It’s time for an update on my long SP500 put position. The SP500 closed at 1262.80. I’m long the Sep 1275 puts. The delta is up to 0.55. That means it’s 55% of a full short position. The sentiment indicator hit the lower band with today’s close. Small cap stocks in the Russell are taking […]

Our short signal was activated this morning on the open in the SP500 at 1395.75. We had a low Daily Average True Range and a High Russell SP500 spread. The signal was activated when today’s open was below Friday’ low. The chart below shows the indicators.

I put on a risk reversal in the Sep SP500 on May 20, 2008 with futures at 1421.00. I bought the Sep 1275 puts for 23.00 and sold the Sep 1545 calls for 13.00. My indicator for the short is a combination of two factors. I use a proxy for option volatility. It is […]

Today’s article roundup
A Tale of Two Housing States Real Clear Markets
Writedown Bug For Lehman Fortune
Trichet Says Shocks Aren’t Over for Europe’s Economy, WSJ Says […]

Maximum Adverse Excursion(MAE) is the maximum loss of a trade during its complete time period. It can be a valuable tool for stop placement. If your winners have low maximum adverse excursion then moving your contracting your stops can dramatically increase your results.
Example
I have an intraday daytrading breakout system in a Sector index. It is […]

How can volatility expansion help the daytrader?
It sounds like a simple concept. I have a little homework for you. Click on this Amazon link . It is a book by Toby Crabel. I’m sure that you have never heard of him. But he is a legend in the managed futures industry and manages 5 Billion […]

After designing a breakout strategy, it’s time to improve the results. There are many methods but I will describe my two favorites. Filtering before the trade is one technique and recognizing a trend day is another method.
Filtering the days
Look for trends in the daily pl of your trading. Identifying a trend in pl that […]

Great poker players calculate the odds before every move. They determine the expected value based on their cards and their estimates of their opponents cards. If the number shows a positive expected value to call or raise then they follow the numbers. Great traders follow the same philosophy.
Expected Value Calculation
The essential calculation is the expected […]

Market prices seem to move randomly. One parameter that does have some predictive power is volatility. A good measure of volatility is implied volatility. Implied volatility can be a good parameter of the assessment of risk in the marketplace. The problem is that volatility tends to reflect an interpretation of past movement and less of […]

The WSJ has a good editorial from Pete DuPont about the tax debate. He offers a sound alternative which include tax simplification and choice. Give the people a choice and they will find the optimal solution.
Pete DuPont editorial
A much more interesting approach was introduced in the House three weeks ago by Rep. Paul Ryan, a […]