Algorithmic Options Trading, Part 2

In this second part of the Algorithmic Options trading series we’ll look more closely into option returns. Especially into combining different option types for getting user-tailored profit and risk curves. Option traders know combinations with funny names like “Iron Condor” or “Butterfly”, but you’re not limited to them. With some tricks you can create artificial financial instruments of any desired property – for instance “Binary Options” with more than 100% payout factor. Continue reading “Algorithmic Options Trading, Part 2”

Algorithmic Options Trading, Part 1

Despite the many interesting features of options, private traders rarely take advantage of them (of course I’m talking here of serious options, not binary options). Maybe options are unpopular due to their reputation of being complex. Or due to their lack of support by most trading software tools. Or due to the price tags of the few tools that support them and of the historical data that you need for algorithmic trading. Whatever – we recently did several programming contracts for options trading systems, and I was surprised that even simple systems seemed to produce relatively consistent profit. Especially selling options appears more lucrative than trading ‘conventional’ instruments. This article is the first one of a mini-series about earning money with algorithmic options trading.   Continue reading “Algorithmic Options Trading, Part 1”

Build Better Strategies!

Enough blog posts, papers, and books deal with how to properly optimize and test trading systems. But there is little information about how to get to such a system in the first place. The described strategies often seem to have appeared out of thin air. Does a trading system require some sort of epiphany? Or is there a systematic approach to developing it?
   This post is the first of a small series in which I’ll attempt a methodical way to build trading strategies. The first part deals with the two main methods of strategy development, with market hypotheses and with a Swiss Franc case study. Continue reading “Build Better Strategies!”

Hacker’s Tools

For performing our financial hacking experiments (and for earning the financial fruits of our labor) we need some software machinery for research, testing, training, and live trading financial algorithms. No existing software platform today is really up to all those tasks. So you have no choice but to put together your system from different software packages. Fortunately, two are normally sufficient. I’ll use Zorro and R for most articles on this blog, but will also occasionally look into other tools. Continue reading “Hacker’s Tools”

Money and How to Get It

Contrary to popular belief, money is no material good. It is created out of nothing by banks lending it. Therefore, for each newly created lot of money there’s the same amount of debt. You’re destroying the money by repaying your credits. Since this requires a higher sum due to interest and compound interest, and since money is also permanently withdrawn from circulation by hoarding, the entire money supply must constantly grow. It must never shrink. If it still does, as in the 1930 economic crisis, loan defaults, bank crashes and bankruptcies are the result. The monetary system is therefore a classic Ponzi scheme. Continue reading “Money and How to Get It”