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Michael,
On Mon, 14 Aug 2000 22:46:49 +0200, you wrote:
>I understand better now what you mean. It seems we
>are discussing two different things here.
Maybe, not really different, but one thing is a part of the other,
please see below.
>The trading system you are working on (and with) uses at-the-monies only,
>doesn't it?
Actually, I do it for at-the-monies only, but of course it can be done
for any "network" of options in-the-/out-of-money and for any
time-to-expiry. Its a matter of resources only.
>It sounds very interesting the way you are describing it, but it
>is not what I would call a true OPTION trading system.
If I would extend my "high frequency" (i.e. TA-based) system to
calculate signals for a "network" of options (see above) in parallel,
it would automatically include all the nice things, that traditional
("non-directional") option traders concentrate on, and your statement
below would no longer be valid:
>What is still unavailable, at least as far as I know, is a mechanical system
>that can trade option strategies such as ratio spreads, butterflies,
>strangles etc. This is where options can play their strengths, isn't it?
I personally do not restrict myself to "non-directional" option
trading, because this imo is a artificial restriction which claims the
"efficient market hypothesis" to be 100% valid for the underlying,
beside of some other simplifications of real markets. That's why I'm
working on something like a "dynamic market trend (DMT)" model, i.e.
my "low frequency" system.
>It would be a wonderful thing to backtest and mechanize the trading of all
>the option strategies that are at our disposal, including the readjustment
>of positions with follow-up strategies, just at the push of a button.
Systematical back testing of all the traditional (non-directional)
option strategies imo would be an unnecessary expenditure, because all
the _useful_ combinations of options to trade would "automatically"
show up if we apply an appropriate system modeling approach to a
"network" (see above) of options with "constant trading strength".
This way, my option trading system imo can be seen as a more general
approach, that includes the specialized "non-directional" strategies,
which particularly becomes true, when the "high frequency" (TA-based)
and the "low frequency" (DMT-based) system components are used in
combination.
>We have great analysis tools, to be sure, but no way to backtest strategies
>on a large scale. And the reason is - insufficient historical data!
Sorry, but I wouldn't agree here fully. Even if it might be convenient
to have more historical data, the information contained in the
historics available today is used only to a very small extent. This is
in excellent agreement with other areas and disciplines, like e.g.
product design and business management, where only between 5 and 50%
of the available know-how is actually used, for which the reasons may
be seen in our education.
mfg rudolf stricker
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