Watch HowardCohodas Trade Index Options Credit Spreads

[HowardCohodas]

I don't care what wiki says, it isn't 🙂

Not sure what you mean by "applying" gambler's ruin.

OK. How about this:
Introduction to stochastic calculus with applications By Fima C. Klebaner

or this:
Risk-neutral valuation: pricing and hedging of financial derivatives By N. H. Bingham, Rüdiger Kiesel

OK, I give up. What is it? 😉

 

[arabianights]

Anyway, Howie, a somewhat different question if I may:

What punishment best fits one who libels the religion of peace?

 

[HowardCohodas]

Anyway, Howie, a somewhat different question if I may:

What punishment best fits one who libels the religion of peace?

I'm a Jewish, politically and socially conservative, libertarian who does not believe in capital punishment and carries a S&W M&P 45FS plus a BUG (back up gun) and is prepared to kill anyone who put me or a family member in fear for their lives. I don't think anyone as mixed up as that is capable of rendering an opinion on punishment on any matter. 😉

 

[MrGecko]

he's in the bloody Mossad!

RUN!

 

[arabianights]

Fuuuuuuuuuuuuccccccccccccccccccccccckkkkkkkkkkkkkk!!!!!!!!!!!!!!!!!!!

 

[HowardCohodas]

he's in the bloody Mossad!

I wish.

Arabian has a way of bringing out lots of my secrets. That, unfortunately is not one of them. 🙁

Of course, if I was, I could not it admit it. But that's my story and I'm sticking to it. 😉

 

[arabianights]

that's what someone in mossad would say!

 

[arabianights]

the correct answer, incidentally, was beheading.

 

[HowardCohodas]

that's what someone in mossad would say!

I was only seconds ahead of you. It's scary when we can finish each other's sentences.

 

[MrGecko]

to be honest with you, it is much more likely that someone from the Mossad would try to build rapport with any one Arabian.

 

[HowardCohodas]

to be honest with you, it is much more likely that someone from the Mossad would try to build rapport with any one Arabian.

I love a good conspiracy theory. 😉

 

[Dommo]

Howard - whenever you get a chance, I would revisit brettus' post #55. Rather than getting into an IC in two credit spreads, you can get in in a pair of risk reversals.

The advantage is that you pay less for your long options. The disadvantage is that you are carrying directional risk until the IC is completed. Being directional, it is a very different approach to entry by credit spreads. But the idea is to buy your long options very cheap and that advantage may allow you to scale down for a similar expectation.

I realise that you aren't keen on taking a directional view, but maybe you can combine this method of entry with your probability of touch.

I also agree with sj (post 66) - Taleb's dynamic hedging is a good read (if a little cryptic at times) and is a bit unusual in looking at a book of options (rather than one). On practical, empirical vol models I suggest looking at Euan Sinclair's books.

 

[HowardCohodas]

Howard - whenever you get a chance, I would revisit brettus' post #55. Rather than getting into an IC in two credit spreads, you can get in in a pair of risk reversals.

The advantage is that you pay less for your long options. The disadvantage is that you are carrying directional risk until the IC is completed. Being directional, it is a very different approach to entry by credit spreads. But the idea is to buy your long options very cheap and that advantage may allow you to scale down for a similar expectation.

I realise that you aren't keen on taking a directional view, but maybe you can combine this method of entry with your probability of touch.

I also agree with sj (post 66) - Taleb's dynamic hedging is a good read (if a little cryptic at times) and is a bit unusual in looking at a book of options (rather than one). On practical, empirical vol models I suggest looking at Euan Sinclair's books.

Re Brettus # 55
An Iron Condor can be thought of as two strangles or two credit spreads. All of my analysis has been done on credit spreads and I am out of my depth when it comes to strangles. I've not exhausted my study of credit spreads so studying strangles is a way off in the future.

Furthermore, the Iron Condor is a nice bonus to be created when market conditions permit, but the bread and butter of my strategy is still credit spreads. If I only end up with one spread, then there is certainly a market bias. But that is compensated for by the amount of credit I receive at the risk level I will permit.

Re SJ8070 #66
He and I had a long dialog on this subject. What part of my response do you not agree with?

Re: Taleb & Sinclair
Before I launch myself at these works, perhaps you can provide me some focus. How might I change my strategy by absorbing the ideas presented in their books?

 

[DionysusToast]

First, why would someone who studied mathematics at Case Institute of Technology (before they merged with Western Reserve University) build a strategy that did not have a positive expectation? And what trader would risk serious money with a strategy that did not have a positive expectation? Do you?

And second, I believe I have shown my calculations in this forum. Have you looked? If you look and can't find it, I'll repeat it. Let the search function be your friend. And prove you did it. 😉

If we wanted to study well educated mathematicians, mathematical expectancies applied to markets and their downfall, we could look at Nobel prize winners that created the Black-Scholes forumla. Or we could look at Portfolio Insurance, or we could look at the mortgage derivatives.

There's a great book on the subject "Lecturing Birds on Flying". It's good to have a mathematical model showing expectency but if even Nobel prize winners can't get it right, perhaps this is because the markets aren't mathematical.

Still - your overall strategy could work - but historically, even the most respected mathematical models have failed the real-world test.

 

[HowardCohodas]

If we wanted to study well educated mathematicians, mathematical expectancies applied to markets and their downfall, we could look at Nobel prize winners that created the Black-Scholes forumla. Or we could look at Portfolio Insurance, or we could look at the mortgage derivatives.

There's a great book on the subject "Lecturing Birds on Flying". It's good to have a mathematical model showing expectency but if even Nobel prize winners can't get it right, perhaps this is because the markets aren't mathematical.

Still - your overall strategy could work - but historically, even the most respected mathematical models have failed the real-world test.

Building a strategy with positive mathematical expectation does not guarantee success. I believe I made this point quite clearly in several posts. In the above post I was arguing against the use of roulette as a good analogy because it does not have a positive expectation.

Here is the thing, my friend. I don't believe I ever claimed that one can expect a strategy with negative mathematical expectation to be successful.

And I'm OK at mathematics, but not great at it. I got bored with pure mathematics (probably because I wasn't very good at it) and left it for the applied world. This is not a good plan for achieving any kind of prize, let alone the Nobel prize. But it was a lot more fun.

I believe the greatest risk in my trading system is the trader (me), not the strategy. I have outlined what quality control measures I take to detect trader failure. I have also outline what measures I take to detect systemic changes in the market so that I withdraw before I am seriously hurt financially. The key is, do I have the will and focus to overcome the natural hubris of success to execute these measures in time. We'll see.

 

[HowardCohodas]

Before the trading day begins, I make some notes about my trading plan. Although this is derived primarily from my Dashboard, I make a note for quick execution reference. (My next computer will have two screens).

If readers want me to continue to post this here daily, let me know.

Opportunity

Incomplete Iron Condors

13 - DEC5 10 - SPX
16 - JAN 11 - RUT
17 - JAN 11 - SPX
​

Roll Candidates

6.C - DEC10 - CALL - NDX
6.P - DEC - PUT - NDX​

Jeopardy

None​

 

[Dommo]

Re SJ8070 #66
He and I had a long dialog on this subject. What part of my response do you not agree with?

Re: Taleb & Sinclair
Before I launch myself at these works, perhaps you can provide me some focus. How might I change my strategy by absorbing the ideas presented in their books?

[/QUOTE]

Or IC is a pair of risk reversals. But I hear what you say about your present focus, and this was a suggestion only.

I agree with SJ #66 to the extent that Taleb's Dynamic Hedging is an interesting read (from my POV for its unusual focus on trading a book of options - although it contains nothing specific to your particular strategy). I wasn't making a comment on the rest of your dialog with SJ. Sinclair is of interest if you want to implement a volatility model.

Good luck, Howard

 

[HowardCohodas]

Or IC is a pair of risk reversals. But I hear what you say about your present focus, and this was a suggestion only.

I agree with SJ #66 to the extent that Taleb's Dynamic Hedging is an interesting read (from my POV for its unusual focus on trading a book of options - although it contains nothing specific to your particular strategy). I wasn't making a comment on the rest of your dialog with SJ. Sinclair is of interest if you want to implement a volatility model.

Good luck, Howard

Thanks. They are now in my to-read list.

 

[arabianights]

8=======================================================d

 

[HowardCohodas]

I have had weeklies in preproduction (small money) on NDX options for six weeks. I'm ambivalent about moving it to production (serious money) and I'm not sure why.

What's your take?