Reddit option alpha watchlist how to use risk profile thinkorswim

Hi David, I would be happy to fxcm trading platform api darwinex labs for some data if you want to add it. Recommended for you. Essentially, yes. Also, the trade structure was born from my desire to hold a large long-term SP position but with a better risk profile-especially on the D. My thoughts begin with a question: are you looking to get into full-blown backtesting? Awesome to have a collected update; I know reading through the comments on the older options posts could be daunting! This oanda box options strategy how to trade gold futures the issue of low yields best crypto exchange for margin trading litecoin faucet coinbase,. Bitcoin otc buy bitcoin cash plus so, what kinds of changes would you be likely to make, and what sorts of indicators would you be watching to know when to make them? From the comments I have read, Karsten spreads out his entry points to minimize the sequence risk. There is a loss multiple column. Only the diversification benefit and the very tiny gap in yield between 10y and short-term. Not afraid of intraday movement? Your posts are always actionable and get me motivated to do. The objectives are 1. The issue of bet volume is a detail that does not serve to diminish the appropriateness of the metaphor. I wonder if was just an anomaly where the stop loss helped and it would have hurt in most other years? As it pertains to your options strategy: most of your margin cash in the strategy is held in instruments that would be hurt badly by inflation. Put sells were always much, much smaller than the equivalent 40 contracts full notional. Simple answer: while working in my finance job, that was the only asset class I was allowed to trade without preclearance from the compliance department. Note that the MMM number does not guarantee bitcoin forum buy did rick edelman buy bitcoin stock will move by a certain magnitude, nor does it indicate in which direction a move might occur. Or keep the usual premium but then use strikes not very far OTM, maybe points right .

Market Maker Move: A Handy Way to Monitor Possible Price Fluctuations

It has to be one of the most under-rated statistical results. I was wondered if you have considered taking advantage of the momentum factor? The strategy is as follows. This is what we actually use to finance our early retirement! I invest the margin cash in higher-yielding bonds and also more tax-efficiently Muni bonds. About 3. They have options on that one! Best short term trading strategies what charts to use for swing trading is not as easy as it seems but very possible especially if using LEAPS long on the call side and shorter duration further OTM puts short on the downside. I just tinkered with the sheet a bit to make it more straight forward. I pay just can you trade forex on etrade pepperstone mastercard half that including exchange ninja forex robot raman gill forex trader reviewsand I would think you could get the same rate I. So they would have a different return profile and be less responsive to rapid changes in Volatility in theory. Premium Target: The further out-of-the-money you write your put options the lower the premium. I just have a question. But I think that the market-making news earnings after the bell and macro news before the bell are why people are willing to pay for protection. I never have to take margin loans in my current setup.

Yeah, possible! Intraday backtesting would support the mechanic of profit takers. Even for two day options, what happens if it becomes in the money on the second day, and then out of the money on the last day? A position could breach a threshold intraday, triggering action to lock in profits, only the swing to the downside later and potentially be a loss due to a VIX spike. Simple answer: while working in my finance job, that was the only asset class I was allowed to trade without preclearance from the compliance department. But even the most badly-behaved statistical distribution becomes more and more Gaussian-Normal that nice, symmetric bell-shaped distribution if you average over a sufficiently large number. I always thought that long-duration short puts are much more scary and risky than my short-dated puts with some leverage. All true, but this call spread has a negative delta. And what about the cash to repay those margin loans; does this originates from, say, the sale of equities from an outside account? Thanks to Jerome Powell! Since one leg of a short straddle is a naked call, the risk is unlimited. And by the way, my former employer was incredibly generous because I know a lot of friends at other banks that were strictly prohibited from trading any derivatives products index options, futures, futures options. Would option buyer exercises it on the second day?

Now to My Questions. The Market Maker Move feature can be particularly powerful when it comes to building an option strategy around earnings. Great work. By Ticker Tape Editors September 21, 3 min read. And again, the way I calculate this percentage is the annualized premium divided by the notional value. VIX nect crypto to coinbase capital raise lower due to the recent performance of the market. But even the most badly-behaved statistical distribution becomes more and more Gaussian-Normal that nice, symmetric bell-shaped distribution if you average over a sufficiently large number. Eric Loading Thank you for your offer on the data. Though I suppose that depends somewhat on how they manage implementation. Of course, there are also at least two disadvantages of trading more frequently. Source: CBOE, see here walter bressert profittrader for metastock download technical analysis tradingview here for the source data. Either you win or you have a huge wipeout. To the same extent, I sometimes wonder if TT is going through this entire effort of research, live shows, their own trading platform. My biggest problem is knowing exactly what volatility value to use. The only way to avoid the negative cash balance is to hold less money in ETFs and mutual funds, see the bottom panel. But that also lowers your income potential from the margin cash! Thank you Loading

They are called preferred stocks, not preferred bonds! Can an uptick in options selling cause the VIX be less volatile because the VIX derives itself partly from current option markets data? Awesome but i think the dataset of is quite less. Very good point. Have an U. The upside to this approach is it offloads the IT burden. Either you win or you have a huge wipeout. Would the benefits outweigh the hammering one would get in an inflation shock event? Thank you Loading There will be some luck involved. But I am very curious about the result. If an insurance company only insured, say, 3 houses, or if a casino only had one customer playing one round, they would be at risk from sequence of returns risk even if they sold their deals with positive for them expected values. Karsten, I just updated the backtest to include as well as through the end of August and the results are pretty interesting. A day later the night was quiet. Again: on high-IV days it depends where the old strikes are. For example, as SPX moves around through out the day, and SPX suddenly drops to near but never cross the short strike, it may have triggered the stop if there is 1.

Suddenly, you become much less comfortable taking risks. Have an U. Greetings, Ern. That said happy to share any data or answer follow-ups. With the how to trade for a profit in black dessert three step risk management day trading delta, especially at delta 5, it seems that preventing the wipeouts is enough to compensate for the additionl number of stops. I will add the sharpe ratio into my spreadsheet. What was your approach and why? Am I reading this correctly? Thanks for the background info! All this effort for such a measly return? Only the die-hard options honchos kept up with that, so it was time to do a post with some updates! Some of these closed end funds have pretty wild swings and people have been talking about munis defaulting for years.

I am not that affluent. But since I first wrote about this, here are some additional updates: 1: The account size is much larger! The potential conflict of interest is an elephant in the room. There is a tab for each separate year as well as a combined tab for the entire time frame. It had a picture of Carl Fridrich Gauss and a small figure with the Normal distribution named after him! Picture credit: Pixabay. If yes, any tips? While the ideas are great and many of the numbers sparkling, what they present is two steps down as just explained from what I would expect as PhD i. Hi Mark. The premium is a bit lower than for the at-the-money options but so is the volatility. Though I suppose that depends somewhat on how they manage implementation. Sounds like a great approach! Very much appreciate your derivative posts. Imagine the index goes down on Tuesday and Wednesday and breaks through your strike price. Then every Monday I sell options expiring on Wednesday and — you guessed it — every Wednesday I sell options expiring on Friday. Obv not the guy you asked. What you are doing is probably fine but may not be optimal. I dont have the same financial background and experience as you, so these posts have been invaluable. There is a tab that graphs the performance vs SPX along with various other metrics such as win rate, average win, average loss, etc.

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Much higher when the crap hits the fan as late last year. Keep the same premiums or accept lower premiums? Have you considered managing early a la TastyTrade mechanics? Hit by Mean-Reversion: Sometimes you lock in the loss with the shorter-dated options. And doing a few SPX option trades on my Android phone, too! That said happy to share any data or answer follow-ups. And I still believe, loony me, that Pabrai picks can add some alpha. To the same extent, I sometimes wonder if TT is going through this entire effort of research, live shows, their own trading platform, etc. Good points! Much of the time, there is no MMM value present.

I use some leverage to overcome the lower premium revenue. So, to start this with some play money might seem like how to put a battery in a crane stock trade nasdaq stocks good idea. The beauty of the option writing strategy is that this is all done on margin! I read another blog. Your calculation is certainly correct: You get fixed income with a decent return and very low vol and that vol is uncorrelated or even negatively correlated with stock risk and then you need much more option income and you beat the index at much lower risk. Not every single transaction but over long-term averages. Probably a long shot but I am thinking about paying some grad student with access to OptionMetrics data some 1 bitcoin buy rate add crypto address to coinbase to go in and re-create most of the better TT studies so I can just see the real data. Might not be a bad idea to start with! The strategy is as follows. Would like to see the performance inobviously! Having said that, 20 and 30 delta are still highly volatile and a wide stop such as 10x is quite dangerous as you might stop out base on a temporary Is there a way to convert bitcoin into coinbase how to trade bitcoin cme futures explosion. I may build on this and implement extra features. They are itemized by contract. I made a pretty ham-fisted attempt at accounting for volatility skew using a plot of the current IV vs call-delta curve that I found, and I think that is the source of my trouble. That said happy to share any data thinkorswim drop down bar leader of the macd indicator ninjatrader 8 answer follow-ups. So they are equally tax advantaged compared to equity options like you would trade for spy for example. Summary: 1.

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The number shows the current expected magnitude of price movement in dollars, based upon market volatility, from an event scheduled to occur between now and the front-month option expiration. Yes, throughout the day! But it gives a good approximation I think and not having a stop in seems to have been very bad. So, I like never getting any of the underlying in my portfolio. But the risk profile lower drawdowns and more consistent income is much more appropriate for retirees than working folks! Same strikes as what I sold today as well. I sold at strikes and with the SPC at So, even a very unattractive and negatively-skewed distribution becomes better-behaved if you diversify over time. And totally agree: in real-life you could probably do a little bit better by managing positions throughout the trading day. I just added in the sharpe ratio and using a stop does appear to improve it.

They have other studies that depict the performance of selling premium vs SP I have seen all say do NOT use stops. I hear ya. Me too Loading I just find the index options easier to handle: 1: tax season is breeze Section contracts 2: I can do buy write options strategy news letters cfd trading methods trades a week Central Limit Theorem works better 3: They are cash-settled which makes the execution of ITM options really easy. Best of luck! Managing losers is anathema to the TT guys, which makes it interesting that they end up favoring just that in this study. I always thought that long-duration short puts are much more scary and risky than my short-dated puts with some leverage. All this effort for such a measly return? But again: the simple PUTW strategy has some nice return stats and is guide to cryptocurrency day trading roth ira finra good starting point, but I think we can do so much better! Instead of selling insurance to 1, different households, I sell insurance over different trading windows.

Interpreting the Market Maker Move

With your volume and size of account it likely would not be a problem for you to get. If the returns are worse, is it still better than simple long equity index ETF? Everyone seems to assume that Q4 will be calmer than last year! I assume you have researched this all and still feel comfortable with your use of margin. Higher deltas and not as far OTM for the same premiums as before. Selecting different strategies could direct the program to what legs are required and, perhaps, what restrictions should go with those legs optional? It had a picture of Carl Fridrich Gauss and a small figure with the Normal distribution named after him! Good question! You can derive the signals all from pretty easily available, zero cost sources. I agree, BradF Is there reason to think one is better than the other? All very relevant! You would still lose if the market goes down though, right? A proprietary calculation then reverse-engineers the option pricing model based on assumptions about implied volatility, creating an estimate of potential daily price movement.

Some people follow the Kardashians. They are called preferred stocks, not preferred bonds! But the risk profile lower drawdowns and more consistent income is much more appropriate for retirees than working folks! So I tried an iterative approach where for a given strike I would keep calculating new deltas until the change was below a small threshold. In the backtest, some of trades blew past the stop limit the tradelog tab has a column for loss multiple and you can see one loss was as large as 9x. Learn how your comment data is processed. You do better your strikes were lower then mine — what was your premium at what is zulutrade in forex swing trading reddit different strikes? Generally, is the strategy trying to maintain a fixed delta at any point in time? The cash-settled SPX options are much easier to handle! Lost all premiums between Sep 6 and now, i. Did you already consider this and discard it? Last week I sold a first put on Microsoft. So, I like never getting any of the underlying in my portfolio. Thanks for sharing! These TT studies are interesting but only tell have the story. In the top panel, we wrote an option with 4 trading days to expiration. Also another word of caution: this strategy works best if you have a steep slope in the bond term structure. Litecoin rsi indicator holy grail script tradingview is a stupid question: Can SPX options only be exercises at expiration?

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If yes, any tips? Glad that I did! Thanks for the info! As for futures, IB allows futures trading in an IRA but the margin requirement is 3x or more vs non-netirement account. Hold your horses. Also the VIX is over a 1-month horizon, mich longer than my options. Will returns be inferior if I am being forced to hold cash instead of fixed income assets as margin for the put selling strategy? Yes, yes yes! Am I reading this correctly? The max was 6 losses in When VIX is lower premium received per unit of time is less. Then sell the losers and buy the very similar but slightly different other funds to avoid wash sales. Sorry, to be clear, the greeks are calculated using data but the SPX price IS based on expiration. But the risk of losing money is also lower. Final tally today: 8 out of 10 puts in the money. Of course, in this or in any other scenario, a trader selling a strangle would first need to be a candidate for the very most risky options trade. Yeah, Federal Reserve Meeting this week!

Selling put options exposes me to the worst possible return profile: I have almost unlimited downside risk, i. What is truly amazing about the put writing strategy is that you generate equity-like returns but you do so with:. Past performance of a security or strategy does not guarantee future results or success. If total return is decreased but volatility of returns is decreased even more, then it might be worth doing. The data is sliced and diced just right to demonstrate the outcome they desire. I just find the index options easier to handle: 1: tax season is breeze Section contracts 2: I can do 3 trades a week Central Limit Theorem works better 3: They are cash-settled which makes the execution of ITM options really easy. The spread might also increase duration of trade, though, which could make this analysis more difficult. But like you, I trade 3x per week, and I noticed that market-moving news earnings reports, employment and GDP figures. It will help with Sequence Risk! But an unexpected spike in implied volatility can also wreak havoc on a portfolio. Only the die-hard options honchos kept up with that, so it was time to do a post with some vanguard roth ira new brokerage account reddit effect on bitcoin Not that bad! I am not that affluent. Intraday backtesting would support the mechanic of profit takers. I thought that was a big issue for you? Hi David, I would be happy to pay for some data if you want to add it. Noticed that. If a stock falls above the standard deviation, a rebound is minimally more likely. If the short puts are OTM or ATM or nearly so the existience of extrinsic value makes it counter productive for the buyer assignor. Once you have mentioned that you closed position early on turbulent day.

I know very little about programming, John, european small cap stock etf which brokerage companies offer commission free etfs I have been interested in having an automated backtester built for some time. Case in interactive brokers paper account performance best food stocks to invest, October through December when I actually made money with this! It was quite exciting at times I took more risk that you. Rob Loading I still have a I think I will get more bang for my buck buying calls on the VIX. Thx for the quick reply. Might be a great way to avoid the really big losses like one I had in early August. Great idea calculating the options prices in matlab. Of course, being a total finance geek I spend way more time in front of the screen looking at finance charts. This is interesting and nice work. Thanks for the suggestion on VXXB call options as an alternative! There is a tab for each separate year as well as a combined tab for the entire time frame. In the bottom panel, the index stays above the strike of the option after two days. Same strikes as what I sold today as. Source: CBOE, see here and here for the source data. So, I have no super strong opinions on this one! I should write a blog post in the SWR Series and market it. But there could be some volatility from the FOMC meeting. If the Delta is in the 0.

You have a way of making the complex understandable without watering it down. If the short puts are OTM or ATM or nearly so the existience of extrinsic value makes it counter productive for the buyer assignor. Market volatility, volume, and system availability may delay account access and trade executions. One exception would be a sharp drop where the index drops by 60 or more points below the strike. Very good. Summary: 1. The yield is pretty decent! Without that we have no idea which strategies actually do better on a risk adjusted basis.. The option strategy is all on margin, so no need to subtract the RFR. You could also re-deploy immediately upon being stopped out but I am not always available to put the trade right back on so for consistency, I like to just wait until EOD around PM. You can specify a delta of 5, 10, 20 or 30 as well as stop loss levels of and x would be basically no stop. I know very little about programming, John, but I have been interested in having an automated backtester built for some time. Before too much more time is spent on this, again I will say it is not a huge factor only one I believed worth a quick mention. The spread might also increase duration of trade, though, which could make this analysis more difficult. If you're trading earnings season, or if you're an investor holding shares of a company that's about to release earnings, MMM can be a powerful tool. So, I keep my margin cash in a more stable portfolio.

Thanks for the link. Of course, being a total finance geek I spend way more time in front of the screen looking at finance charts. I do recall reading something not too long ago about an uptick in options trading circa It is not as easy as it seems but very possible especially if using LEAPS long on the call side and shorter duration further OTM puts short on the downside. That is such a good perspective to put it in. As you may have guessed from the name, MMM uses some of the same inputs that market makers do, such as stock price, volatility differential, and time to expiration. Many brokerages allow cash-secured options trading in IRAs. You can specify 10, 20, and 30 delta various stop levels. So, yes, I find this intriguing. Selling put options exposes me to the worst possible return profile: I have almost unlimited downside risk, i. The formulas in excel work great for ATM options but the calculated values begin to skew as the deltas get farther OTM. Thanks for the update! Not sure what your options are abroad…. Site Map.