Anything about XJO

[Trembling Hand]

Hi,
I was wondering if IB has CFDs for the XJO? Would anyone know the ticker symbol?
Or is there anyway to trade the XJO Point for point?.... with minimal slippage.
(Short of doing a basket of it's components)
I have been trading the AP but slippage for options is too high. It's too hard to get out quickly and keep to my money management rules.
Also I would like to set up conditional orders and can't do that too well with options.
Many thanks

SPI futures, You wouldn't touch anything else for directional trades.

 

[cutz]

Hi,
I was wondering if IB has CFDs for the XJO? Would anyone know the ticker symbol?
Or is there anyway to trade the XJO Point for point?.... with minimal slippage.
(Short of doing a basket of it's components)
I have been trading the AP but slippage for options is too high. It's too hard to get out quickly and keep to my money management rules.
Also I would like to set up conditional orders and can't do that too well with options.
Many thanks

Yeah IB do have it, can't remember the code but it's IQV6 on iress, ATM 4556.4/4562 but it does vary.

With XJO i've found option synthetics (synthetic long/short) work best, the spreads are normally fairly tight, obviously not tight enough for short term trading but acceptable for adjustments.

 

[Toothyfish]

Sorry about that waffle.
What I meant to say was does IB have a code for XJO CFD which is IQ with the Australian brokers.

 

[cutz]

Sorry about the waffle.

Punch in SPI on TWS, select CFD.

 

[Toothyfish]

Beautiful! Thanks Cutz! :worship:
Tried to contact IB but their MSG Site is down for maintenance.... during Market hours. Not good form.
Anyway.

 

[cutz]

No worries Toothyfish.

Are you looking at using it for hedging or straight out trading ?

 

[Toothyfish]

Thanks for the responses
Sorry for hijacking this thread.
Trading, I just made a little automated strategy on the XJO and want to test it out.
Just a play account and Options obviously won't be suitable.

 

[mazzatelli]

Mazza, with historical models to use when trying to forecast vol, such as ARCH or GARCH which can give off stochastic vol or moving averages and exponential methods as an alternative, what do you like to use?

I moved it here, as the other thread was VIX specific

I run a GARCH (p,q) and/or GJR-GARCH + exogenous regressors for equity/index vol.
It will depend on the market/asset I'm analyzing - so diagnostic tests are important.

 

[mazzatelli]

1. Are there any traders out there trading calenders on index options as an income strategy?
2. If calenders require contradicting requirements of a quiet spot AND rising IV, why does the Dan Sheridan in his CBOE videos rave about calenders as a monthly income strategy?
3. Should calenders be used primarily for directional bets or delta hedging purposes only?

Missed this, but:
1/ No, for reasons you mentioned
2/ Doesn't he play very short term, quick turnover of very cheap calendars?
3/ Not optimal for delta hedging, unless your trying to replicate the gamma+ vega convexity against your initial position

 

[Grinder]

Missed this, but:
1/ No, for reasons you mentioned
2/ Doesn't he play very short term, quick turnover of very cheap calendars?
3/ Not optimal for delta hedging, unless your trying to replicate the gamma+ vega convexity against your initial position

1. not as income but under optimal conditions might take a vol bet
2. Think he might also us strict management so as to not let em get outta hand.
3. Hedging some short vega is all I use em for, but as Mazza said it's not optimal.

I moved it here, as the other thread was VIX specific

I run a GARCH (p,q) and/or GJR-GARCH + exogenous regressors for equity/index vol.
It will depend on the market/asset I'm analyzing - so diagnostic tests are important.

Your obviously got access to systems where you can run the data that a lowly retail trader like myself cannot do. Even if I did I probs would'nt know where to start

 

[mazzatelli]

You can use R or Matlab for retail scale - they have add-in modules. R is free and open source - though command line driven, so more learning investment is required.

My suggestion would be to read vol forecasting literature especially Bollersev and Anderson, to determine whether there is any utility.
For some balance, Taleb and McMillan for example, don't think highly of GARCH models.

In the end it will come to the models + heuristics on part of the user. Enjoy

 

[Grinder]

You can use R or Matlab for retail scale - they have add-in modules. R is free and open source - though command line driven, so more learning investment is required.

My suggestion would be to read vol forecasting literature especially Bollersev and Anderson, to determine whether there is any utility.
For some balance, Taleb and McMillan for example, don't think highly of GARCH models.

In the end it will come to the models + heuristics on part of the user. Enjoy

I don't put alot of faith in forecasting models and have read both Taleb and McMillian but nothing from Bollersev and Anderson as yet. Thanks for the direction to Matlab, will check it out and see how far I get.

 

[Fox]

2/ Doesn't he play very short term, quick turnover of very cheap calendars?

There is also something not quite right about his video examples of managing income trades. He seems to have tight control of delta at the start of the trade but lets delta rise dangerously high towards the end of the trade. In the end, it would appear that his trades are sometimes profitable due to the spot moving favourably in his direction.

Perhaps he takes more risk with delta towards the end of the trade because of higher theta? ie. his end of trade delta to theta ratio is commensurate to the ratio at the start of trade?

In a nutshell: just because its low doesn't mean it will revert
Knowing the speed of reversion average and amount of time it clusters in addition would be helpful. But definitely not an indicator to be taken by itself.

Is the speed of reversion an observed speed? ie. is this speed from observed historical vol data?

As for the speed of reversion of vol forecasts, am I correct to say that the speed of reversion of GARCH forecasts will depend on the GARCH parameters you input to your model?

 

[Grinder]

Fox,
Know your questions were for Mazza but will throw in my

There is also something not quite right about his video examples of managing income trades. He seems to have tight control of delta at the start of the trade but lets delta rise dangerously high towards the end of the trade. In the end, it would appear that his trades are sometimes profitable due to the spot moving favourably in his direction.

Perhaps he takes more risk with delta towards the end of the trade because of higher theta? ie. his end of trade delta to theta ratio is commensurate to the ratio at the start of trade?

On Dan: I like the way he goes about it but can't help but think you might be onto something here. I haven't checked it out his webcasts in quite sometime but do remmember the theme of the majority of his trades were to keep them going (even when delta was pushing quite high) till theta really kicked in, then the spot seemed to move in his favour.

Is the speed of reversion an observed speed? ie. is this speed from observed historical vol data?

As for the speed of reversion of vol forecasts, am I correct to say that the speed of reversion of GARCH forecasts will depend on the GARCH parameters you input to your model?

Can't answer that question but my guess would be yes. Figure it all depends on how far back you are looking and the size of the data, and then to also forecast vol is to favour one model which was undertaken when markets were behaving quite differently to how they are at another point in time.

Like I said it's just my and am sure Mazza will enlighten me.

 

[mazzatelli]

In the end, it would appear that his trades are sometimes profitable due to the spot moving favourably in his direction.
Perhaps he takes more risk with delta towards the end of the trade because of higher theta? ie. his end of trade delta to theta ratio is commensurate to the ratio at the start of trade?

remember the theme of the majority of his trades were to keep them going (even when delta was pushing quite high) till theta really kicked in, then the spot seemed to move in his favour.

imo more to do with betting on mean reversion than theta. If spot is far otm [assuming atm calendar] theta inverts => negative [trimodal].

Is the speed of reversion an observed speed? ie. is this speed from observed historical vol data?
As for the speed of reversion of vol forecasts, am I correct to say that the speed of reversion of GARCH forecasts will depend on the GARCH parameters you input to your model?

Can't answer that question but my guess would be yes. Figure it all depends on how far back you are looking and the size of the data, and then to also forecast vol is to favour one model which was undertaken when markets were behaving quite differently to how they are at another point in time.

The speed, will come from the co-efficients that GARCH estimates.
In terms of size of data - there are diagnostics to select representative samples and keep standard errors as low as possible [basic stats] + heuristics e.g earnings etc

Forecasts aren't the end of the process - there's still trading rules and optimal hedging approaches that need to be considered :crap:

 

[mazzatelli]

Perhaps he takes more risk with delta towards the end of the trade because of higher theta? ie. his end of trade delta to theta ratio is commensurate to the ratio at the start of trade?

majority of his trades were to keep them going (even when delta was pushing quite high) till theta really kicked in, then the spot seemed to move in his favour

Didn't realise the edit got cut out - adding to my point about theta getting smaller the further away from the strike and eventually inverting to negative - I can't see the delta to theta ratio spoken of.

Is this an ATM calendar you're discussing Fox?

 

[Fox]

I can't see the delta to theta ratio spoken of.

Is this an ATM calendar you're discussing Fox?

Apologies for the confusion. I had swapped topics and departed from calender trades, but still referring to DS videos.

I was NOT referring to Dan's calender trades. I was referring to his IC and IB videos, whereby he puts in a lot of effort to cut deltas at the start of the trade, but lets his deltas build to such high levels a week before expiry. It just does not make sense to me that his trades always ends up profitable because the spot moved favourably for him ie. having exposure to high deltas and yet have the spot move in your favour. Seems more of taking a punt than good risk management.

As far as delta:theta ratio for an IC is concerned, theta does increase towards expiry. Hence, my comment that perhaps he lets delta get higher towards expiry as well, such that the delta:theta ratio still remains fairly constant. I recall reading a DS related article where a delta:theta ratio of less than 8% was described as acceptable risk.

 

[Grinder]

I sat through a couple of his webcasts to freshen up on his methods again.

Heres what I found:

He put an IC at 30 days out then after 10 days the sp moved up 5% so he rolled half the puts up and a quarter of the calls. Market then did nothing for the next 10 days in which theta really kicked in and he had made 15% profit.

Another one he kept buying calls as the market kept moving up whilst at the same time cutting deltas, then the sp stopped and theta did the rest.

It's a tough call, theres some good mangement but also depends on theta comming good at the right time. Hhmmmm.. undecided as yet. Might have ta sit through a few more.

 

[mazzatelli]

As far as delta:theta ratio for an IC is concerned, theta does increase towards expiry. Hence, my comment that perhaps he lets delta get higher towards expiry as well, such that the delta:theta ratio still remains fairly constant. I recall reading a DS related article where a delta:theta ratio of less than 8% was described as acceptable risk.

The theta in these positions are trimodal and polarity is topical on spot. I was assuming short strikes violated close to expiry- hence negative theta. Having read up on the approach, I'm assuming the position is not kept if the ratio is high/inverts.

He put an IC at 30 days out then after 10 days the sp moved up 5% so he rolled half the puts up and a quarter of the calls. Market then did nothing for the next 10 days in which theta really kicked in and he had made 15% profit.

I suspect the drop in vol [stagnant market] would contribute more to PnL than theta with 10 days til expiry.

It just does not make sense to me that his trades always ends up profitable because the spot moved favourably for him ie. having exposure to high deltas and yet have the spot move in your favour. Seems more of taking a punt than good risk management.

The conditions seem diametric. New traders are taught to throw neutral delta positions at the market, but then have to make directional bets on adjustments, despite being wrong on realized vol.

There's no issue if one is adept at directional bets [vol/price], which I am sure Dan is, but for his students who only know neutral delta, it is uncomfortable for sure. It's the selling point along with it being "passive" income.

I tried [unsuccessfully] to bring this idea of punts in the IC strategies thread - you have to come to the same conclusion anyway haha

All in all, I can't stomach the <10 delta short strikes and expensive replications
Each to their own

 

[Grinder]

There's no issue if one is adept at directional bets [vol/price], which I am sure Dan is, but for his students who only know neutral delta, it is uncomfortable for sure. It's the selling point along with it being "passive" income.

spot on like usual mazza. There not for everyone and nor should they be, speaking from my own experience it's taken me 2 years to be able to comfortably trade them profitably