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The big assumption here is that the volatility of the underlying symbol
correlates positively (and closely) with the volatility of the equity curve
of said system that trades that symbol.
Has this been shown to be true ? Maybe for some systems.
They may be related trading entities, but they are not the same.
For instance, I could have an option straddle-selling system that does
wonderful (high equity slope)
when volatility is low, but vise-versa when the underlying is girating away
from my strikes and the premiums that I've sold are soaring against my short
positions.
> -----Original Message-----
> From: Mark Brown [mailto:markbrown@xxxxxxxxxxxxx]
> Sent: Thursday, February 03, 2000 3:01 PM
> To: Phil Lane
> Cc: Omega-List
> Subject: Re[5]: Rocket Science
>
>
> Hello Phil,
>
> PL> Hi Mark,
> PL> Can I assume you would REDUCE the size when the equity curve
> gets volatile,
> PL> and not the other way around?
>
> very sharp phil, but just the opposite. the old saying when the going
> gets tough the tough get going applies. so rather than be scared of
> volatility i embrace it.
>
> PL> Also wondering if you would treat Upward volatility in the eq curve
> PL> differently than Downward.
>
> extensive test have shown that this is the most survivable way to
> trade it. however i don not personally like to back off that way.
> however because i am a fully mechanical system trader i obey and
> comply with what the computer tells me is the best method. i want to
> make money NOT be right.
>
> PL> a thousand questions,
> PL> phil
>
> I'm in an answering mood..
>
>
> --
> Best regards,
> Mark Brown mailto:markbrown@xxxxxxxxxxxxx
>
>
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