Kevin_in_GA
4,599 posts
msg #131679
- Ignore Kevin_in_GA |
10/2/2016 2:23:27 PM
Imho, the only reasonable instruments to use for this system are options spreads or futures spreads or other hedged instruments, because, as Kevin says, those open drawdowns already seen in 2 short trades are actually nothing, compared to the worst case scenarios, seen in the past( take a look at those Wild , fast swings in 2008, 2011 : without stops you could be out of money just by being once only on the wrong side of the market)
++++++++
I think that proper position sizing is important - the system allocates between 5-10 "units" based on trade signals, so that should mitigate some of the concerns. A 50% drawdown in 1 unit translates to only a 6-12% drawdown in total equity, depending on your number of units traded.
|
mahkoh
1,065 posts
msg #131684
- Ignore mahkoh |
10/2/2016 3:38:14 PM
Sell the Oct18 10 call for 5.90, buy the 23 call for 0.40 as insurance against apocalypse and your max risk is $ 750. All else remaining equal the value of the futures should drop to spot VIX value at Oct19 expiration and you stand to make some $250. A 3/1 risk/reward ratio is not bad for an option selling strategy in my opinion.
|
dtatu
143 posts
msg #131685
- Ignore dtatu |
10/2/2016 3:47:19 PM
mahkoh
I thought the VIX future has a multiplier of 1000?
Then, 23-10=13-5.9=7.1+0.4=7.5 x 1000= 7 500 $ risk
Am I wrong?
Also , you give yourself too little time, with the short option deeeeeep in the money?
|
dtatu
143 posts
msg #131686
- Ignore dtatu |
10/2/2016 4:08:16 PM
Anybody has any idea about :
Vix futures daily chart ( let's say VIX Oct 2016 contract): The OPEN represents what time of the day??
If we take Sep 30 : the Open is ? ( I see on the contract description an almost 24/24 hour session , with a break from 15.15-15.30 every day? The Open of Sep 30 is Sep 29 15.30??( extended hours) or Sep 30 7.30 AM ( regular hours)
What about e mini SP (ES) daily chart :the open Sep 30 is Sep 29 18.00 or ??
Thanks for the help
|
gmg733
788 posts
msg #131687
- Ignore gmg733 |
10/2/2016 4:23:02 PM
I was not trying to argue. I'm always open to opinions. It makes me a better trader. Sorry if it came off that way.
Options spreads on the Vix is what I am proposing. It is just unconventional for sure selling in the money options. But being cash settled and defining my risk on order entry is what makes it appealing to me. You can tweak the risk/reward if you wanted too. I just started with a 1:1. I like to trade a lot and keep it small so I have not looked at Vix futures (though I do trade futures a lot) and with good reason. Doing a Vix futures spread is a no-no for me. I also don't use stops. No need to on defined risk for sure, it's that risk is defined on order entry thing again. I know my max loss on entry. Let the trade play out.
This is great dialog nonetheless. I plan to paper trade naked debit spreads on Vix options just to see how they behave in realtion to the systems results. What worries me about Vix options is the bid/ask differential. Is it going to be tight enough to enable gains on positions that only get small moves.
|
gmg733
788 posts
msg #131688
- Ignore gmg733 |
10/2/2016 4:36:07 PM
@dtatu
Is this what you want? /VX. http://www.cboe.com/micro/eth/
/Es. http://www.cmegroup.com/trading-hours.html#equityIndex
Es closes at 3:15p daily and reopens at 3:30p.
|
gmg733
788 posts
msg #131690
- Ignore gmg733
modified |
10/2/2016 4:43:02 PM
I re read your note. The next day's opens current day minus weekend stuff. So the 30 th session opens on the 29th. I know the ES and VX futures work this way. Some other futures do not, cotton, coffee and etc have different hours
|
mahkoh
1,065 posts
msg #131691
- Ignore mahkoh |
10/2/2016 5:11:14 PM
I thought the VIX future has a multiplier of 1000?
Then, 23-10=13-5.9=7.1+0.4=7.5 x 1000= 7 500 $ risk
Am I wrong?
Also , you give yourself too little time, with the short option deeeeeep in the money?
------------------
Futures do have a multiplier of 1000, but I was talking about the options.
Deep in the money, true. But if we trade upon a signal that VIX is likely to decrease in value, then why limit our profit potential? The only possible benefit I can think of from choosing a higher strike would be that maybe you have to put up a little less margin, but I actually doubt that.
But you are correct that a 30 % spike down is far less likely than the same % spike up.
|
dtatu
143 posts
msg #131692
- Ignore dtatu
modified |
10/2/2016 10:16:48 PM
Options on futures have always the same multiplier as the underlying:
Oct 18 10 call at 5.90= 5 900 $, as far as I can tell
And Yes, with only 2-3 weeks left, if the market goes the other way, you have the equivalent of a future going against you, and , maybe not having the time to come back in such a short lapse of time.
Also the ratio risk reward is not favorable at all for a 10-23 bear call spread.
Read gmg733 post on how he would chose the strike prices to have a favorable risk/reward ratio.
|
dtatu
143 posts
msg #131693
- Ignore dtatu |
10/2/2016 10:17:52 PM
Gmg733
Thanks for the infos ( yes, the 2 message is the one I was looking for)
|