Watch HowardCohodas Trade Index Options Credit Spreads

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Re: 12 JAN 2010 Trading Plan

UgoDadeo said:
Howard - As an example, I can sell the credit spread in an opening trade for $ 1.60 credit. Later, I see that I can close the spread for 15% of the opening trade ($ 1.60 * 0.15 = 0.24 debit) then the dashboard would show the opening spread at 85% under the opportunity spread P/L heading. Now I can consider the opportunities for rolling the spread.
Am I getting it yet ?
Click to expand...

Perfectly. :D
 
IT HAS SUDDENLY DAWNED ON ME WHAT HOWARD'S EDGE IS!

He is taking advantage of the "Bernanke put". Durrr!!!!!! It's soooo obvious.. stocks will never be allowed to go down again.
 
meanreversion said:
IT HAS SUDDENLY DAWNED ON ME WHAT HOWARD'S EDGE IS!

He is taking advantage of the "Bernanke put". Durrr!!!!!! It's soooo obvious.. stocks will never be allowed to go down again.
Click to expand...

In the five months I have traded this strategy in this account for real money we have had one down month, one sideways month and three up months. I have detected no differences in performance. However, this has all been in an environment of low volatility. Although probability of touching should adjust for that, it remains untested with real money.
 
HowardCohodas said:
In the five months I have traded this strategy in this account for real money we have had one down month, one sideways month and three up months. I have detected no differences in performance. However, this has all been in an environment of low volatility. Although probability of touching should adjust for that, it remains untested with real money.
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What if more vol causes the PoT on all (or at least half) your trades to hit their 20%?
 
scose-no-doubt said:
What if more vol causes the PoT on all (or at least half) your trades to hit their 20%?
Click to expand...

A dramatic increase in volatility might expose 40% of the account to a loss of 20% to 30%. The ability of my management strategy to effectively deal with this event remains untested except in back-tests.
 
12 JAN 2011 Trading Summary

2011-01-12_p_journal.png


12 JAN 2011 Trading Summary

A roll was executed within Iron Condor (#15) by closing a PUT spread (#70) and opening another PUT spread (#78) closer to the NDX price.
 
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Journal Entry - Trials and Tribulations

Journal entry under Trials and Tribulations

THIS ACCOUNT HAS NO AVAILABLE BUYING POWER

This status came about because one of the spreads I opened yesterday had a leg adjacent to another spread in the same series. Their quarantined funds calculator thinks I was trying to form a butterfly rather than completing an Iron Condor. Software bug!

I was trying to complete my roll so I called the trading desk and they executed it for me, including several tries at limit orders until a fill was obtained.
 
13 JAN 2010 Trading Plan

2011-01-13_a_Journal.png


13 JAN 2010 Trading Plan

The Dashboard above informs me as follows:
Opportunity - Takeoffs are optional
Spread #61 is unpaired. Opportunity to form an Iron Condor.

Spread #75 is at 100% of it's capped profit but has only 0 days left until expiration. No opportunity to roll.

Spread #69, #58, and #61 at more than 80% of capped profit. This is indicated by the cell in the Spread P/L column highlighted in yellow. Opportunity to roll.

Jeopardy - Landings are mandatory
Spread #76 is likely to be closed rather than left to expire. If I am unable to monitor this throughout the day, I would place an order to close this spread with a market order now, and let it execute when the market opens.

If I am able to be available at market open I would watch a bit before trying to execute the close. The overnight futures show only small changes in the indexes are expected at open. When I was ready to close, I would try some limit orders to get the best price.

If I am able to be available throughout the trading day and the short never gets ITM, then I will close the trade near the close of trading.

Spread #75 is likely to expire as it currently shows 0% probability of touching.

Other than spread #76, three spreads show slightly negative return with 35 days until expiration. No action required.

New Opportunity
New weeklies are available today. However no trades will be entered until quarantined funds are released for series where today is the last day of trading. Patience will be rewarded.
 
I've not been paying much attention to this for the last week primarily because I'm busy thinking and analysing my own trading right now. Whilst doing this I came across some video footage of a talk given by Linda Bradford Raschke - I knew of her but I tend to do my own research & thinking so I mainly avoid this kind of thing. It's about 70mins of audio split into 7 pieces.

I came across this and I paraphrase:

"I've seen more people with engineering backgrounds who want to stuff the market into a little black box and it's tough because you have to accept all its imperfections and limitations. It will do freak radical things and every system that is successful and stands the test of time tends to capitalise on these abberations in behaviour."

About 4m 40sec into the video.
http://www.youtube.com/watch?v=XegBKbwBm8c&NR=1

I thought this might stimulate some thinking for you. I think your engineering background is limiting you. I can say this with plenty of context - I am a professional engineer by trade of 20 years. As soon as I stopped thinking like an engineer and started to learn how to think like a trader, matters improved considerably.

When you overlay the skills we learn as engineers onto a trading mentality it's a powerful combination. Trying to treat the market and trading as an engineering problem is not the same and will probably lead to a different result. We can talk more by PM so as not to clog up the thread.
 
robster970 said:
When you overlay the skills we learn as engineers onto a trading mentality it's a powerful combination. Trying to treat the market and trading as an engineering problem is not the same and will probably lead to a different result. We can talk more by PM so as not to clog up the thread.
Click to expand...

Don't be daft, let's have it in the thread!
 
Good post Rob.

I wrote my first program at 13 years old. I am now 40.
My first commercial software system (Retail sales for a tyre company) went live when I was 17.
My 'day job' is running a sotfware company that, amongst other things, maintains a programming language - compilers & sh1t.

If I don't fit the profile of a nerd/engineer, then no-one does, although I do choose not to rub people's noses in that fact generally speaking.

I went down the exact same path that you did. I came to the same conclusion that you did.

Trading is not a problem with a mathematical/engineering solution.

Of course statistics help. The fact that the first push to the overnight high fails in a certain market 65% of the time does help you in your trading.

BUT

Bear Stearns had a bunch of clever quants in their derivative department. I can't recall the exact metric but they had something like 6 six-sigma events occuring in 6 consecutive days. By their calculations the chance of this was so remote that it would never occur. We are talking trillions to one. Of course, in their case, the problem was magnified by the fact that a bunch of other people were getting into similar positions based on the same calculations - so when they all tried to unwind...

Same happened with portfolio insurance.

Those that don't learn from history are doomed to...
 
Vic-20 aged 13. Was writing games in machine code by 15.
Degree in Electronic Engineering, turned down SERC funded PhD (in electro-optics, lasers,etc) - probably the only regret I have in my life.
Worked in telecoms for 8 years. It was either that or designing guided weapons systems and electronic counter-measure systems for aircraft.
Set up and ran software company in 1999 specialising in billing/provisioning systems for telecoms. Sold it in 2004.
Been consulting for the same company for 7 years since. Run development of european web portals for said company covering the UI and all the middleware that integrates with about 50 other systems behind it. Low latency, high performance transactional stuff. Low maintenance life compared to running a business.
Age 40.

There are plenty of us around, first generation geeks from the first generation home computers.
 
Nerd !

Vic 20 brings back memories... or rather lack thereof.

Actually - running a business is simple enough if you learn the fine art of delegation.
 
I got the 16k rampack to add to it when I got fed up of cramming stuff into 3.5k
Eventually moved onto a BBC-B with 32k and an assembler on it which made life more interesting in a geeky kind of way.

Geeks unite!

Re: Running the business - 2001 crash and World Trade Centre caused considerable consolidation in our sector. Things got very hard in 2002-2003. I tried to raise more capital, couldn't get it and eventually sold to a bigger outfit that had deeper pockets and wanted to get into the game. An experience I wouldn't ever trade. My first attempt at a business died quite quickly. I learnt from that one and then got a 6 year run on the second one.
 
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As you have evoked some memories - allow me to do the same...

Dragon 64k - more memory than you knew what to do with... well, almost...
 
robster970 said:
"I've seen more people with engineering backgrounds who want to stuff the market into a little black box and it's tough because you have to accept all its imperfections and limitations. It will do freak radical things and every system that is successful and stands the test of time tends to capitalise on these abberations in behaviour."

I thought this might stimulate some thinking for you. I think your engineering background is limiting you. I can say this with plenty of context - I am a professional engineer by trade of 20 years. As soon as I stopped thinking like an engineer and started to learn how to think like a trader, matters improved considerably.

When you overlay the skills we learn as engineers onto a trading mentality it's a powerful combination. Trying to treat the market and trading as an engineering problem is not the same and will probably lead to a different result. We can talk more by PM so as not to clog up the thread.
Click to expand...

I'm happy to kick this off.

I believe it's more a matter of the lessons one learned and their level of practicality. I believe many of the things I learned as an engineer, a team leader and a project manager are great lessons for becoming a trader.
  1. There are practical limitation to creating bug free software in terms of time and cost. As for me, I'd never launch a bot from software I wrote. I have a decision support system that advises me, but my brain and finders are in the loop between advice and execution.
  2. The discipline of bringing a product to market and establishing quality assurance feedback mechanisms from the assembly line have also served me well. It was the inspiration for my four step strategy qualification process and my quality assurance process to separate potential trader problems from strategy problems. Quality assurance is not just detecting poor product. It's about identifying the source of the problem to deal with the issue inexpensively and in a timely fashion.
  3. The company I used to work for would recruit fresh out of college mechanical engineers and train then to become sales engineers. My team would teach them to use the performance prediction software used to analyze our product in a customer design. Their initial instinct was to treat the software as a black box. They would fiddle with the design parameter to get the optimal solution, often making adjustments that had no practical value from a manufacturing practicality point of view. Worse yet, they would hone in on solutions that were highly unstable. Small changes in input made huge changes in result.

    They had lots of book learning but had no clear idea how a tapered roller bearing worked, barely new what one looked like and had trouble envisioning its performance as part of a system. I had to teach them the ideas behind sensitivity analysis. Sensitivity analysis is an important part of my qualification methodology.
This is just off the top of my head and focused on the benefits. I'll let you provide some things we learned that don't inure to our benefit as traders. :)
 
I believe it's more a matter of the lessons one learned and their level of practicality. I believe many of the things I learned as an engineer, a team leader and a project manager are great lessons for becoming a trader.
Click to expand...

I think that is the axiom that causes the division of though between other contributors to the thread and yourself.

If you are using engineering as a frame of reference here Howard, you will miss the point entirely. I'm prepping for open so will post more later.

Humour me - pretend you weren't an engineer. How would you go about learning to trade and creating a method which was profitable?
 
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Howard - the problem you haven't grasped yet is that the market is not a problem with a mathematical solution.

It doesn't matter at all how well a team you worked on resolved a business or engineering solution - the markets are just not like that. It doesn't matter at all that you released software & supported it. These skills are irrelevant in the markets.

Your employer uses my company for support of some of their software. These skills are nice to have but i leave them behind when I trade.

Your 'disciplines' just don't apply here.

Many people try to apply their non-trading skills to trading. You will make the most gains when you stop doing this.
 
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