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Rudolf,
thanks for your response. I understand better now what you mean. It seems we
are discussing two different things here.
The trading system you are working on (and with) uses at-the-monies only,
doesn't it? It sounds very interesting the way you are describing it, but it
is not what I would call a true OPTION trading system. Though of course
perfectly legitimate and honorable, and hopefully very profitable, such a
system trades options not much differently than one would trade futures.
The German trading company I told you about had quite a few of these
systems, even in the prehistoric times nine years ago!
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?
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.
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!
Kind regards,
Michael Suesserott
-----Ursprungliche Nachricht-----
Von: owner-metastock@xxxxxxxxxxxxx
[mailto:owner-metastock@xxxxxxxxxxxxx]Im Auftrag von rudolf stricker
Gesendet: Monday, August 14, 2000 19:42
An: metastock@xxxxxxxxxxxxx
Betreff: Re: What options to sell?
Michael,
On Mon, 14 Aug 2000 13:17:06 +0200, you wrote:
>about nine years ago I worked with a German trading company on exactly such
>a project. We did our own C++ programming (quite a novel language at that
>time) with a programming staff of about a dozen highly qualified people,
>plus two Cray supercomputers and a number of UNIX workstations.
Maybe, you were too early, and you had too much computational
resources available ...B-)...
>Now with the advent of new electronic exchanges, and you are right to
>mention the DAX contracts here, the situation might slowly change. Still,
>even with the DAX, I don't know if there would be a bid/ask history on
>options that goes back a sufficient number of years.
Is it really necessary to have bid/ask histories? Imo, most TA people
do not use them in their systems, even if they may be very helpful.
>I can only repeat that I have yet to see a real mechanical option trading
>system. If you know of one, or have written one yourself, I'd be interested
>to know.
I have done some work on an option trading system, which not
concentrates on "non-directional strategies" (like most option traders
seemingly do), but looks at option markets as _dynamic systems_ (in
contrast to most stationary option pricing models).
The system employs two components with different "frequency horizons",
where the "low frequency" part (5 ticks or more) deals with the
current "dynamic market trend" (based on a _dynamic_ option pricing
model), and the "high frequency" part (1 tick or more) handles
external disturbances coming along from economics, politics, etc.
The "high frequency" part as a pure TA model (, which I also use for
practical trading at this time,) is based on a sliding ROC indicator
working with "continuous" prices "at-the-money" & 20 days to expiry.
Results are satisfying, even if the out-of-sample profit is only about
2% of the value that could be achieved in a-posteriori calculations.
Presently, I work on some refinements of the "high frequency" model
and on basic out-of sample tests of the "low-frequency" model. For
both I have a long list of potential refinements and ToDos, which wait
for implementation because of my limited time and resources available
for this project.
Let me know, if you are interested in any detail.
mfg rudolf stricker
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