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Michael,
Even though the OEX has taken backseat in my
trading room, I still keep some charts on it. Today the CBOE call and put
trins were in a bearish configuration after 10:05 AM ET. Prior to that
they were mixed. Tick hit less than -600 but a long was avoided
because of the 30 minute rule and the cboe trin config and the breadth
information. So with this setup a long trade was avoided until the OEX hit
an upper distribution(red arrow) and turned south, everything was in sync for a
short, even a +800 TICK. Another rule was to buy puts at the top of the
hour +,-10 minutes depending on tick and prem and some breadth info(in the
posted system it was an intraday McClellan Osc). I'll make another post
following this one showing a more sophisticated layout. There would have
been no problems taking 5 points out today.
bobr
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----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
<A title=beeline@xxxxxxxxxxxxxx
href="mailto:beeline@xxxxxxxxxxxxxx";>Michael
To: <A title=realtraders@xxxxxxxxxxxxxxx
href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx
Sent: Wednesday, January 08, 2003 2:26
PM
Subject: Re: [RT] setups
Bobr, thx for the email I trade options (on a non
US exchange ) & found your post useful...
one point I wld take issue with as being a
bit simplistic (from my experience) however was point 9...specifically
......
"Once you get the one point gain, don't give
it back. Move your stop as the option goes more in the
money."
This sounds nice in theory, but most here are
familiar with the concept of slippage in futures trading ....but in options
trading slippage is worse & can be much worse, than that in futures
trading in my observations anyway (& more so in short dated
options trading which is what you seem to be recommending
here....ie.. "If the trend
is strong and with your trade you can play closer to the
close. This is more significant during expiration week which gives you
the best trades because of the gamma
effect.")
I
realize you were only outlining these pointers from memory of an old system so
my comments may be unfair also you are referring to strongly trending issues
so this adds to the odds of success for your method & makes
slippage less of an issue..but obviously even in strongly trending stocks you
do get corrective retraces ..So I thought it worthwhile
pointing out ...also by my penning this email,somebody may be able to show me
why slippage is not such a big issue in trading US options trading(I have only
traded on the Aust exchange) if so I wld be interested to read the
explanation & may switch exchanges if true...but (in my experience)the
concept of Implied volatility combined with short dated vehicles...not too
mention large spreads in most issues normally can result in very savage
pullbacks in the option bid/ask in a v.short time ..if the basis stock has a
quick retrace/pullback etc..fwiw.
Despite these negative issues I
still find options trading worthwhile..but I have learnt only to trade
sparingly here & when odds are in my favour (I realize your list of rules
above were also towards that end btw & I concur ...but thought it
worthwhile mentioning one of the negatives that you appeared to oversimplify
..(imo))..I think overall (& I realize this is not a revelation)..but most
options trading is more suited to position traders, due to concepts like wide
bid/ask spread & other factors some which I have mentioned above
while futures more suited to daytrading....But if you feel you have a
trading advantage in derivatives ..due to system or whatever I guess that can
help to even the score & keep you daytrading options vs
futures.
Thanks
MichaelO
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----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
<A title=bobrabcd@xxxxxxxxxxxxx
href="mailto:bobrabcd@xxxxxxxxxxxxx";>BobR
To: <A
title=realtraders@xxxxxxxxxxxxxxx
href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx
Sent: Wednesday, January 08, 2003 7:08
AM
Subject: Re: [RT] setups
Here is a rough draft from memory of how I
traded it a few years back. Some may recall statements being posted on
rt.
It is a discretionary, read not proprietary and
not coded, system. Thus it may be difficult to duplicate, but here
goes:
Requires a realtime datafeed, online broker
with discount commissions, and realtime OPRA with no funny stuff like BMI
used to do with options..Set up a chart with the 5 minute OEX in subgraph
one. TICK in subgraph 2 with 5 lines at zero, +400, -400, +600,
-600. Put the PREM in subgraph3 with the fair value, buy level, sell
level lines, updated each day. The CNBC levels worked good, the
w.programtrading levels didn't and seemed to be more useful for breakouts
than cycletrading.
1. Determine the daily trend of the OEX
midpoint, or the pivot trend, has it been going up or
down.
2. Make entries using at the money or one
strike out options in the direction of the trend, but make the
entries on pullbacks against the trend, thus your entries are in sync
with the MM's and not the general public.
2a. Trades can be made against the trend with
lower expectations of profit.
3. Apply classical pivots and fib pivots to the
OEX. Use a combination of the standard daily pivot and S/R levels along
with the FibonacciTrader half range, 0.618 range, range levels for "fuzzy"
entry levels, meaning close enough is good enough. Some days the
standard S/R levels are hit and other days the FT levels are dominant.
Seems to very depending on whether everyone is trading or if there is a
holiday period coming up or just finishing.
4. Wait ~30 minutes after the cash open to make
the first trade.
5. Visualize a time sector at the top of the
hour and bottom of the hour(using a circular 12 hour clock).
6. Enter puts in the time sector
at the top of the hour and enter calls in the time sector at the bottom
of the hour. This puts the odds in your favor of being profitable for
a short period of time. You might use a fast oscillator as price
approaches an S/R level, I didn't.
6a. Toggle the bid/ask quotes during the time
sector and watch for a change or peak in sentiment.
7. Monitor the TICK and PREM to determine the
quality(inhalation/exhalation) of price trend during those sectors and as
confirmation of intraday trend change. There is a dominant 30 minute
half cycle in existance on many days.
When the power players are in the
game, the sector is wide(~+,- 10 minutes) and you can see money coming
in and leaving at the top and bottom of the hour plus minus about ten
minutes. When the sector is narrow(~+,-6 minutes) and the prem and
tick are inconclusive the trend is weak and there might not be enough
followthrough to be profitable. Put entries on strong
bullish days come after the top of the hour, and on weak days the
deterioration begins before the top of the hour. Likewise for calls at
the bottom of the hour.
8. Trade 5 contracts to start with and set
a minimum daily goal of $500.
9. Look for a one point gain from the Ask
entry to the Bid exit(only trade long calls and long puts). Once you
get the one point gain, don't give it back. Move your stop as the
option goes more in the money.
10. Don't hold overnight, and especially
don't hold over weekends or holidays to avoid time decay, volatility change,
and premium adjustments.
11. Increase the number of contracts as
the account grows.
12. Don't overtrade, two to four
roundtrip trades would not be overtrading.
That's pretty much it. Grind it out
day after day. Use stops based on the option premium. Since you
are daytrading, time decay will not be significant unless you get into or
out of a trade too close to the open or close of the day when they are
adjusted. Be wary of premium changes on Friday close and Monday
open. Thus wait at least 15 to 30 minutes after the open and be
careful going into the close. If the trend is strong and
with your trade you can play closer to the close. This is more
significant during expiration week which gives you the best trades because
of the gamma effect. Just be sure you know what you are doing and what
the name of the game is. No doubt there will be controversy about this
system, and it could be improved with additional timing tools.
bobr
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----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
Ray
Raffurty
To: <A
title=realtraders@xxxxxxxxxxxxxxx
href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx
Sent: Sunday, January 05, 2003 3:08
AM
Subject: Re: [RT] setups
Hi Bob,
You wrote "<FONT face="Courier New"
size=3>I had an options system that could quintuple the account in 5 weeks
of OEX trading. It was so boring I quite trading
it.
<FONT face="Courier New"
size=3>
Sent it to me
{;-)
<FONT face="Courier New"
size=3>
Good luck and
good trading,
<FONT face="Courier New"
size=3>
Ray
Raffurty
<BLOCKQUOTE
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----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
<A title=bobrabcd@xxxxxxxxxxxxx
href="mailto:bobrabcd@xxxxxxxxxxxxx";>BobR
To: <A
title=MedianLine@xxxxxxxxxxxxxxx
href="mailto:MedianLine@xxxxxxxxxxxxxxx";>MedianLine@xxxxxxxxxxxxxxx
; <A title=realtraders@xxxxxxxxxxxxxxx
href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx
Sent: Tuesday, January 07, 2003
2:19 PM
Subject: [RT] setups
OK, this is the setup I am looking at for a long
exit/short entry. Todaymarks the 4th day of a positive NDX net
percent up down volume (up -down)/total. A lower high on the
4th bar of a 4 bar set with a higher highon the NDX may be a prelude
to a down day the next day...at least that isthe thesis being
examined. Perhaps it is reinventing the wheel, butdiscovery
sure is fun as is the journey. I had an options system that
couldquintuple the account in 5 weeks of OEX trading. It was
so boring I quitetrading it, |;-)
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