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15 comments:
Happy Holidays Juan! I'm new and learning alot about your trading system. Still have lots of reading and learning to do before i'll throw money at it. Good luck in the new year!
Al
Thanks sg350, I look forward to your input in the future.
Juan
One thing i have to say regarding TA is that price is king. Therefore, price support and price resistance is what i study and use to trade because its the only thing i believe that is verifiable. EWT, Fib Line, tea leaves etc are just way to subjective for my taste to trade off of. If there is any stock which you would like me to help define support and resistance lines for please feel free to ask. Once I collect $100 to join your private blog I can try to apply my knowledge to the candidates for the PCCRC system.
No matter what Technical Analysis you use, it is a probability's game. I traded the Elliott wave successfully in the 90's, even with what I now know was a terrible strategy: Buy calls in a very volatility market. So I relied on my knowledge of the Elliott wave and make good money.
One not so good friend told me... the thing about TA... it works until it doesn't. Ironically, it happened with the stock I had the largest position on in Sept 1999, AAPL. I expected one more rally... instead I had a huge decline. I was so shocked and disappointed, I stopped trading for the next 3 years, which, as it turns out was a good decision.
I then dedicated my time and effort to figure out an Options technique so that I would not be surprised again, as it happened with AAPL. Hence the PCCRC.
That is not to say that you could not trade your TA indicators. In fact you should work out a combination TA/options strategy. For example, you could play put vertical credit spreads when you are bullish. Just limit your risk, place your trade and forget about it, until a few days before expiration. That is how I would attempt to take advantage of my TA knowledge.
With the PCCRC, there are other factors that will influence your decision to enter a position, and to take profit.
I look forward to discussions with you on such issues.
I complete agree with the fact that trading is a probabilities game. However, i found that defining accurately support and resistance price levels increases your probability of a successful trade. Technical indicators like all indicators simply follow price and really don't tell you anything except for divergence which i use with support and resistance to again help determine my next move. I am, to say the least, curious of your PCCRC system. Although I am knowledge of options and the greeks, knowledge isn't neccesarily power, however application of knowledge is! That is why i am trying to find the benefit of incorporating my knowledge of defining what i believe to be accurate levels of support and resistance with your PCCRC trading method. I look forward to discuss this forward. Do you have an example of a recent PCCRC trade which was successfully traded as well as one that was not?
Al
G350 said: However, I found that defining accurately support and resistance price levels increases your probability of a successful trade. Technical indicators like all indicators simply follow price and really don't tell you anything except for divergence which I use with support and resistance to again help determine my next move.
Juan said: The reason I looked for and finally implemented the PCCRC was to NOT to depend on technical analysis. Name the TA and I have done it. I remember making decisions based on previous lows or highs (support resistance) back in 1994. I have no doubt that it is a helpful analysis. I don’t doubt that you feel confident about it. If you didn’t, you would not be using it. My point is that at some point sooner or later, you’ll go through a period of doubt. This is because all TA approach, in the end, fall is the category of “yes-no-maybe-so”. Your percent success may be high, but it is a percentage anyway. With the PCCRC, you could incorporate your TA into the decision making process, particularly when to take profits after a strong move. But you don’t have to, because you can be reactive, rather than proactive. All this will become clear as you explore the hundreds of articles, examples and videos I have published on the PCCRC in this blog and my private blog.
G350 said: I am, to say the least, curious of your PCCRC system. Although I am knowledge of options and the Greeks, knowledge isn't necessarily power, however application of knowledge is! That is why I am trying to find the benefit of incorporating my knowledge of defining what I believe to be accurate levels of support and resistance with your PCCRC trading method.
Juan said: I enter PCCRC’s based on 3 strategies, the most reliable of which has to do with a strong move with low Implied Volatility and nothing to do with TA. To enter a PCCRC because of a TA signal may be a mistake because a certain Volatility profile in the options of the underlying is necessary.
You’d have to change your mind set, which has been one of being proactive, looking for the perfect set up, after a stock hits support or resistance, to a reactive: you set your scan on TOS platform and wait until the markets tell you which stock to take. This is confusing at first, but in the end is quite liberating, as you don’t have to be in the hunt but rather wait until the pray comes to you.
You can certainly use the TA to exit the trade or portions thereof, but I would suggest that doing so puts you in a proactive mode again, analyzing and overanalyzing perhaps, on a daily basis, which trade needs to be adjusted. I designed the PCCRC so that you only need to check it once a month, specifically, one week before expiration. The idea is not to have to work on figuring out good spots to enter and exit. You maybe thinking right now that you can IMPROVE over my system with your advanced TA knowledge, but I suggest that you don’t have to, and that is a timesaving, to say the least. Imagine that, you could go on a vacation, and not worry about your trades for weeks. My original goal was to be able to go to Africa or some faraway place, knowing that my trades were making money for me without me being concerned until 1 week before expiration.
I am glad you have your skills, and I too look forward to discussions with you. But the PCCRC is meant to free you from the burden of making decisions based on TA. That is comforting to me and to others that may not have your knowledge. My reason: I grew tired of the analysis game, which in the end is always “yes-no-maybe-so”.
SG350: I look forward to discuss this forward. Do you have an example of a recent PCCRC trade, which was successfully traded as well as one that was not?
You can certainly start by looking backwards in this blog. There are many examples here. In my DVD’s, I set up a papertrading account, and show how I entered the trades over a one month period and quickly build profits. The account is still open and has made over 47% in less than one year, and only with occasional trades and never using anywhere near the available cash. There is enough information for anyone with a little determination become as proficient as I am, or maybe more.
Send me an e-mail and I will send you also a link to my original description of the trade.
Paperprofit1@gmail.com
I appreciate your responses Juan. The PCCRC has a slightly bullish bias to it. So my two questions are:
1. Would you attribute a portion of the success of the system due to the bullish market we have experienced since mid 2003?
2. I don't have the tools in order to back test this system for the past 5-10 years. I was wondering if you were able to backtest during discover/development of this system during a bearish market and rate its success?
Thanks
Al
Al said: I appreciate your responses Juan. The PCCRC has a slightly bullish bias to it. So my two questions are:
2. I don't have the tools in order to back test this system for the past 5-10 years. I was wondering if you were able to backtest during discover/development of this system during a bearish market and rate its success?
The PCCRC has a bullish bias in most cases in so far as DELTA is concerned. This is easy to see in the risk graph because the expected profits to the upside appear larger.
What is not immediately obvious from the risk graph is that a spike in volatility of about 10% would increase your profits significantly. And when does volatility increase? when there is fear! that is, when mutual fund managers want to protect their stock positions by buying puts. It is then, when fear mounts (proximity to news or the stock declines strongly) that both Delta and Vega work for you to the downside.
So to answer your question, the Bulish bias is only apparent because the risk graphs do not show you the Vega exposure.
Al said: 1. Would you attribute a portion of the success of the system due to the bullish market we have experienced since mid 2003?
In 2006, I made 30% on my money. In 2007, I made above 70%, despite the subprime lending crisis, or just because of it. Here are some stats on my account that would reveal to you more or less the nature of this trade.
a. My best trade of the year: AQNT. The stock jumped from the high 30's to the low 60's several days after entering the position.
b. My second best traded stock was GOOG. I actually entered 3 of these trades in 2007. I made money as the stock went up, but also as the stock went down in early November. The PCCRC can be transformed as the stock rallies, you SELL SOME back month calls and the possibility for large profits to the downside open up.
c. My best month was Jul-Aug when the subprime crises showed up. MOST STOCKS WENT DOWN strongly, and the volatility increase cause most of my trades to be profitable at one time. DO YOU KNOW of any trade that can do this with low risk?
You may say that this was a bad year for most traders as the stock market had strong swings in either direction, making it an TA analysts night mare. Yet, I had my best year since 1998. Can you suggest another technique that can do this?
I have tested and backtested the PCCRC. I started in 2003, and went back using the Optionetics' Platinum application. I tested trades from available data, back to 1999, but as time has gone on, historical data have been eliminated.
I suspect what you want to know is a response to a common question: Is my system reliable not just over specific, favorable years.
I wish I had the computer and man power to do it more systematically and be able to tell you what sort of results would I have gotten at different times in history. Perhaps one day I will hire someone with such power to test the approach, but then I would not be giving away my strategy for free, would I?
The good thing is that you pay NOTHING to try it yourself. IF you have a Platinum subscription you could, and probably should back test years back.
What I can tell you for sure is that the price of an option depends on Implied Volatility, Time decay and appreciation or depreciation of the underlying. These factors are measured by Theta, Vega and Delta. Understanding these greeks is paramount in the designing of a successful options' strategy. That I know of, only PCCRC takes advantage of the gains that these three greeks have to offer. And Gamma too, on occasion.
im wondering if software could be a viable replacement for Optionetics. http://www.hoadley.net/options/options.htm
I'm going to download the trial version and see what it does. Its only $87. BTW i'm not advertising for this software just looks like it might be a good tool and a much cheaper price then Optionetics.
Al
Juan, thank you for sharing your strategy.
Feliz Navidad y próspero Año Nuevo.
May 2008 bring you Helth, Peace, Love, Prosperity and lots of Options.
A E Senior
SG350 said...
im wondering if software could be a viable replacement for Optionetics. http://www.hoadley.net/options/options.htm
I'm going to download the trial version and see what it does. Its only $87. BTW i'm not advertising for this software just looks like it might be a good tool and a much cheaper price then Optionetics.
Al
Juan said: Thanks Al. Don't you ever worry about bringing up any merchandise you think is useful. I am very happy to see that friends like you are willing to share their finds.
Are you a ThinkorSwim user?
Hi Juan,
Im an optionsxpress user. I've downloaded the thinkorswim platform to get familiar with it. Does your DVD use thinkorswim to place the trades? BTW i'm at January 2007 on your blog! :) I really want to make this strategy work for me like it has for you and i want to have the tools to participate in providing good candidates. Wish me luck!
TOS offers easy to follow tutorials that will bring you up to speed on the use of their platform. Just click on the HELP tab.
OX does not allow the entry of the PCCRC as a single trade. That makes things very difficult. In addition, they charge a per-trade fee, that makes adjustments prohibitive. Not to mention that entry and exit a PCCRC is a double commission. With TOS you'll enter the stock with one BID.... That way you'll get a better fill, better price and likely better profits.
In addition, web based-platforms are too slow for advanced traders like you and I.
As you can tell, I already used OX, and in the end was not satisfied.
My most recent videos are based on the TOS platform.
GOOD LUCK!!!!!
Merry Christmas 2010, to all that still read the Advanced Options Trading Systems.
Good New Year wishes for 2011.
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