Quote from: cypherdoc on October 15, 2014, 09:46:52 PM

Quote from: sidhujag on October 15, 2014, 09:37:34 PM

Quote from: cypherdoc on October 15, 2014, 08:59:16 PM

Quote from: sidhujag on October 15, 2014, 08:35:25 PM

Quote from: cypherdoc on October 15, 2014, 08:21:07 PM

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Quote from: zeetubes on October 15, 2014, 07:36:12 PM

Quote from: cypherdoc on October 15, 2014, 07:26:08 PM

16000 crossed 9x today.

That was a nice call on 16K you made earlier. The fed is the only thing between DOW 16k and DOW 3K, where it should probably be about now. I'm pretty sure they'll keep it above 16K today but they're going to be busy tonight wondering what the hell to do in Asia and Europe. Every time the DOW dips, someone is moving significant money out and the fed is pumping money back in using one of its many hidden channels. I wonder where the money that's taken out is being parked.

along with the end of day ramp. altho it those ramps can get even more intense than it was.

it can get truly ridiculous.

Yup. It would be an interesting exercise to look at the last seven years of DOW history and work out on days when it was both down and falling at 3.30pm what you would make if you had invested at ~3.35pm and then pulled out at ~3.55pm.

Back in 2008,someone did that study, or something very similar; buying/selling in the last half hour or so based on some such strategy.

My favorite one; wait for the Warren Buffett rumor to come out hinting that he was going to buy out Hovnanian, or some other tanking home builder. Guaranteed for a 300 point ramp in 10 minutes. Must have happened half a dozen times.

Aside from the manipulations I came up with an option strategy that would take advantage of the volatility of the market opens/closes... essentially capatilizing on the fact that the theta did not price in volatility at market open on days where options were set to expire in 2 to 3 weeks and previous days didnt have crazy volume. Essentially you would straddle both sides and sell the profitable side once you double up or more depending on what time it is.... and then hold the losing side until expiry or you see fit as a free trade... idea is you would hit homeruns with no risk other than the theta of the option but you are only holding for a few hours so the theta vs the potential to have unlimited gains was a win win for me... I did some paper trades and noticed that alot of mornings the theta would drastically change and gave up but I know its a killer strategy as out of 10 days it would give me more than half profitable days (an edge)... I just didn't have the time to really automate it or put a large sum of cash in an exchange to try it out.. would mean getting up at 5am every morning too so I left it for a rainy day... wonder if anyone has had experience with a system like it? I know some start up trading firm in NY was highlighted after it raked in millions for doing something very similar.

i don't trade options as i'm very averse to time pressure. of course, the flipside of that is i'm exposed to infinite losses in either direction if i'm stubborn. i prefer to rely on a mixture of fundamentals and swing trading using cycles and other assorted indicators.

as far as your theta trade, i've never understood how taking both sides of a trade and then selling the profitable one is any different than just shorting or buying a put after the underlying has gone up 2x or so.

there are all sorts of strategies like this and they usually work until they don't.

You didn't get it.. you're straddled so you CANT have infinite losses. Equity curve should look like a slight downward slope then big spikes up... that's a successful curve in my eyes with low risk.. however I dont know I think that more people doing this type of thing increases theta so much as market open that it removes any profit from the 2 hours that there is volume.

Long term traders will tell you to cut your losses short and let the runners run... thus you're losses are the fees for opening the trades and closing from no movement and your runners are the free trades that you got from closing your winning side of the straddle at aggregate breakeven or in profit.

i wasn't referring to your straddle when i said that i am exposed to infinite losses via long term trading.

i think i understand what you're saying regarding your theta trade. it presumes a repeating pattern of 6h or so of downward movement with a late day ramp? you set up the straddle at the open, let them market grind down until your put has approx doubled or whatever, cover the put, and then wait for the last half hour spike?

my point was, why not just buy 2h before the close?

The value of the option drops dramatically overnight (also most of the time the market doesn't move enough at the end, but maybe you can buy during the midday lull and sell right at close as a similar strategy)... in the morning it is reflected on open... so you would only buy before close if you think premarket will move the price of the underlying considerably like maybe on unexpected earnings., thus you're opening up to a bigger loss on your theta... I would essentially do the opposite buy on open and double up in the first few hours and cut loose, let the other side run indefinitely OR if there is a late day plunge/rally. Anyways when I thought about this, ther weren't any good historical options charts that were any good to backtest... so I couldnt test my strategy using code... but maybe something to think about when I have some time.. end of day everyone has their own strategy that works the best for them based on their personality.. thats why you can take a winning strategy from person A and have person B lose wildly because it doesn't match their philosophies.

It really is just a play on volatility.. put simply.