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Hi, if you’re looking for strategies other than stocks, check out my C2 featured strategy focuses on global macro and exploits pricing dislocation of asset classes such as commodities, treasuries, currencies, and volatility. Sophisticated program for sophisticated investors.
I am a professional trader fairly new to this platform. Really looking to expand my operations here. $88/month, ask for intro discount. Cheers!
Results are hypothetical.
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Big day today. The volatility index we’ve been sitting on finally paid off, spiked 25%.
how often do you bet 100% of the account balance on a single trade ? (a serious question)
Never. No self respecting pros would do that.
But your balance was 35k and you long 35k of vix future yesterday. Didn’t you?
I’m glad it worked out. I ask the question so I can see what is the expected volatility or DD when the trade didn’t go your direction.
@OSUTIA is correct. He bought 2 14.50 VIX contracts, so effectively 29k of exposure on a $28k account at the time. If you want to look at it that way.
However, going long at 14.5 is not the worst thing in the world, especially with a month until expiration. Figure in this market 12 might be the low, so maybe a $5k loss at worst, but as you can see on days like today, upside 100% or even more. Good risk/reward. Although in hindsight 1 contract probably would have been the safer way to go.
Looking at the contract value is not the right way to evaluate risk when trading futures. The margin to hold those contracts are roughly 7-8k a piece. At $14.50 entry each percent decline is $145 per contract. So you define how many percent points you will tolerate. There’s a lot more to that but you get the gist. Cheers!
For example, one crude oil contract values at > $70k. Each percent move is roughly $700 per contract. It doesn’t have nearly the same volatility as stocks so I define risk by percent moves. Hope it helps.
What you are saying is you won’t go more than 1 contacts on futures that more than 40k per contract?
You see every futures strategy on c2 is extremely leveraged out. They all said they are the MASTER risk management, stoploss is always set, never let DD more than 2%, 5% etc… then when shit hits the fan they all said it’s just part of trading. I got burn so many times here.
So even with one YM contract you are already 3x of your account balance. How do you manage risk like today or when mkt drops 5% in a few hours?
I get it. We understand margin, obviously you could have bought more, but like OSUTAI says, leverage on C2 seems to be used like candy… until developers choke on it.
With VIX Futures it’s easy to judge the notional amount per contract, that’s why we look at it like that. Let’s hope you can keep the leverage under control during your time here.
I mean a strategy for ym is down 30% on 1 day. I know he will be fine, he will just keep adding to position until it’s profitable. But those are the strategy I’m trying to avoid.
Margin in stock trading = borrowed money
Margin in futures trading = deposit to hold contracts
Looking at the overall contract value is meaningless when trading futures.
In general risk management philosophy should be as follows:
If my account size is $40k and I am holding 2 crude (1000 x 2 barrels $70 oil) contracts worth $140k, each % against me is ~$700 x 2 = $1400 = 3.5% account loss for a single position. One would be wise to size positions and place stops based on potential loss as a percentage of account size so he doesn’t get wiped out by a single trade.
Obviously execution is another matter. I’m sorry you got burned many times.
I should also mention futures trading is not for everyone. They are highly leveraged instruments and should be handled with extreme care.
It is important to consider the margin/nominal/notional value when trading any instrument.
I assume you took this into account with your VIX trades, you agreed with me that 20% looked like the most likely downside loss to your strategy. We got there by taking 2 VIX contracts and going from 14.5-12 or so on the VIX - hitting you with a $4-5k loss.
Nominal value in long term buy-and-hold stock investing is meaningful because the value could go to zero. In short term futures trading it is a useless, even dangerous concept in terms of both gains and losses.
Yes, the likely floor for VIX at the time was around 12 but the ceiling might be the February high in the 30-40 range. Reward/risk was highly asymmetrical and the $5k potential loss was reasonable. I could have rode it higher but I did not like the action and I knew how quickly VIX can crash back to earth.
Yes, it was a good trade. I think we are talking around each other. Good luck and hope you don’t take the leverage too far.
@TheMonk, I think your
@TheMonk, sorry I incorrectly hit the reply key too early…lol
You should be careful of your stops with the sizing and account size that you are using.
Just a little advice.
Thank you.
I’d like a little input on fitting this strategy to retail investors. Is it critical that I trade in even number lots so that investors can scale up or down easily?
How about just looking at $ and % margin used overnight? It appears you were very close or at a margin call (95-100%) from 10/8 to 10/9. I’ve heard IB just automatically liquidates with no notification or time permitted. Keep it under 50% of account asset value. Do non-retail investors go for this kind of risk?
