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2020.11.11 – SESSION 17 – GO ASK A TRADER

3 replies, 2 voices Last updated by Sherri Locke 6 months, 2 weeks ago
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    • #16871

      Sherri Locke
      Keymaster
      @KDAKSj4ux
      Going to The Trading Triangle LIVE 2016Ultimate Income Trader Workshop

      The video index of this session is posted and ready to view. Enjoy!

    • #16634

      Sherri Locke
      Keymaster
      @KDAKSj4ux
      Going to The Trading Triangle LIVE 2016Ultimate Income Trader Workshop

      The GO Ask A Trader recording from earlier today is ready to view. Enjoy!

    • #16629

      Gianfranco silveri
      Participant
      @ginothe1@gmail.com
      Points: 386
      Rank: Freshman

      Apologize I am not posting my question 48 hours before the meeting. If it is too late, maybe this topic can be discussed in the Monday morning webinar? Thanks.
      ***

      Hello John. newbie here. I just finished back testing the Bull (RUT) strategy using ONE. I did follow the guidelines as per my understanding.
      I back tested the strategy back to the start of 2011. Every month. I learned a lot, and the strategy performed beautifully from 2011 to 2017. However, I also found that the strategy has consistently underperformed the S&P 500 ‘buy and hold’ since the beginning of 2018 until today. These are 3 consecutive years of underperformance. I did cross check my results with your Tlogs, to make sure I was not not doing something wrong. For reference, I was back testing a 10-lot put spread.
      Worth noting is that starting 2018, a drawdown occurred lasting all the way to March 2020. The max drawdown experienced was $20,450…. yes very significant, when considering that the capital required for the strategy is around $28k. this means that by April 2020, if I wanted to continue trading the strategy, I would have invested in the strategy $20,450 loss + $27,500 for next trade ≈ $48k. as of today, the strategy has not recovered all the capital lost in the drawdown. In other words, if I would have started trading this strategy Jan 1 , 2018, I still would be under water today.
      Is it possible, that due to most current market conditions, that the strategy lost its edge and efficacy?
      I will suspend trading the Bull until I can get a better understanding of the strategy, or figure out whether I am doing something wrong. I do understand trading strategies are not 100% infallible, and some periods of underperformance and relative sizable losses are expected, but I find 3 consecutive years a bit concerning, particularly if I am new to the strategy.
      Appreciating your feedback,
      Gino

    • #16617

      Pierre Antoine CHAPELLE
      Participant
      @paqueuc@hotmail.fr
      Points: 318
      Rank: Freshman

      Hi John,

      A calendar is a positive Vega trade.

      A butterfly is a negative Vega trade.

      After the election day, the IV dropped and both trades gained value (if set ATM).

      When you do the maths, you understand that :

      The calendar gained value because the front month lost value quicker than the back month.

      The butterfly gained value because the ATM short lost value quicker than the long wings.

      My questions are :

      -how do analytical softwares calculate the Vega ?

      -except the theoretical “Vega means +$1 in P/L when the IV rises +1 point.” what does really mean to be vega positive if a contraction in volatility produces a gain ? Is this behaviour could only be seen with calendars (due to the fact that it has no intrinsic value ? or what else ?) or could we see this behaviour on other types of positive vega trades ? And last, is this behaviour is related to the speed of the change in IV ?

      Thanks John,

      Regards,

      Pierre Antoine

    • #16550

      Sherri Locke
      Keymaster
      @KDAKSj4ux
      Going to The Trading Triangle LIVE 2016Ultimate Income Trader Workshop

      We highly encourage all participants to post their questions and topics to be discussed in the REPLY TO text box below at least 48 hours in advance of this meeting.

      Click here if you would like to request a mini coaching session.

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