Thursday, October 11, 2012
AAPL Trade
Just before the close I added an AAPL Ratio Butterfly. I believe that there is not much risk on the downside. The RB is designed to be profitable above 575. I don't expect it to go in that direction and am rather looking to harvest profits as we hit first 10% and then 15% on a journey upward. I love butterflies. They can be structured to fit a scenario while at the same time giving enough protection when my view is wrong, mostly still making a profit.
Wednesday, October 10, 2012
Taking my Profit
The pic below shows a trade I have on: a double butterfly. You can see details of the trade on the pic. There was a long call as part of the trade but I have taken profit on it. The position is showing a profit of almost 10%. The problem is SPX is more difficult to get fills in than RUT and I can't get out without giving some profit back.
While ETFs are easier to get fills in, the commissions are too high. The problem with SPX is that it's still pit traded and has high volume - usually from big players. My small size seems to be ignored. I don't seem to have the same problem with the RUT. While I'm an ex local, getting rid of the pits couldn't happen soon enough for me. Even with the technological aids that didn't exist when I was in the pit, pit traded instruments are a lot less efficient for retail traders than the electronic traded instruments.
While ETFs are easier to get fills in, the commissions are too high. The problem with SPX is that it's still pit traded and has high volume - usually from big players. My small size seems to be ignored. I don't seem to have the same problem with the RUT. While I'm an ex local, getting rid of the pits couldn't happen soon enough for me. Even with the technological aids that didn't exist when I was in the pit, pit traded instruments are a lot less efficient for retail traders than the electronic traded instruments.
Monday, October 1, 2012
Finding Trades
I'm flat on all my trades except the SLV which I'm trying to close. I got out of the calendar part of the trade and now just have the butterfly. I'm trying to sell it at 1.50 which will put me into profit of about 1%+. This recovers the loss on the calendar. Still not a fan of calendars. It's partly me and partly calendars. They are just not as good a risk/reward as butterflies.
Trading options is either keeping all your eggs in the same basket and watching it carefully which is what I did mostly on the floor - I had two guys working for me and each traded just one market. The other way is to create a diversified "portfolio" of trades. Somehow, off floor, I'm not comfortable carrying anywhere near as large a position as I used to carry when I was on the floor. Here I feel like a retail trader when on the floor I was the market, or at least one component of it.
My butterfly trades have been very solid but a black swan is always hiding in the bull rushes so I decided that diversification was the way to go. I day trade futures for a couple of hours and then want to do other things away from my computer. The technology is there to do that with option trading so the challenge was to find enough trades on a regular basis.
After trying a lot of things, I decided to turn to the technology I know. I've set up an algo to look at a list of stocks, ETFs and indexes against which I do option trades. I have two live algos: one uses daily data and the other uses bars drawn every 3 hours. I can do this on both TradeStation and MultiCharts.
I have a strategy live that finds the trades. OptionFlo. The trades are on the underlying and don't get executed automatically. What happens is that I get an email alert when there is a possible trade. It can only happen on the US open and at set 3 hour intervals so I know when I could expect an email if I'm not on a PC.
When I get a mail, I jump onto my iPad or laptop and have a look at the chart on my VPS in the cloud. If I like the chart I put on a trade - a vertical credit spread, Iron Condor or Butterfly. This process can take about 6 minutes as my morning prep gives me a heads up of the possibilities - alerts are not a surprise. I also get emails if the market hits milestones on positions I may need to protect. All exit orders are in the market GTC after a trade is initiated.
I'm using both MultiCharts and TradeStation for OptionFlo. The big advantage with this methodology is that I have a structured and consistent process for finding trades that have been back tested as both high win rate and profitability. The pic below shows the RadarScreen that looks for trades. There are two screens: a daily and a 180 minute. When I get an alert, I click on the symbol which is linked to a chart and I make my assessment on whether to take a trade. The shorter term trades are either a Vertical Credit Spread or a Directional Butterfly. If the markets look like they are staying in a range then an Iron Condor is my trade of choice.
Trading options is either keeping all your eggs in the same basket and watching it carefully which is what I did mostly on the floor - I had two guys working for me and each traded just one market. The other way is to create a diversified "portfolio" of trades. Somehow, off floor, I'm not comfortable carrying anywhere near as large a position as I used to carry when I was on the floor. Here I feel like a retail trader when on the floor I was the market, or at least one component of it.
My butterfly trades have been very solid but a black swan is always hiding in the bull rushes so I decided that diversification was the way to go. I day trade futures for a couple of hours and then want to do other things away from my computer. The technology is there to do that with option trading so the challenge was to find enough trades on a regular basis.
After trying a lot of things, I decided to turn to the technology I know. I've set up an algo to look at a list of stocks, ETFs and indexes against which I do option trades. I have two live algos: one uses daily data and the other uses bars drawn every 3 hours. I can do this on both TradeStation and MultiCharts.
I have a strategy live that finds the trades. OptionFlo. The trades are on the underlying and don't get executed automatically. What happens is that I get an email alert when there is a possible trade. It can only happen on the US open and at set 3 hour intervals so I know when I could expect an email if I'm not on a PC.
When I get a mail, I jump onto my iPad or laptop and have a look at the chart on my VPS in the cloud. If I like the chart I put on a trade - a vertical credit spread, Iron Condor or Butterfly. This process can take about 6 minutes as my morning prep gives me a heads up of the possibilities - alerts are not a surprise. I also get emails if the market hits milestones on positions I may need to protect. All exit orders are in the market GTC after a trade is initiated.
I'm using both MultiCharts and TradeStation for OptionFlo. The big advantage with this methodology is that I have a structured and consistent process for finding trades that have been back tested as both high win rate and profitability. The pic below shows the RadarScreen that looks for trades. There are two screens: a daily and a 180 minute. When I get an alert, I click on the symbol which is linked to a chart and I make my assessment on whether to take a trade. The shorter term trades are either a Vertical Credit Spread or a Directional Butterfly. If the markets look like they are staying in a range then an Iron Condor is my trade of choice.
Subscribe to:
Posts (Atom)