Q.
Dear Mr. Veale,
To your knowledge, has anyone used AIM / Idiot - or a modified version - for futures trading ? or even options on futures?
I can feel the potential of implementing AIM's principles to futures but I can not put it in practice? What is your opinion?
What is the price for Newport? Do you have a demo version?
Thank you in advance for your help. Looking forward with interest to
hearing from you.
Kind Regards,
Ammar
PS Where is Mr. Lichello now?
A.
Dear Ammar,
Here's the answers in reverse order! First, I've tried to contact Mr. Lichello a few times, but with no success. Not having a direct way of doing so, I wrote to him care of Signet Books hoping to hear back. Alas, no reply. He last updated the AIM book in 1992, so we know he was around then.
Newport Programs has an order form for their software at the web site
execpc.com
They sell the full program as a demo for $19.95 (with a 90 day clock built in). On that disk is the complete program, Help and a 'slide show' demo. You can use the program to try a variety of strategies or histories, but for a limited time frame. The full program is $119.95, I believe. The ubiquitous Shipping and Handling fee is also there to be added.
If you plan to do several "What If" type of histories for longer periods than 90 days, I'd suggest your getting a copy of one of the AIM templates for Excel. These are freebee's that people have developed. They are cumbersome for running a real time AIM program, but are great for trying AIM out on new situations to learn how it would respond to market swings.
I have used option contracts as an AIM suppliment, but not as the main equity for AIM. I've not corresponded with anyone that has to date. In owning an equity for AIM, I've found that during times of broad market moves (either up or down) there are generous option premiums to be harvested while staying very close to AIM's original intent.
For instance, lets assume we have our favorite stock at $25. AIM is suggesting that we sell an additional 200 shares if the price is to reach $29 5/8. We check the newspaper and find that there's an October CALL contract at $30 that is selling for a $1.50 premium a this time. Since we plan on selling the shares at near $30 anyway, why not sell two CALL contracts today, collect the $300 gross and let the clock run. If the option expires unexercised, we keep a net of about $260. If the option fills, we keep the $260 net and get the sale of 200 shares as well- just as AIM wanted. Assuming that AIM made $6 per share selling the stock for us, our option strategy just enhanced that by an additional $1.40 bringing the total yield to $7.40. That's nearly a 25% improvement in yield on the transaction.
I do not use this strategy until I have AT LEAST a 30% cash reserve accumulated for a stock. The reason is that one must have adequate buying power already on hand at every point except a market bottom. Should the option expire unexercised, we will not be adding any cash to the reserves. This is not a good thing if the market turns against us.
That's about as close as I've come to using AIM with options. I have essentially NO experience with trading futures contracts. I can envision AIM acting as an "Inventory Control Manager" on a commodities type product. Let's say we have an inventory of Coffee at a value of $2 per pound. We could adjust our inventory using AIM. Sell off some inventory at higher than $2.00 and add inventory below that point. The inventory is being substituted for a stock equity position. Here again, I would guess that options and futures could play a hand in there somewhere, but don't have the experience to advise how.
I hope this helps in some fashion! One more note on the Newport software, it's designed for weekly updates. Even that is an excellerated rate of activity beyond what Mr. Lichello suggests in his book. However, it's probably not often enough for the 'day trader'.
Best regards, Tom Veale |
