I typically use a fixed lot size for each entry. If it starts really running you can break your "entry" in 2 legs so you add 1/2 of the new entry at a time. For leverage, I wouldn't start with anything larger than 1:1 per entry. Especially when ...

100% agree. These approaches are usually red herrings. Would be interesting to see chart if it showed all of the projected values at each step so you could see the differences between projected and realized values.

Hey parisboy, Do you mind clarifying what you are trying to show in these? I assume the bands are where you are looking to enter to trade back to fair value, but am curious how you are calculating their widths?

Yes sir! They were “highly leveraged” which caused them to blow up. It’s the same thing that causes anyone who has ever blown up in the past or will blow up in the future. Nothing new or revolutionary about it. A tale as old as time. Even with ...

Thanks for dropping in alphaomega! Big fan of your work! You guys are really missing the point I am making though. I have explained the exact question quoted in detail multiple times in the thread. Specifically, the information around delta hedging ...

This is exactly what I am saying.

Thank you! The 3 charts together paint a good picture of what I am trying to describe with skew. If you slice certain parts, it appears like there is some kind of skew. However you are simply slicing down to small sample sizes, where the illusion of ...

very cool graph. With the +3% and -2% graphs, are things changes of + or - 3%, etc? Or only looking at +3% moves (not -3% in last 24hr moves)? can you draw the graphs with no filtering, so it captures all 1.4m data points?

No no no, it’s not a straddle. I am talking about a single call or put contract. Even with a SINGLE contract, you are trading volatility in the aggregate of your trades, not direction. A some example: Here is a call price with following inputs: ...

How do you know this single path is a true representation of population skew and not just a long lead on a distribution with no skew? I have tried to solve that problem for years and years and years but never cracked it… For every path like this, ...

Haha yes on the surface it does appear directional, similar to an option contract. But at its core, it’s not a directional bet. Lets think back to how the price of an option contract is calculated. For one contract in isolation, it’s a directional ...

Hedging as described above is not part of the strategy. Above comments are to illustrate other attempts at isolate variables to try and trade, besides skew.

I know a lot of folks are tired of hearing me harp about option theory as it relates to dynamic hedging, but it’s really an amazing example of isolating a variable to trade that isn’t skew. it’s also the core inspiration for this method. Instead of ...

Thanks for clarifying! Very cool stuff. something I think to be careful of, is not getting back into the habit of trying to forecast directionality of price. as soon as you do this, you are back to betting on skew more than anything. And if you add ...

I am a little confused what exactly the bands are showing if you don’t mind clarifying. Is it saying at this point (a close price and the bands at this index), the MA will meet somewhere in the bands range within 200 candles approximately 68% of the ...

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Yeah, so this is an instance where you'd almost certainly end up with a net loser across all the positions for this move, whether you rolled or not. This large of a move is a <3% (probably even a less than 1%) of the time move, and these are the ...

The risk may not be as tolerable for others but I find it to be fine/easy to deal with. Also if you understand risk/reward and probabilities it should be fairly obvious that if your win rate is above 50%, your drawdowns will almost always be larger ...

There were 36 total trades (unique orders/entries) for the month as shown in the last pic. I would definitely be defending positions a lot harder if DD was approaching 15%-20%. Something to understand is DD will always be pretty large relative to ...

Here are my results for August with this strategy, The Month started slow but ended well Many will turn their nose up at 4% (which is a lower monthly return than usual) but 1.04^12 = 60% annualized. So I'll take 4% from stress-free, low-intensity ...