Watch HowardCohodas Trade Index Options Credit Spreads

[the hare]

Double negative, you're saying Howard should use a $100k starting balance to illustrate?

Yes, Howard should provide examples based on a hypothetical starting balance and $100K is as good as any other number.

 

[HowardCohodas]

How about we remove all lack of clarity by using some absolute numbers.

Let's say (for example) that you began with $100k in August.. this is now $165k, right?

Yes, but I fail to see how that is relevant to understanding credit spreads as trades to be entered, managed, closed and summarized when closed. What added value does account size provide to the journal and to the understanding of my trades? No one has made a case for it other than the "I want" case.

How many $ do you receive in premium for the typical spread?

After some requests, I added several columns to the identification section to the Dashboard, although the information was available in other posts by using the spread number as the key. I though it might make things easier so I did it.

To save you the time to go back and find the latest Dashboard image, here it is. Isn't the answer to your question self-evident? I think it is.

 

[HowardCohodas]

Of course, we also know you consider the onus is on the teacher to ensure his explanations are clear to the students - as you have said many times.

Professor HC - it is not clear :smart:

Make the case for why this is necessary to "make things clear" for what I am "teaching." It's the spreads that count, not the account size. The only time the account size is relevant is if the strategy does not scale well. No one has made that case for the account size of the typical reader of this journal thread.

In your thread about integrating with Excel, you have stated requirements but said that you do not want to expose "what you are doing." I could have requested that you reveal more of what you are doing to "make things clear" and to improve my understanding of why you chose the path you did. I did not. Why? I am curious about your undisclosed analysis. It would have improved my understanding of what you are trying to accomplish. I could perhaps have led you down some easier paths given some of my relevant experience.

 

[robster970]

Simply put Howard, people want to get a sense that HC's method generates an xx% return on an account size of yy.

For example, if your method generates 4% annually (compounded) on account on a fictional $100k account then many will be turned off. On the other hand if your method generates 134% annually (compounded) on $100k then people might think it's worth following.

TBH, most people measure performance annually against account size. Why the reluctance? Hare and others have suggested using a fictional amount so you don't have to disclose personal stuff.

 

[meanreversion]

Make the case for why this is necessary to "make things clear" for what I am "teaching." It's the spreads that count, not the account size. The only time the account size is relevant is if the strategy does not scale well. No one has made that case for the account size of the typical reader of this journal thread.

Well, 95%+ of self-backed traders would approach this strategy knowing their initial starting capital, which is $100k. You're saying that after 4-5 months, the account is up to $165k (right or wrong?). Then the question is, how many dollars does an average spread earn, if completely successful.

I think the reason for you putting it in these terms is so the vast majority of traders could easily understand it.

Having said that, nothing has changed my original opinions, I'm afraid. I'm going to leave money management to one side, but for the strategy itself -

1. You are perpetually short gamma and vega, thus de facto you believe options are systematically overpriced.

2. You have no magic probability calculator, my opinion is you're comparing ATM vol through one formula with the skewed vol shown in vanillas and concluding the skewed vol should be sold.

3. Your ability to manage the losing trades is overwhelmingly important.. too much so, I would say. When the downside spreads go wrong it can happen incredibly quickly, so not only will you be at the mercy of liquidity, you're also exposing yourself to the strong cognitive bias (cut winners/run losers - are you 100% sure you will close when you thought you would.. maybe the market will bounce..)

 

[HowardCohodas]

Simply put Howard, people want to get a sense that HC's method generates an xx% return on an account size of yy.

For example, if your method generates 4% annually (compounded) on account on a fictional $100k account then many will be turned off. On the other hand if your method generates 134% annually (compounded) on $100k then people might think it's worth following.

TBH, most people measure performance annually against account size. Why the reluctance? Hare and others have suggested using a fictional amount so you don't have to disclose personal stuff.

I'm off to a committee meeting, so I'll be brief. Please don't take it as a sign of disrespect.

Percentage is percentage. Pick any base size you want that permits at least one spread to be sold. I recommend $3,500 minimum. That, not coincidentally, is the minimum account size to be qualified to trade options when I opened my account.

The only way I can see that account size is relevant is if the strategy does not scale.

I have also said that the account return exceeds my living expenses.

This strategy should appeal to someone with $3500 to risk. It should appeal to someone with $100,000 to risk. It should appeal to someone... Well, you get the idea. I have not analyzed what the upper limit is and how it would affect the market. Thus my concern about scaling.

Other than at the extremes, account size is irrelevant. The focus is on percentage return.

One other reason to report the month on month percentage returns is to account for transaction costs. When I report my results on a single spread basis, I do not include transaction costs.

 

[meanreversion]

Percentage is percentage. Pick any base size you want that permits at least one spread to be sold. I recommend $3,500 minimum. That, not coincidentally, is the minimum account size to be qualified to trade options when I opened my account.

The only way I can see that account size is relevant is if the strategy does not scale.

Ay caramba.. are you for real?

We do understand what percentage means (from "per cent", Latin for of one hundred).

No-one on this thread now understands the numbers you are reporting.

If I had $100k to risk in August and placed it with you, would I now have $165k?

(Hint - the answer is yes or no)

 

[DionysusToast]

Make the case for why this is necessary to "make things clear" for what I am "teaching." It's the spreads that count, not the account size. The only time the account size is relevant is if the strategy does not scale well. No one has made that case for the account size of the typical reader of this journal thread.

You do not need to give account size Howard. What you have given thus far doesn't add up.

This is a trading board. If you appear to make .2% profit per trade, make 60 trades and then show you have made 62% profit - do you not expect someone to ask how you managed it?

In your thread about integrating with Excel, you have stated requirements but said that you do not want to expose "what you are doing." I could have requested that you reveal more of what you are doing to "make things clear" and to improve my understanding of why you chose the path you did. I did not. Why? I am curious about your undisclosed analysis. It would have improved my understanding of what you are trying to accomplish. I could perhaps have led you down some easier paths given some of my relevant experience.

In my thread about integrating with Excel, I stated how to integrate to Excel. I gave all the parts and all the parts work together in a coherent whole. Job done. Strawman argument, Howard.

Not sure why you brought it up - I'm only asking how you turned your stated per-trade profit into your stated total account gain.

 

[HowardCohodas]

If I had $100k to risk in August and placed it with you, would I now have $165k?

(Hint - the answer is yes or no)

Asked and answered. Question overruled.

 

[HowardCohodas]

You do not need to give account size Howard. What you have given thus far doesn't add up.

This is a trading board. If you appear to make .2% profit per trade, make 60 trades and then show you have made 62% profit - do you not expect someone to ask how you managed it?

Asked and answered. Instead of asking it again, try explaining why my answer was insufficient to explain it. It's not that many posts back.

 

[HowardCohodas]

1. You are perpetually short gamma and vega, thus de facto you believe options are systematically overpriced.

I have provided you with the list of all spreads I have open at the moment. Show me how I am excessively short gamma, if in fact I am short gamma.

 

[robster970]

I'm off to a committee meeting, so I'll be brief. Please don't take it as a sign of disrespect.

Percentage is percentage. Pick any base size you want that permits at least one spread to be sold. I recommend $3,500 minimum. That, not coincidentally, is the minimum account size to be qualified to trade options when I opened my account.

The only way I can see that account size is relevant is if the strategy does not scale.

I think people are just looking for a metric of how performant your strat/method is and trying to tease one out of you that is commonly understood.

The account size, the money at risk in relation to the account size and the return for the money at risk are what traders are looking at to ascertain whether it suits them.

Hence does your method look to generate a minimum 6% return per trade per $3500 at risk (2 legs, 3% per leg)?

 

[meanreversion]

I have provided you with the list of all spreads I have open at the moment. Show me how I am excessively short gamma, if in fact I am short gamma.

Buddy.

Page no. 1 of the options handbook.

If you want to earn time decay, you have to sell SOMETHING, whether it is gamma, vega or skew (or all three).

Please don't argue with this point - you will make yourself look like an idiot.

Ok, so what are YOU selling? For the most part, you sell low delta spreads, which means you are selling gamma and skew (not a lot of vega on the front dates).

I didn't say you were EXCESSIVELY short, I said you were perpetually short (which is the case). If you are ALWAYS selling gamma and skew (which you are), you de facto believe that options are systematically overpriced.

(You refuse to admit this, which is why I included the "de facto" bit).

Ok, I'm done with the strategy side. Now for the money management.

Why can't you answer the question -

"If I had $100k to risk and invested with you in August, would I now have $165k?"

If the answer is yes, then we don't understand your 0.2% premium receipt per trade.

If the answer is no, then you're just fabricating your numbers.

 

[meanreversion]

Ok, there is a third option. When you say "+65%", you don't mean on the total account balance, you are referring to return on capital risked, or some such.

So, if that is the case, how much would the $100k invested in August be worth today?

 

[Hotch]

It's like pulling teeth, someone get Richard in here.

 

[HowardCohodas]

Buddy.

Page no. 1 of the options handbook.

If you want to earn time decay, you have to sell SOMETHING, whether it is gamma, vega or skew (or all three).

Please don't argue with this point - you will make yourself look like an idiot.

I don't believe I have ever denied that I was not selling something(with respect to options characteristics ). It's just that you have insisted emphatically and often that it was gamma. I have said it was not. I showed you my open positions and suggested you show me your case. You ducked. And I'm the idiot. Oh well.

Ok, so what are YOU selling? For the most part, you sell low delta spreads, which means you are selling gamma and skew (not a lot of vega on the front dates).

Once again, I have showed you my currently open spreads. You insist again, not a lot of vega. And I'm the idiot.

I didn't say you were EXCESSIVELY short, I said you were perpetually short (which is the case). If you are ALWAYS selling gamma and skew (which you are), you de facto believe that options are systematically overpriced.

(You refuse to admit this, which is why I included the "de facto" bit).

I'll give you the point on perpetually short. Is this good or bad? If it is neither, why bring up the point. If you are just trying to characterize my strategy to help me better understand it, good on you. I'm still curious about your opinion on the level as well as the sign of gamma.

Selling skew in what sense?

Selling vega. You bet. Big time!

Ok, I'm done with the strategy side. Now for the money management.

Why can't you answer the question -

"If I had $100k to risk and invested with you in August, would I now have $165k?"

Do I have to take you by the ear and have you read my yes/no answer to this question out loud to the entire class? It was asked and answered. And I'm the idiot. Oh well.

If the answer is yes, then we don't understand your 0.2% premium receipt per trade.

If the answer is no, then you're just fabricating your numbers.

Did you read my post in response to this repeated question where I used "puzzled" in the first sentence? I've given you a search term, but you must do some of the work to back up your claims, don't you think. And I'm the...

If the answer is no, then read it.

If the answer is yes, then reread it.

 

[meanreversion]

Ok, I apologise, I missed your reply to the $165k question back then, my error.

Vega is the integral of gamma, so your perpetual short vega position means also that you think .. etc ..

The skew you are selling is due to there being more vega on the closer strike than the further strike. So yes, you are buying an option in addition to selling an option, but the net effect is you are selling the "pump" (or skew) that downside strikes attract.

Ok, back to the +65%. Well done. Still not getting the 0.2% thing, but too tired to care.. goodnight..

 

[HowardCohodas]

I think people are just looking for a metric of how performant your strat/method is and trying to tease one out of you that is commonly understood.

The account size, the money at risk in relation to the account size and the return for the money at risk are what traders are looking at to ascertain whether it suits them.

Hence does your method look to generate a minimum 6% return per trade per $3500 at risk (2 legs, 3% per leg)?

I thought I had made it clear in this thread, but I am posting answers to my strategy in several places and I will admit to some confusion on my part. My cousin, one of four kids, used to tell her mother that rather than telling each of her kids something once each she sometimes told the same kid four times. I fear I may be exhibiting that behavior.

I aim for 10% when the Iron Condor is formed. This averages to 5% per spread, but that obscures the trading for the past several months. From my reporting of closed spreads and from a cursory analysis of my list of open spreads you will see that many times the first spread opened will have a lot more than a 5% potential return. Check out the closed spreads in still active series that are on my Dashboard. Spreads 33 and 34 were closed for a roll after reaching around 85% of their potential profit. Yet they each achieved over 8% yield.

That does not mean that I will put on the other side just so that the sum is 10%. My minimum is 3% because, although the second spread is put on without increasing quarantined funds, there is, none-the-less, some additional risk.

Again, a look at my Dashboard tells all. All the spreads are there for everyone to see and analyze to their hearts content. I get a little frustrated when I answer some of these questions as a courtesy rather than simply telling the questioner to RTFD, where D stands for Dashboard.

I try to answer questions differently rather than louder, but some who post here prove I am still a work in progress.

How do I get these pretty smart people who have a lot to offer me in terms of their experience, to do some homework rather than ask the same questions repeatedly or repeat the same inaccurate statements repeatedly? Wise counsel is always welcome.

 

[HowardCohodas]

Ok, I apologise, I missed your reply to the $165k question back then, my error.

Vega is the integral of gamma, so your perpetual short vega position means also that you think .. etc ..

The skew you are selling is due to there being more vega on the closer strike than the further strike. So yes, you are buying an option in addition to selling an option, but the net effect is you are selling the "pump" (or skew) that downside strikes attract.

Ok, back to the +65%. Well done. Still not getting the 0.2% thing, but too tired to care.. goodnight..

Thank you. Sleep well. Tomorrow is another day for fresh and challenging dialog.

 

[DionysusToast]

It is impossible to make 65% return from 60 trades that yield on average a .2% return.