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Beginner Trading Group

Discussion in 'Beginner Traders' started by Harry, Feb 18, 2017.

  1. Harry

    Harry Well-Known Member

    I thought this may be a good thread for offline commentary about this group. Tim Pierson recently started it and I like it but I can not participate live. Thanks for doing it.
     
  2. Harry

    Harry Well-Known Member

    In the second session (Feb 16, 2017) at around 18 minutes, Tim has a document about a trade plan and while I do some of it, I never considered "distracted and hence get out of the trade" and in reality that's when I have had my bigger losses. (thumbsup)

    While it is a small document and I can type it, it will be good to have its copy in the Library.
     
  3. Tim

    Tim Well-Known Member

    Thanks Harry. I plan to discuss my tradelog excel sheet in more detail next week, and will post a copy in the library so you can use it. No need to type it in. It does a lot more than just track my trades, which is why I would like to discuss it. I also plan, in the next 2 weeks to show and discuss another spreadsheet I have for planning your lot size based on capital available for roadtrip trades or any other trade you want to use. Again I will post a copy at that time. OK to wait for a week or two?
     
  4. Harry

    Harry Well-Known Member

    Absolutely no hurry. BTW spreadsheets are complex and I dare not clone them as you can clone look and feel but never the formulas, I was talking about the tiny word document you had.
     
  5. status1

    status1 Well-Known Member

    Tim,
    On the most recent presentation where you have the table for the debit spread data I think there may be an error
    For the DS that is ITM I think it was 2390/2370 it shows the strike price as 2307 where it makes $500 at t+14
    while the ATM was at 2311
    This doesn't look right to me
    Are you sure it's not 2317 instead of 2307 ?
    This should make the $500 sooner than the ATM and OTM

    Also at one point you said that the low theta is good while you were pointing at the OTM theta which was negative
    I am not sure if you were talking from the standpoint of an adjustment but a debit spread by itself with negative theta would loose money over time
     
  6. Tim

    Tim Well-Known Member

    You are correct there is a problem with that chart. I think I made the graphical snapshots and then made the table from live TOS after the market had moved.

    ITM is incorrectly listed as 2390/2370 but the graph is 2410/2390.

    Since the $500 point was done at t+14, and I didn't snapshot those graphs (the graphs are t+0) I will have to reproduce the example. You are correct that the ITM should reach $500 sooner than ATM or OTM, as long as it doesn't go above its 75% point or so before doing it and you paid less than $15 for a 20-wide spread. If $500 was only reached at say, 90% of its maximum quote I suspect it would actually be at a lower price than ATM or OTM.

    Since a DS is a long position, and you have bought it, ideally it wouldn't have much theta decay. A negative theta would be losing money day by day, while a positive theta would be making it as can be seen in the graph at points far above the long strike price. The criteria should have said high theta was good. On the graph above where the expiration line crosses below zero the DS will be losing to theta every day as the t+n line will essentially be "moving" towards the expiration line (save for a small point range where it will actually be moving above the expiration line for a while - this is a very important characteristic to know as it is how the roadtrip can make a lot of its profit).
     
  7. status1

    status1 Well-Known Member

    Thanks for the clarification
    That makes more sense since the max profit you can make is $770 for the ITM DS , so to make the $500 the underlying would have to be lower

    I have a separate question about the monthly bar chart
    I understand the p/l by strategy has an important value when you want to see which strategy is working better but I am not sure what value has p/l by month other than just as a business statistic
    I mean it could be that you just placed a trade maybe a week before the end of the month so it may not show much gain or loss so looking at it by month you can't say which trade was good in any one month
     
  8. Tim

    Tim Well-Known Member

    All the bar charts show results only for closed trades. I dont enter p/l for any trades while they are still open. So in your example a trade placed just before month end would not be reflected.

    This is also why i consider a month to be at the monthly expiration on the third friday. By then all my trades for that expiration series are closed and so the charts show me how much i made per expiration.

    This is also why in the expiration month i will put say, 5May so i know the series, but in the expiration column i put 5/19/17 since that is the next monthly expiration cycle and so the trade will go into the may bar chart.

    The chart by month is the one i use the most to see how my trading results are doing.
     
  9. status1

    status1 Well-Known Member

    I guess maybe I misunderstood the way the spreadsheet is made

    There was one point a little after the 25 min mark where you said once a month on expiration day you enter the totals for the month
    It looks like you have two end of the month dates there
    Is that used for the monthly bar chart or is that something unrelated ?
     
  10. Tim

    Tim Well-Known Member

    Here's an example. In the ExpMonth column, circled in red I have two trades using the Dec2 expiration, and two using the DEC expiration. The "next" regular monthly expiration for these trades is the 3rd Friday of December, so in the "Exp" column I put 12/18/15. It is the "exp" column that drives the bar chart for monthly p/l. This data is on the "income Options" tab. When a trade is closed I enter the p/l net of commissions and it drives the bar chart.

    upload_2017-2-28_7-19-42.png

    On the "Equity Curve" tab, I enter the "as of" date column as of the date that I am reading the account balances. These dates drive the "options account equity curve" chart. These are the ones I enter in once a month:

    upload_2017-2-28_7-27-52.png
     

    Attached Files:

  11. status1

    status1 Well-Known Member

    Yes the equity curve tab is the one I was wondering about
    What is the importance of tracking it by the month ?
    I am not sure what value that would bring other than just a reference or business statistic
    There could be trades that expired and also trades that just started in one month or there could be unrealized gains or losses which don't mean too much until the trades is closed
    Can the equity curve be based on the trades closed ?
     

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