Discussing the article: "Trading Options Without Options (Part 2): Use in Real Trading"

New comment
 

Check out the new article: Trading Options Without Options (Part 2): Use in Real Trading.

The article considers simple options strategies and their implementation in MQL5. We will develop a basic EA that will be modernized and become more complex.

In the first part of the series, we briefly described the option trading instrument, its capabilities, advantages and disadvantages. We developed a theory and practical implementation in MQL5 of a method for emulating an option using an underlying asset. It is time to try options in action in actual market trading. 

To this end, we need to create an EA that will map option emulation levels into real orders and positions on the underlying asset and continuously rebalance the resulting total position.


Author: Dmitriy Skub

 

That’s really interesting – thanks for the information; I’m reading through it and studying it in detail....

 

Thanks, Dmitry, for the article!

I haven’t read it yet, but I’ve been really looking forward to another article on this topic!

 
Sergey Chalyshev #:

Thank you, Dmitry, for the article!

I haven’t read it yet, but I’ve been really looking forward to the next article on this topic!

You’re welcome! There’ll be another article on more complex strategies, complete with visualisations of the levels.
 

Good afternoon!

Of course it’s interesting.

BUT!

You:

--> Let’s suppose we’ve decided that, within the day, the EUR/USD price will move predominantly upwards....

---> Now let’s suppose that the next day we decide that the price will reverse and go down...

Once again, it’s a ‘coin toss’, which will ultimately and inevitably lead to the loss of your deposit.

You, Dmitry, have put in a lot of work, but it won’t lead to a stable income.

Added

I carried out an experiment a while ago.

I took a one-year period for the M1 candlesticks and initially bought at the opening of each candle, then sold at the close, and carried this on for the whole year.

I ended up with a big loss.

Then I swapped buying for selling, and selling for buying, and did the same for the whole year. And...

I ended up with a big loss! :)

Added

Trading a hedging portfolio of futures on all MOEX shares.

Risks: +85/-15%

Minus 15% because dividends could be announced unexpectedly

9 days ago

Today

I’m working hard to reduce the -15%

 

Well, there are no market strategies that guarantee a steady income. That includes yours, especially in today’s climate – when you never know what tomorrow will bring. That’s why, in my humble opinion, the only way to make any money is through intraday trading, without holding positions overnight.

With your HFT strategy, your main profit comes from the stock-futures pair, am I right?

 
Dmitriy Skub #:

Well, there are no trading strategies that guarantee a steady income. That includes yours, especially in today’s climate – when you never know what tomorrow will bring. That’s why, in my humble opinion, the only way to make a profit is through intraday trading, without holding positions overnight.

With your HFT strategy, the main profit comes from the stock–futures pair, am I right?

No, because Finam doesn’t offer a discount on purchased shares, I’m not currently using this ‘golden’ 100% profitable strategy.

At the moment, I’m only trading futures to hedge my portfolio against absolutely all MOEX shares.

---> So, there are no market strategies that guarantee a steady income.

You just haven’t come across them yet...

No one, including me, is going to tell you about them.

Added

Any hedging strategy should generate consistent profits.

There are 5 key factors

1. Risks

2. Proper implementation

3. Speed of trade order execution

4. A trader’s greed (some are happy with 50 per cent a year, whilst for others even 500 per cent isn’t enough – this is why 99 per cent of traders lose money...)

5. Trading ONLY via robots (the human factor must be completely eliminated)
 

What do you need to know here?

You wait for the maximum divergence (in a statistical sense) between the share and the futures contract, buy the share at that moment, and sell the futures contract. You then wait for expiry. With substantial capital, this is a perfectly viable strategy. However, it does have its own risks.

Previously, you would buy or sell on divergences or convergences within a single day (or over several days), perhaps closing only one position.

Why aren’t you doing this now? Presumably, there isn’t enough liquidity.

 

Options and option strategies do not, in themselves, generate any profit. It’s the same as in forex: a 50/50 chance. The maths is the same: a normal probability distribution.

Options can only generate a (risk-free) profit when used in conjunction with futures or shares.

New comment