my account or a wipe out?
2. If, as many have pointed out, I have little in-depth options knowledge, will my QA plan still be effective?

The remainder seems primarily a variation on the same themes.

One common thread is that in spite of all the warnings, I have not backed away from my strategy. My push back is viewed as rejection rather than a sincere attempt to understand rather than just walk away.

On the other hand, much of the thoughtful criticism has informed and changed my management practices and the quality assurance program.

The only reason for enduring the trash here is to find the nuggets of truth. I thank all of those who worked hard to make me smarter and hopefully more effective with my strategy.

I fault myself for spending so much time dealing with the trash. I forgot one of my favorite sayings: "Never get into a fight with a pig. You both get dirty and the pig loves it." We'll see if I can better resist the bait.

 

[HowardCohodas]

No, I'd go along with that. He's bamboozled himself with his own brilliance and is a perfect example of a little knowledge being a dangerous thing.

Howard reminds me of a guy on a gambling forum someone sent me a link to once who had enough maths to think he had invented a way to beat roulette. He put all sorts of complicated formulae up for 'proof' but had missed the point that each spin was a mutually exclusive event. Essentially it was a martingale with a couple of twists. More and more people tried to show him the error in his assumptions, initially with goodwill to save him from himself, but getting increasingly heated as he refused to take on board their comments - the thread was worth it for the lulz. Then, just as the argument was reaching a climax, he disappeared, missing assumed dead from the inevitable blow-up. I think this thread will go the same way, and for the sake of his friends and family who are now using his strategy I hope it happens sooner rather than later before serious sums are committed to it.

Howard - you commented that the recent spike in vol. has caused some pain. Have a look at the vix chart, say on a five year view. The pick up in the last couple of weeks or so doesn't even show... I don't think Howard's got any idea that selling theta/gamma strategies have been in a sweet spot since last summer because of where the markets have come from, nor how those strategies will fare given the only two conclusions from here: a normalisation as everything calms down, or mega-volatility as we hit another major crisis.

I monitor VIX and I purposely back tested using data that included the huge spike. Back testing has serious limitations. Does that mean that my strategy can survive that high volatility regime? NO. Does that guarantee that my quality assurance program will warn me away in time. NO. But I think it has been engineered to do so with a high degree of reliability.

 

[HowardCohodas]

for me its as easy as this:

1) the options are correctly priced, so he is not trading arbitrage

2) he doesnt look at the probability of the long strike, so he cannot be trading skew

so his profits have to be made up from a combination of

3) theta, gamma, vega, maybe delta

and he doesnt say how he forecasts any of them so to know which way to bet. he just always goes +theta/-gamma/-vega with deltas in small change probably. no discretion in the trade at all.

thats all there is to it really. oh maybe as well the probability talk instead of volatility talk shows he "taught" himself and made up ansewers as he went along instead of learning from someone else or a proper options book.

You actually had my interest until the self congratulatory smiley.

Yet I persisted. Many of your conclusions are quite accurate.

 

[Martinghoul]

I monitor VIX and I purposely back tested using data that included the huge spike. Back testing has serious limitations. Does that mean that my strategy can survive that high volatility regime? NO. Does that guarantee that my quality assurance program will warn me away in time. NO. But I think it has been engineered to do so with a high degree of reliability.

Against my better judgement, I'd like to chime in here, if I may...

Howard, don't you think that the capitalized "NO"s above should tell you that, at the very least, you're, how do I put it, not quite ready to teach your "method", gratis or otherwise? I have no problem with you looking to blow yourself up, as it is, ultimately, a trader's prerogative to learn from their own mistakes. Teaching others is a different kettle of fish entirely.

P.S.: I haven't had a chance to do any analysis, as I've been very busy.

 

[HowardCohodas]

Against my better judgement, I'd like to chime in here, if I may...

Howard, don't you think that the capitalized "NO"s above should tell you that, at the very least, you're, how do I put it, not quite ready to teach your "method", gratis or otherwise? I have no problem with you looking to blow yourself up, as it is, ultimately, a trader's prerogative to learn from their own mistakes. Teaching others is a different kettle of fish entirely.

P.S.: I haven't had a chance to do any analysis, as I've been very busy.

I come from primarily an academic and research environment. Sharing experiments and results, freely or for pay, is part of that tradition. Is it fair for me to teach "what I am doing" without the expertise you require? I think it is provided I fully disclose the limitation of my knowledge, my experience and my methods as I understand them. Students will make an informed decision.

 

[DashRiprock]

You actually had my interest until the self congratulatory smiley.

Yet I persisted. Many of your conclusions are quite accurate.

which of my conclusions are wrong and which are wright then?

p.s. the smiley was at the end, so there was no more persisting to be done

 

[arabianights]

It will be not be an informed decision because you don't have the knowledge to adequately disclose the facts!

 

[DashRiprock]

I come from primarily an academic and research environment. Sharing experiments and results, freely or for pay, is part of that tradition. Is it fair for me to teach "what I am doing" without the expertise you require? I think it is provided I fully disclose the limitation of my knowledge, my experience and my methods as I understand them. Students will make an informed decision.

the thing is though that you like to talk all clever like a smarty pants and enyone who was new in options might think "hey hes dead clever ill learn from him" but not be able to make an informed decicion cos they dont know about options to know why your wrong.

even you dont understand why your wrong so hpow can they if they know less about options than you? its the blind leading the blinder

 

[HowardCohodas]

It will be not be an informed decision because you don't have the knowledge to adequately disclose the facts!

Of all the serious posters, you are among those with whom I have the greatest respect. I have not taken this decision lightly. I believe that my risk management methods both during the play and post game analysis sufficiently mitigate your concerns. The fact that you do not concerns me and I will rethink my position. I do not guarantee that I will come to your conclusion, but a good researcher always takes reviews of his work seriously. It is difficult to do this in an ego-less way.

 

[Martinghoul]

I come from primarily an academic and research environment. Sharing experiments and results, freely or for pay, is part of that tradition. Is it fair for me to teach "what I am doing" without the expertise you require? I think it is provided I fully disclose the limitation of my knowledge, my experience and my methods as I understand them. Students will make an informed decision.

Ah, Howard, you're being disingenous now...

Firstly, how many of your students are presented your results described as "an experiment"? Secondly, the academic environment is all about peer review. I'd say that, in your case, your "research" has been deemed unfit for publication. Thirdly, yes, strictly speaking, the whole caveat emptor bit should absolve you of all responsibility. However, you're not selling this to informed punters, are you?

 

[DashRiprock]

because of the new adverts rules on the internet, does howard need to have fsa quals to offer investment advice?

 

[HowardCohodas]

Ah, Howard, you're being disingenous now...

Firstly, how many of your students are presented your results described as "an experiment"? Secondly, the academic environment is all about peer review. I'd say that, in your case, your "research" has been deemed unfit for publication. Thirdly, yes, strictly speaking, the whole caveat emptor bit should absolve you of all responsibility. However, you're not selling this to informed punters, are you?

Do not misinterpret my push back. I am not rejecting your conclusions out of hand, but I am troubled by some of your reasoning to get there. It is primarily the reasoning that I am challenging. Too many here mix up these two different lines of discussion.

My disclosures serve much more than to absolve me of responsibility. They serve to instill in the student the seriousness of the risk mitigation practices, because they know less than I do. It's a matter of practicing in good faith, not just staying out of jail or court.

I use experiment in the sense that if trading was a well formed process you would never lose any money. Is that your situation? You never get it wrong? A large part of life is practiced without in depth knowledge in life/death circumstances. In those areas considerable risk mitigation is in place. You have concerns that I take seriously about my breadth and depth of knowledge. However, I don't recall any analysis of the risk mitigation elements of the strategy. Do they compensate adequately? Obviously I think they do or I would not risk my money or presume to teach.

 

[HowardCohodas]

because of the new adverts rules on the internet, does howard need to have fsa quals to offer investment advice?

Please explain how offering to teach "what I practice" is construed to be investment advice under previous or new rules.

 

[DashRiprock]

Please explain how offering to teach "what I practice" is construed to be investment advice under previous or new rules.

cos you market yourself as someone with authority and understanding (i read your website). and its specially bad if you show your results.

I guess it would be ok if like a disclaimer on your home page that said

"Hi, im howard, and in my website ill explain how i trade my options strategy. but you should know that i dont really understand options at all, and loads of people that do know about options have said i am a plonker for what i am doing. because i dont understand options i dont understand why im a plonker so im going to carry on regardless"

'this option strategy has no identyfyable edge and after enough time you will lose money cos of comms and spreads"


"Do you wish to enter?"

 

[Martinghoul]

My disclosures serve much more than to absolve me of responsibility. They serve to instill in the student the seriousness of the risk mitigation practices, because they know less than I do. It's a matter of practicing in good faith, not just staying out of jail or court.

Yes, but, Howard, surely the problem is you assuming you're qualified to instill anything in the student, whether it's done in good faith or otherwise? Your experience is woefully inadequate. I propose that you yourself don't fully comprehend the seriousness of risk mitigation practices, let alone are able to impart or instill it in anyone else. This is not a dig at you, as there's a lot of more experienced people in the mkt (including myself) who don't fully comprehend risk management. But the key difference is that none of these people (including myself) consider themselves capable of teaching.

I use experiment in the sense that if trading was a well formed process you would never lose any money. Is that your situation? You never get it wrong? A large part of life is practiced without in depth knowledge in life/death circumstances. In those areas considerable risk mitigation is in place. You have concerns that I take seriously about my breadth and depth of knowledge. However, I don't recall any analysis of the risk mitigation elements of the strategy. Do they compensate adequately? Obviously I think they do or I would not risk my money or presume to teach.

Of course, I get it wrong... I get it wrong all the time. And yes, the fundamental uncertainty of trading (and life) is precisely why I think you're fully entitled to learn from your own mistakes. However, you're going well beyond that in trying to teach others. As to your risk mitigation practices, my point to you (that echoes Arab's) is that you haven't experienced enough risk to claim that your risk mitigation methods are effective. Again, it's not a problem if you're doing this with your own money that you're, effectively, prepared to write off.

 

[HowardCohodas]

cos you market yourself as someone with authority and understanding (i read your website). and its specially bad if you show your results.

I guess it would be ok if like a disclaimer on your home page that said

"Hi, im howard, and in my website ill explain how i trade my options strategy. but you should know that i dont really understand options at all, and loads of people that do know about options have said i am a plonker for what i am doing. because i dont understand options i dont understand why im a plonker so im going to carry on regardless"

'this option strategy has no identyfyable edge and after enough time you will lose money cos of comms and spreads"


"Do you wish to enter?"

Non-responsive.

 

[HowardCohodas]

Yes, but, Howard, surely the problem is you assuming you're qualified to instill anything in the student, whether it's done in good faith or otherwise? Your experience is woefully inadequate. I propose that you yourself don't fully comprehend the seriousness of risk mitigation practices, let alone are able to impart or instill it in anyone else. This is not a dig at you, as there's a lot of more experienced people in the mkt (including myself) who don't fully comprehend risk management. But the key difference is that none of these people (including myself) consider themselves capable of teaching.

Of course, I get it wrong... I get it wrong all the time. And yes, the fundamental uncertainty of trading (and life) is precisely why I think you're fully entitled to learn from your own mistakes. However, you're going well beyond that in trying to teach others. As to your risk mitigation practices, my point to you (that echoes Arab's) is that you haven't experienced enough risk to claim that your risk mitigation methods are effective. Again, it's not a problem if you're doing this with your own money that you're, effectively, prepared to write off.

:-0 I'm sorry that you don't teach. I think that limits your understanding of pedagogy. I'll add that to the data as I continue to reevaluate my position based on your concerns.

 

[Jack o'Clubs]

I'll add that to the data as I continue to reevaluate my position based on your concerns.

But you don't, Howard, do you? Over the course of this thread and despite the well-intentioned interventions of any number of experienced contributors, absolutely nothing has changed in your approach either to trading your strategy or your intention to teach it.