Just to clarify, are the statistics you just posted for the same
investment (in other words, are your calculations based on
something like this: invest X dollars in the single entry
system with each signal; divide X into some percentage, such as 40,
20, 20, 20 and invest that percentage of X in the multi-entry
system with each signal)?
The stats assume the same number of contracts per trade using
consistent trade criteria. So for the stats I posted the
assumptions are 10 contracts per trade (single and multi entry), at
the money strike with 50-80 days before expiration.
You could also run a model assuming a fixed investment - say
$10K per trade - but you would have to adjust each trade as they
would have a different number of option contracts. Unfortunately my
crude excel skills make it easier and more timely to use a fixed
number of contracts.
What I am trying to show is the risk/reward using options for
the SPY System is outstanding (regardless of using fixed investment
vs. contracts). My hunch is it's better than buying stock, though
you'd need a quant to really crunch the numbers. What I find
particularly appealing is limited risk - especially if your short
and concerned about black swan events. I'd rather have $10K at risk
vs. $100K.
So, to get it straight, in your calculations, if the multi-entry
system has four trades, it invests four times as much as the single
entry system. Is this correct?
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Again, many thanks. Just to clarify,
Feedback
Posted by algyros on 18th of May 2011 at 12:47 pm
Again, many thanks.
Just to clarify, are the statistics you just posted for the same investment (in other words, are your calculations based on something like this: invest X dollars in the single entry system with each signal; divide X into some percentage, such as 40, 20, 20, 20 and invest that percentage of X in the multi-entry system with each signal)?
The stats assume the same
Posted by tumbler on 18th of May 2011 at 12:59 pm
The stats assume the same number of contracts per trade using consistent trade criteria. So for the stats I posted the assumptions are 10 contracts per trade (single and multi entry), at the money strike with 50-80 days before expiration.
You could also run a model assuming a fixed investment - say $10K per trade - but you would have to adjust each trade as they would have a different number of option contracts. Unfortunately my crude excel skills make it easier and more timely to use a fixed number of contracts.
What I am trying to show is the risk/reward using options for the SPY System is outstanding (regardless of using fixed investment vs. contracts). My hunch is it's better than buying stock, though you'd need a quant to really crunch the numbers. What I find particularly appealing is limited risk - especially if your short and concerned about black swan events. I'd rather have $10K at risk vs. $100K.
So, to get it straight,
Posted by algyros on 19th of May 2011 at 07:42 am
So, to get it straight, in your calculations, if the multi-entry system has four trades, it invests four times as much as the single entry system. Is this correct?