Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
As already mentioned, TDA/TOS is not possible for me.
I have an IB account and I do trade complex positions there. But as Ron already mentioned, the margin is too high for his trading style. Also, IB does auto-liquidate.
@ron99, regarding the fees: For the 2:1 spread the fees have a very high influence on ROI. Lets take your excellent Excel backtest file as an example. The lowest entry price on 11/22/13 is for 1,30. The take profit is roughly a month later for 0,65. For this 0,65*50=$32.50 profit you had to pay $18.36 as round turn. So this leaves a net profit of $14.14. So the fees are more than your profit! (And my round turn costs are even more - $25.86).
The lowest fees I could find (Zumo $0.50 + $0.56 exchange fees) are $6.36 (round turn for 3 contracts), which would give a net profit of $26.14 - which is 85% more profit.
While I agree, that for the "3 Delta" short put the fees are not that important (minimum margin is far more important), the same is not true for the "5Delta2Longs" ratio spread.
Please do not see it as critique to your approach. Thanks a lot for your openness and the excellent backtest you shared.
Thanks to other contributors for mentioning TT and CQT as platforms where these spreads are possible. I will try out CQT. (TT seems with $400+ per month a bit expensive.) If you know futures brokers that execute spread orders I would like to hear about them.
Do the diagonal with the longs only 70 DTE does not work because the longs will not give you as much protection when prices crash.
Looks at what happens on 20150929 in these examples. Using the lower DTE longs means a margin call and a 58.3% draw down but when using the same month for longs as the short, the amount of account used for IM is only 52.3%.
SPAN Margin for that spread is $260. So IB is 385% higher. So you save a few dollars on commissions but lose far more dollars because you have on less spreads.
Thanks for taking the time to post this. I have a couple questions.
Look at 20150821 to 20150824, is that a data error or do the prices really diverge? I can't imagine these two very similar spreads going in opposite directions during a crash.
Also, during the slower drift down from 20150916 to 20150929, the prices of the two spreads seem to be very close each date. However, the IM when the trade is put on for the diagonal is 226 vs 564 for the vertical. Would this explain the larger drawdown and margin call for the diagonal?
The diagonal table data is correct. But the other table was wrong. But the correct table looks better than what I had posted previously.
The strike of the longs for the diagonal are 1680. For my spread they are 1570. So when there was a quick crash in price the 1680s made more money than the 1570s because they are closer to the futures price.
The larger drawdown and margin call is because the longs are closer to expiration so they are giving less coverage and have lower premiums because of the low DTE on them. That also means a higher margin requirement.
On 20150915 the diagonal longs were down to 31 DTE and the strike was 290 OTM.
For people considering Zumo, Generic Trade (59 cts commission per side, according to website) et al, the FCM is Ironbeam. If you're opening an account with a lot of money - whatever a lot is to you - you should check Ironbeam out on the CFTC site.
They're not very big and they don't have a lot of excess capital. Maybe that means nothing and maybe CFTC/NFA enforcement has improved since MF Global and Peregrine. Personally, I'd spread my money around a bit.
BTW, if you're not in a hurry, you might wait until March and see what Sosnoff has up his sleeve at TastyWorks. I think I read that they're doing equity options now and adding futures/FOPs in early Spring. I've never been a customer but a lot of people like the T.O.S. software he helped develop and with the split from TD Ameritrade, the commissions are supposed t be cheaper at the new brokerage.
Do you like to see a large number in "excess net capital"? Or is the percentage to "adjusted net capital" more important?
Either way, Zumo does not offer the trade execution I'm looking for (option spreads). I found another software that can trade spreads (at least according to its manual): OEC Trader. It is available at Futures Online and Cannon Trading.
From the web sites I figured the round turn at Cannon Trading would be $4,76 and for Futures Online $3,70. But I still have to contact both brokers and confirm these quotes (and check whether they support spreads). Both clear via GAIN.
I would look at both, esp. for the smaller firms. About two years ago, Velocity was quickly wound down/assets transferred. They were quite small, somewhere in the neighborhood of a million or two in excess capital. You could probably track the history by looking at the monthly archives of the CFTC. With the small private firms, unless you know they have deep pocketed backers willing to add capital if necessary, it doesn't take that many super-stretched customers in a volatile market (Swiss Franc) to bring a firm down.
I think Gain is fine. I have a small account there. The firm is publicly traded so I can keep an eye on it and they recently picked up Daniels Trading and Top Third Marketing, the latter an ag advisory firm (and it's likely now an in-house introducing broker). Gain stock is volatile, perhaps because of their retail FX business. The Swiss Franc situation hurt in early 2013; more recently it looks like FXCM's woes may have helped them.
From memory here are the publicly traded FCMs that are not part of a huge bank, and do accept retail accounts either directly or through introducing brokers.
1. Interactive Brokers
2. Charles Schwab/OptionsXpress
3. Gain Capital
4. Archer Daniels Midland/ADMIS
5. Gain Capital
6. International FC Stone (not sure if they accept retail).
7. E-Trade (via OptionsHouse/TradeMonster acquisition; I think Aperture is the FCM)
8. TD Ameritrade/Think or Swim
After getting burned with PFGBest, I want my next broker to be located in Canada so at least I am protected by IIROC and/or CIPF. So other than IB Canada or RJOB Canada, does anybody have a good brokerage to recommend located in Canada?