Gary

There are successful traders who employ hold (long and/or short) thru earnings strategies. Granted that is a much different beast that must be managed differently than the "slow and steady" approaches we favor in SO.

@Ophir Gottlieb great product ... thanks for making it available to us at a discount Question - have you considered adding "max drawdown" to the summary "tiles" when running backtests? Really looking forward to some of the new features like the excel download. Thanks again!

Any thoughts on the platforms they have available? If I take the plunge I might try OptionNetExplorer as a front-end (since I'm a subscriber). They offer a pretty nice discount on ONE but I'm guessing you can't "stack" that with the $40 offer for SO subscribers. https://brokerage.tradier.com/platforms

Does real time data come with the account for free?

Nice update Kim. I like the new look and features and especially how there's basically no learning curve. I can tell this place is run by someone who knows his IT

I think greenspan76 is referring to a single calendar, while you are referring to a double calendar. greenspan76's commission per contract is 65.89 / (42 * 2) = $0.78 If I understand your post correctly, your commission per contract is 215.00 / (36 * 4) = $1.49 So yes it seems you could save on commissions by switching brokers. Aside from commissions, you will probably also benefit from better execution (from what I've heard about OptionsExpress). I like IB. TOS and TradeStation are also popular. If you want to negotiate I think you'll have better luck with TOS or TradeStation (although not sure you'll beat IB). I have accounts with all three to enable analysis but trade with IB. Good luck.

not to belabor the point, but shouldn't the difference be the full 67 cents roughly? thinking: long call factors in 67 cent downward drift, times ~50% delta, = ~33 cent discount to parity long put factors in 67 cent downward drift, times ~50% delta, = ~33 cent premium to parity if "parity" is 45 cents (arbitrarily selected), call trades for 12 cents, put trades for 78 cents short call/put not affected by dividend

These calendars must have been slightly away from the money bc the price difference should have been much higher with a 67 cent dividend.

Thanks Kim for arranging this discount for us! By the way, if you have previously tried the trial for ONE, you will not be able to sign up using the link above. In that case, you should ask ONE to configure your account for the SteadyOptions discount. The best way to do that is to create a ticket at their helpdesk (requires registration): http://optionnetexplorer.helpserve.com/default_import Once they configure your account, you can log in to the downloads area (accessible from their home page), using the same userid/password from your prior subscription(s), and your renewal options should reflect the discount.

Yeah I agree there are a lot of mixed signals and that it's usually a fool's game to listen to them. It's just that there are several indicators with good long-term track records that are pointing to trouble. I think outright directional bets would be very speculative, but this information can still be helpful ... for example, we might want to be careful about "over-reacting" to the underperformance of certain strategies in 2013. I think 2013 was a very unusual year, and 2014 promises to be more interesting. BTW I'd be really surprised if 2015 was a bad year. We haven't had a negative pre-election year in the Dow since 1937. This is actually another reason why I think the market is poised to let some steam out in 2014.

I know we have a lot of strictly non-directional traders here... just wondering if anyone is exploring the idea of a medium-term downside bias in 2014. I usually don't have any conviction about market direction one way or the other, but lately I've seen some data points suggesting that we're at or near a market top. It started with a video I saw a few weeks ago on tasty trade. The segment took a look at the 5 secular (long-term) bull markets since the 30's (including the one we're in). So far, all of these markets ran for 54-59 months and ended in a sharp decline of 28-54%. The current bull market started in March'09 and is 57 months old. Click here to see the video. Another indicator that I like to keep an eye on is the Value Line Median Appreciation Potential (VLMAP). VL takes their standard universe of ~1700 stocks and estimates 4-year appreciation potential for each one. The MEDIAN figure is currently 30%, or ~7% per annum. This number has historically been a pretty good indication of market bottoms and tops. To my knowledge, 30 is the lowest figure seen in many years. I believe the lowest it's EVER been is 25. I'd say 80 is a "normal" figure, while market bottoms can see numbers in the 150-200 range (March'09 was 185). If the market goes even 5% higher this figure will be in unprecedented territory. There are successful trading services that use 50/100 as trading signal thresholds for VLMAP. Another data point that would seem to support a sharp correction was mentioned in the tasty trade video. It's "net free credit" - i.e. total margin debt less the cash available in cash and margin accounts to cover margin calls. As of November this figure was at NEGATIVE $130 billion. This means once a correction starts it will likely be exacerbated by margin covering for a while. It's not perfectly clear whether the margin is being used mostly for bullish bets, but with the index put/call ratio at 0.64 (as of Tuesday) and the direction of the market recently, it seems there's a lot of bullish betting going on. I'll attach a spreadsheet showing the calc. net_free_credit.xlsx I'm curious to get other thoughts on this. At a minimum it seems fairly evident that we should not expect the whole of 2014 to be like 2013 was... volatility could be higher, and there could be some sharp moves.

Hmm I haven't tried Virtual Firefox, but I think TWS runs on the Java virtual machine that is intended for desktop applications (independent of any browser).

VNC is very popular and works well most of the time. I usually opt for Windows Remote Desktop when I have a choice... the latter's protocol is based on sending high level rendering instructions, while VNC is based on sending changes in graphical images. Sending the rendering instructions consumes a lot less bandwidth than sending changes in pixels. The good thing about VNC is that you can get client and server for free on just about any platform. With Windows RDP you usually need a "pro" version of Windows on the machine you want to control (but RDP clients are easy to get for the controlling machine).

Have you tried a windows 8.1 tablet running on intel architecture? I haven't tried it, but it seems like you should be able to download the standalone TWS installation file for windows and run it on an IA tablet. Maybe one of the big box stores (e.g. best buy) would let you test it before you buy. Seems like you could get it to work on an android tablet somehow as TWS is a java program and java is supposed to be cross-platform... I just don't have any practical knowledge of how to accomplish that (or if it is even possible).

I also like the ONE software. It's really easy and intuitive to model positions and perform risk analysis. It's missing some basic things like option price charts but to be fair it is a fairly new product and I'm sure they will be steadily adding features. My trial runs out in a few days and I'll likely renew for 6 months. Although I've heard good things about the mentoring, I've decided to skip that for now... taking some of that $6K and investing it in other resources like ONE and the historical option data service that dbh21 mentioned (historicaloptiondata.com).

I love the idea if it works consistently. In theory the price of AAPL should reflect the dividend on the ex date, so that a rational holder of the call would exercise it. Does AAPL not behave like that in practice?

Hi all. I'm just curious about your opinion of Sheridan Mentoring, esp. for those of you who use the service. I hear they are changing the pricing structure to include a $300 annual fee (in addition to the ~$6K initial fee) to access the resources of the service. Still worth it? Also, I'm curious about thoughts on OptionNET Explorer software. It seems really nice... thinking of signing up for a trial. I've heard OptionVue also has a nice backtester but wow the pricing for that product is really complex and I'm not sure if it's any better than OptionNET.

Hey dbh - that pretty much matches what we found earlier... as a trading rule, 2.0 actually worked better than 1.4. If you have some time give 3.5-4.0 a try. A higher threshold in that range seemed like it might filter out some serious losers.

Has anyone tried trading options on some of the other futures contracts (like the e-mini S&P 500 or perhaps EUR/USD options)? Just curious how come of the more liquid ones compare with what we're accustomed to.

Samer - let me first say thank you for sharing your analysis. I have learned a lot by studying it. You have taken the ratio (IV - HV) / IM (I will refer to this as SQ - Samer Quotient) and regressed this measure against median returns for 4 categories of trades ranging from losers to winners. The R-squared was 98% (pretty amazing). The SQ sure seems to be telling us something important. This was certainly exciting to see but something strange happened when trying to translate these categorical medians into concrete trading rules. It turns out the median of the "worst" category (median SQ 2.08) seems to be the close to the best trading rule (average 3.5% return vs. 2.06 best of 3.8% return), and the median of the best category (median SQ 1.42) seems to be a relatively poor trading rule (average 2.4% return). By trading rule I mean "if the SQ is less than X, then do the trade, otherwise skip the trade." Of course I understand that average return is not the end of the story (you have to take capital availability into account) but it is informative nonetheless. See the attached spreadsheet for details. The "trading rule" sheet builds on your analysis. I used excel "data tables" to test the effects of numerous trading rule thresholds. You can see that the numbers jump around a lot (suggesting a sample size too small to infer from) until you get to a SQ of 2.0-2.5. 2.06 is the optimal threshold (from an AVERAGE return perspective) for this sample. If you look at the numbers further (see the "profitable" column) the trades seem profitable enough to be worthwhile all the way up to SQ's of 3.5 - 4.0. Long story short, this is what IMHO I think we can infer from this analysis of this sample: We should be leery of trades with SQ's in excess of 3.5 - 4.0 The SQ is clearly a powerful metric that warrants further study as our sample dataset grows Thanks again Samer for sharing your knowledge with us! This is just my opinion... looking forward to hearing what others think. p.s. Kim - is there a way to configure the site so we can upload *.xlsx files. Currently we have to zip the file before the site will let us upload it. Gary SO Samer Analysis.zip

As far as I know it's not possible on IB to be both long and short the same contract in the same account. If you are long 10 contracts and you sell 5, then you are "selling to close" 5. If you are long 10 and you sell 15, you are "selling to close" 10 and "selling to open" 5. To me this functionality is desirable as it has the effect of minimizing your commissions. Thus, if your physical position is made up of several logical positions you have to track the logical positions separately (perhaps in a spreadsheet or through TOS thinkback or something).

Awesome post Mikael thanks for sharing. I want to read all of Augen's books and it drives me crazy not having the time ... PaulCao I'll take a stab at the math question: It looks like what this is doing is converting a population stdev to a sample stdev. When you calculate the stdev of a population you take the sum of the squared differences from the mean, divide by "length", and take the square root. However, if you are inferring the population stdev from a sample, you have to divide by "length - 1" to get an "unbiased estimator" of the population stdev. The reason for this is to adjust for a fairly esoteric mathematical concept known as the "degree of freedom" taken up by using the sample mean as an estimator for the population mean before computing the sample stdev. I did a google on ToS's stdev function and it does appear to be using the population version, so this adjustment appears to be correct. Here's a link to the formula for the ToS version: http://demo.thinkorswim.com/manual/dark/thinkscript/reference/Functions/Statistical/StDev.html. Note that in Excel, the "default" stdev function is the sample version, and you have to use stdevp to get the population version.

I don't think there is a maintenance minimum for a ToS account... just the opening minimum. I have $500 in mine and it works fine.

Good observation Mikael. I recently discovered this section (the guys on tastytrade were talking about it) and it provides some really cool stats.

just building on PaulCao's comment ... in many cases the lowest iv/hv are companies being acquired. long story short you have to weed out a bunch of names before you can really start the analysis based on this metric.