Shift Positions

Reduce MPR to 1370 - 1460
Increase MPP to ~4%

10d,Theta: 1.80%

10d,65% VAR: 0.57%
10d,95% VAR: 6.21%
10d,99% VAR: 22.22%

Risk Measurement

VAR stands for "Value at Risk".

Wikipedia: http://en.wikipedia.org/wiki/Value_at_risk

In this measurement, VAR is calculated from probability of market
movements for the next 10 calendar days. It is the maximum
possible portfolio loss with 3 different confidence levels: 65%,
95%, and 99%.

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Theta comes from Greeks of Black Scholes Model. In this
measurement, Theta is calculated from time premium gain
of next 10 calendar days, with assumption that market
neither goes up, nor goes down.

Wikipedia: http://en.wikipedia.org/wiki/The_Greeks

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Risk management is a big part of trading. So, here are
some numbers :-)

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As of Friday market close (12/22/2006),

10 day VAR (Value at Risk):

65% Confidence Level: 1.72%
95% Confidence Level: 13.06%
99% Confidence Level: 34.04%

10 day Theta gain: 2.2%

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Note: these are calendar days, not trading days

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Shift Positions

Extended MPR to 1370-1470
Reduced MPP to 3.5%

Jan 2007 Positions

ES quote: 1240
(March 2007)

MPP: ~4%
MPR: 1370-1460

MPP --- Maximum Profit Potential
MPR --- Maximum Profit Range

2006 review

Since August 2006, I've been posting "Index Gambling"
trading records at goofiz.com. However, due to restructuring
of the goofiz.com web site, these blog articles are lost.

Here is a review of these 5 months' trading:

Performance:

Aug, 2006: 4.1%
Sep, 2006: 3.0%
Oct, 2006: 6.0%
Nov, 2006: 1.7%
Dec, 2006: 2.1%

5 Months Total: 16.9%


Trading started August when market volatility is much
higher than today (IV was ~15+ in Aug, it is ~10 today).
As market went up, volatility went down. This directly
contributed to the performance data above. i.e. Nov and
Dec performance numbers are lower than those of Aug,
Sep, and Oct.

If market keeps at the current elevated range, I would
continue to expect lower performance numbers. Lower
performance number is usually accompanied with lower
risk. This is necessary to prevent sudden market movement
from causing significant drop of portfolio value.

Any other "gamblings"?

Besides "Index Gambling" blog, I also maintain a public accessible
simulation account at fortuneseeds.com. All simulation accounts
at fortuneseeds.com has initial fund of $100k. My account
started ~Sept, 2006, as of today, this account size is ~$119k.

http://www.fortuneseeds.com/account_details2.php?account_id=85
cristunity's volatility trading.

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Update
=====================

This simulation trading was stopped on 02/18/2007.

Trading Period: about 6 months
Trading Return: ~28%

More discussions can be found here:
http://www.fortuneseeds.com/viewtopic.php?p=27692&highlight=review+stop+trading#27692

Why "Gambling"

"Gambling" is a taboo for investors. It is also a negative
word for many traders. It reminds people addiction,
misjudgment, irrationality, losing money, and
other negative thoughts.

However, "gambling" is also a privilege. One should
gamble when he can still afford to lose. If one can no
longer afford to lose, then he has lost the privilege of
gambling. When that time comes, it is usually too late
to make up for the lost opportunities due to out
of the game.

Nevertheless, this is not to say that everyone should
empty their saving accounts, refinance the mortgages,
and put all their money in future market for speculation
purpose. People live in different stages of their lives, and
have different risk tolerance levels. There is never one
rule that fits all.

What is "Index Gambling"?

"Index Gambling" is the name of a trading strategy. It speculates stock
index movements by trading index options.

This trading involves selling both call options and put options (similar
to short straddle or short strangle) . It speculates the settlement
price of the underlying index options on the expiration day.

When the market moves up sharply, this strategy losses money. When
the market moves down sharply, this strategy also losses money. This
strategy makes money if the market is relatively stable, when the index
settlement price falls within the profitable price range established by
the call/put positions.

It sounds difficult to make money. The reality is...
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it IS difficult!

Making small profit each month is relatively easy. But the hard
part is to manage the risks, to keep the portfolio from significant
losses, and/or even from being wiped out.

Cristunity's Blog Moved Here

Due to recent problems at goofiz.com, my previous blog
space (http://www.goofiz.com/blogs/cristunity/)
is no longer accessible. This distrastous event has
caused losing of about 5 months' of blogging.

I will post my past 5 months performance reviews here.
However, the dynamics of trading, timing and market
movement will be lost for that period.

http://www.cristunity.com/