Gersh; RE:" inside out "
>double contracts as strike moves against you and half the number of contracts as it moves in your favor ..
You know I am fond of spreading out LIMIT orders to accumulate and distribute, given low commissions. A couple days ago Berney and I were working with various tactics for exploiting apparent trading ranges. If he doesn't mind me sharing part of that conversation with you, I'll lay one out.
Consider BEL - Bell Atlantic. The stock is in a ragged, 11-day stoch cycle that appears to be an orbit about the perceived pivot of ~55 +/- 2 = sigma. One (long, scalping) trading tactic under discussion looks like this; read this table as if BEL stock was at ~55 pivot now, and falling :
59 SELL 1x = 100% position @ ~57 AVG, if it rose this far
58 SELL 2x
57 SELL 3x
56 SELL 4x
55 HOLD @ pivot
54 BUY 1x
53 BUY 2x
52 BUY 3x
51 BUY 4x = 100% position @ ~52 AVG, if it fell this far
50 = 200d EMA
...a short, scalping tactic would invert this pyramid such that the AVG short position was ~58 and the AVG cover price ~53. This is a little more aggressive than "doubling". (Of course, it's not a spread, like yours, with simultaneous longs+shorts, either).
Following this scheme during the last two sessions, one would have bought BEL 1x @ 54 on Monday, then sold out @ 56 on Tuesday, and would now be flat (+3.7% gain, unleveraged).
Another, "progressive" scheme might be built upon a fibonacci sequence; eg.,
0x / 1x / 1x / 2x / 3x / 5x / 8x..., N; where N = (N-1) + (N-2)
IMHO tactics like this work best when the underlying is, at least temporarily "stationary" or, without Trend. Further, I think it would be better to work with BigBoy turtles, in apparent trading ranges, rather than most go-mo TechStox.
P&F charts, with say, 1/2-point box sizes, 1-point reversal, are very useful for working with these apparent trading ranges, Gersh, as there is no trend, and so no mo or time series to chart - and I am exploring that now, fwiw.
-Steve |
