Caveat emptor : Quant Models Volatility false track record

C2
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Looking at this new system track record it immediately hit me something is fishy , the developer specialises in UVXY options , many prices dont make sense look closely at the strike prices and the expiration dates , looks like he found irregularity in c2 quotes , I will dig deeper .

Example : At 17th of April the developer did a series of suspicious short term trades .

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In the above example he took a 28/4 expiration put at 3.2 and then closed it five minutes later at 1.82 !

Did he do it once no , now look at these series of trades in the same day 17/4 all closed within minutes and notice the price swings in the puts , he always sell these puts at higher prices then close for a profit minutes later .

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Bear in mind that these arent same day expiration options , its not last minute trading , these options still have time to expire , some even have a month ! Check that one .

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So here an option that has one month to expiry ( 19/5 ) moved from 3.35 to 1.55 in 17 minutes !

These are 16 put , the funny thing after minutes he shorted the 15 put at higher prices ! How come you’ve just closed the 16 put at 1.55 time 15:20 , then you short the 15 put at 2.52 time 15:49 , and its the same expiration date 19/5 ! How come the 15 put is more expensive than the 16 put ? Then to add insult to injury he closed the trade ten minutes later at 1.15 !

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Ofcourse these are just examples , i dont care how much he have made in these trades even if its just $1 it shows that he was trying to exploit a C2 stalled quote here and there in UVXY puts and thats the basis of his whole system .

I want to add a note that C2 bid/ask prices are always on the dot but it is not unheard of to get a stalled quote here or there in options prices .

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I also checked the price of UVXY on 4/17/2017, it was on the decline the whole day, especially during the last hour, it directly went down without a rebound.
While in order to have UVXY put price go down so fast so big, there should be a price spike higher on UVXY at the time.

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This shows just how the difference between hypothetical and actual execution of trades can be like night and day, especially in options. Unless you have a track record built on actual trading, it must be taken with a large grain of salt. Already 30 years ago my employer drilled into us noobs that “would have, could have, should have” is worthless. It’s all about execution, execution, execution!

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You again are making a speculative claim of stalled quotes. Would you please explain more precisely what you mean by that and offer some evidence for your speculations.

As I wrote in response to your earlier speculation:

I’m not sure what you mean by stalled quotes, but if you mean that some reporting system showed some stale quotes at a price at which there were no actual trades, just stale bid prices that no one could actually trade at, that’s not what happened.

Remember, none of my opening trades are fills on a bid or an ask [in the absence of trading]. All of them are trades at prices where real options were bought and sold on an options exchange after I placed my limit order, mostly hours after I placed my order. . . .

For example, on March 31, I placed a limit order to STO UVXY1707P15.5 at limit 1.57. My trade was “filled” by C2 when options actually traded at $2.92. 176 options at that strike and that expiration traded that minute, though it’s not public how many traded at that high price.

You point out that I successfully captured a spike in the price of several options, but somehow you see something bad about this. Indeed, you say: [quote=“PropTrader, post:1, topic:9901”]
it shows that he was trying to exploit a C2 stalled quote here and there in UVXY puts and thats the basis of his whole system .
[/quote]
First, that’s not the basis of my whole system. Second, you have offered absolutely no evidence of a stalled quote, then assumed that your unfounded speculations are fact.

You need to support your claims about stalled quotes. Real options traded at the price that C2 “filled” my limit order. This was not some phantom stale quote that no one would honor.

Here is the chart (from Fidelity) from the days around one of the trades you complain about, the 5/19 16 put:

The trade you complained about was the first spike on this chart. If this were really a “stalled quote” from a period when bids that high were routine, it would have to have been lying around for more than a week with no one noticing. Indeed, if that quote had been lying around for a week, someone would have grabbed it long before then.

If you looked at the charts for every one of the highly profitable put sales my strategy profited from, you would see a similar pattern. That you didn’t see this pattern before I did is no reason to make up a story about “stalled quotes.”

By the way, I also tried to capture spikes in call pricing and unusual drops in call & put pricing, but none of these strategies worked because there were not any real world traders trading at the prices I was looking for. When you rely on real trades, as my strategy did, and not “stalled quotes,” you can’t just conjure up trades that never happened.

Face it. The trade spike shown in the chart above was an extremely current, totally up-to-date quote, and a real buyer bought real options at that price on a real options exchange. Why can’t you admit that simple fact?

I noticed an anomaly in UVXY put pricing and placed hypothetical orders that took advantage of this anomaly.

Also, as I noted before:

During the period my strategy was private, I was extremely successful in writing UVXY puts that were very temporarily mispriced. It remains to be seen how much I will be able to scale this part of the strategy up with subscribers because of the way that C2 handles limit orders (which once filled for anyone become market orders for everyone else). Every one of my trades selling UVXY puts traded through my limit price, usually far through. Still, I stopped writing these on April 25th, when I realized how limit orders in autotrading actually became market orders for many (or most) subscribers on C2.

So, if you exclude the period with the extraordinary returns from selling UVXY puts, the returns from Quant Models Volatility are still extremely positive at C2.

If you consider only the two periods since Feb 16 during which I wrote no UVXY puts at C2 (Feb. 16-Mar. 20 & Apr. 26-May 9), my hypothetical daily return was 0.85%, which projects to an 8-fold increase over 252 trading days in a year.

Obviously, such a high 8-fold annual return would far exceed the results of my backtesting, and thus should not be expected going forward.

So you might reasonably gripe that there may well not be sufficient liquidity to allow me to go back to a put selling strategy that I suspended 2 weeks ago, but please don’t keep talking about “stalled quotes” without offering even the slightest evidence to support your speculations.

Of course, one is always right to suggest “Caveat Emptor.” And if anyone thinks that anyone can generate 50% returns a month (or more) long-term, they are not thinking straight.

In my opinion, the real test for me starts now. How will my strategy perform now that autotrading has begun? I repeat my suggestion that the Leader Board and Grid contain a column for total returns since autotrading began, and that this become part of the C2 rating system as well.

As M. Klein says here many times: the returns on C2 are hypothetical. But they are far less hypothetical after autotrading begins.

Good luck trading.

5

Hello.

I have a question.
That anomaly you noticed, and I do believe price quote on C2, it can’t be that different.
What if 10 people followed you signals? Would that affect price, would all of subscribers had profit? Was that thiny traded option, or volume is decent?

Thank you

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The average number of shares traded at the same minute as my trades was over 30 shares, but it is not public info how many traded at that high price. When I developed this technique, I thought fine: if only 2 or only 5 contracts trade at a high price, then with a limit order 2 or 5 subs can get the benefit of a highly profitable trade. The rest will miss out, but not lose any money.

But when I discovered that with autotrading, when a limit order is filled, it fairly quickly turns into a market order, I realized that a few might benefit, but most might lose. So I suspended this practice a couple weeks ago and relied only on my basic XIV timing model, which has so far worked very well.

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The earlier explanation by the developer doesn’t make sense , as everyone can see in this screenshot here is a group of trades taken the same day closed within minutes , in multiple strikes and in multiple expiration dates across the whole day , what that mean ? Were there many puts prices spikes across all strikes and all expirations all day long ? This doesn’t make sense . And even if thats true then that proves the point that the whole system is based on erroneous prices .

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Thank you for you answer.

In the end, if not enough volume then one can only trade for his account, but
no one following can benefit.

Good luck with your system, and glad you modify what you see is not working good.

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Your basic XIV timing model did not performed as well as you claimed.
I calculate all your VXX and XIV trades, the total result is -$316.
What it means?
It means you have no ability to predict VXX and XIV price movements, all you could do is to catch options price irregularities,whether they come from C2 stale quotes or from option market price irregularities.
That could not be a consistent income source.

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Like I’ve said earlier, if you truly believe you have an excellent market timing model, then it’s easy to prove it by trading Nasdaq or S&P futures. These are the most difficult to manipulate, misslead with or falsify, and they are very liquid.
You won’t find many successful futures traders here on C2 for these reasons. Good luck!

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To the developer you are wasting your time arguing about these trades , subscribers have the right to ask for a refund whether now or later and then you will have to pay from your own pocket 7.5% refund fee and any charge back fees . So its a matter of time until subs discover what you did there . You think you are the first one to discover some erroneous prices in options , will you are not but its stupid to build a track record based on them .

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Another example , at 31/3 he shorted 15.5 puts Apr 7 at 2.92 then 11 minutes later closed them at 0.64 ! 20 minutes later it stayed at 0.64 another one hour later its at 0.59 . Lets get real here , the option still has a week to expire , and its clear the real price was around 0.6 however the entry price at 2.92 is totally bogus .

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Another note here , if you look closely at the track record you would notice he prefers puts in the half dollar like 15.5 and 16.5 , why ? Because these strikes are more prone to stalled quotes and erroneous prices .

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Here is what I wrote:

If you consider only the two periods since Feb 16 during which I wrote no UVXY puts at C2 (Feb. 16-Mar. 20 & Apr. 26-May 9), my hypothetical daily return was 0.85%, which projects to an 8-fold increase over 252 trading days in a year.

Here is the support for what I wrote::

I did the computations mid-day on May 9, when my portfolio was $50,181. It closed slightly lower than that.

I referred to two periods in which I sold no UVXY puts, which were the disputed transactions.

During the first period (21 trading days), I had a 20.6% return (from 2082 to 2511), or 0.896% a day.

During the second period (10 trading days), I had a 7.7% return (from 46585 to 50181), or 0.75% a day.

Over the 31 days of both periods combined (31 trading days), I had a 29.9% return, or 0.85% return a day.

A 0.85% a day return over 252 trading days in a year yields an 8.39-fold increase in a year.

I just reran the numbers with the closing price on May 9, and the daily rate is 0.834% a day, which still projects to an 8.1 fold increase.

Did I make an error with any part of this?

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You cant multiply your daily performance which you have achieved in a very short period by 252 days to inflate your numbers . Anyone can make a 1% return in a day thats not a challenge . Are you going to achieve 1% day in day out with no mistakes or drawdowns ? Lets get real here

1 Like
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I agree. Let’s get real here.

I was responding to an incorrect claim that I had misreported my returns during the periods when I was not selling the puts, when I was just investing in a way that you should find unremarkable. I didn’t requote the rest of my original quote but it ended like this:

So, if you exclude the period with the extraordinary (discretionary) returns from selling UVXY puts, the returns from Quant Models Volatility at C2 are still extremely positive.

If you consider only the two periods since Feb 16 during which I wrote no UVXY puts at C2 (Feb. 16-Mar. 20 & Apr. 26-May 9), my hypothetical daily return was 0.85%, which projects to an 8-fold increase over 252 trading days in a year.

Obviously, such a high 8-fold annual return would far exceed the results of my backtesting, and thus should not be expected going forward. But these two periods reflect trading mainly the main timing model, with discretion used to determine the size and precise makeup of the directional position and any hedging to be used.

Soi finally we should be able to agree on something: a 0.8% return each trading day is a good return AND such a high return so far exceeds even backtesting that it should not be expected going forward.

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So I excluded all the short UVXY put option trades and the total profit is $3823, Since I started with a $2802 account, that might be great or it might not. You would have to look at % increases in the portfolio as my analyses above do.

If you look at just the trades of the XIV itself and the VXX itself (which you may been referring to) the total profit is even better: $4351.

I just realized why your numbers are wrong. My initial 20% return trading volatility was when the account was small ($2082), so they didn’t count for much in your practice of just adding up the profits. Then the trades over the last two weeks, where bought & sold the VIX but I let the gains run, did not show up because they were under the 168 hour delay. I will eliminate the delay for the next few days so you don’t have to take my word for it. Essentially, you are missing a $4800 trade in VIX because it was temporarily hidden.

Alll this shows is that looking at % returns during the period I was not selling puts is the way to analyze the performance of my basic timing model so far, not adding up profits from what is in essence a small account and a bigger account.

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Again, you are just making stuff up.

On my supposed preference for half dollar puts, you could look it up. One of the great things about C2 is that all of my short put fills are online and you have quoted them more than anyone.

I actually slightly preferred to put in trades at full dollar amounts because there needed be a strong enough market to generate spikes. There had to be enough of a market that someone would chase a price (or perhaps feel confident enough to enter a market order at the wrong time).

If you bothered to actually look at the evidence on your computer screen before making up false criticisms, you could have easily seen that I had more than twice as many fills selling puts at full dollar amounts than at half dollar amounts.

It’s really pointless to try to have a reasoned discussion with someone who won’t stop fabricating evidence and arguments out of thin air: stalled quotes, charts without spikes, more fills at half dollar, my supposed preference for these half dollar prices. You have not provided one iota of evidence for any of these fabrications.

I don’t know why you’re so angry with me, but really try to get control of your emotions because they are driving you to just make stuff up, even stuff that’s easily checked.

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I should say until now his argument is much more convincing than your point.
He offered evidences to support his arguments and it is you who made up false performance to mislead your subscribers.
Are you claiming you can reproduce that huge gain your strategy performance suggests?
Are you claiming you can offer such performance to your subscribers?
If not, you are misleading people here.

Discontinue your strategy and reset a new one, which are entirely based on your XIV timing model that you claim to be capable of reproducing your past performance.

1 Like
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Haha just saw these two trades , lets take a close look :

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At 21/3 he shorted at 2.25 11 minutes later he closed at 0.18 !! , at 22/3 he shorted at 2.36 then 21 minutes later he closed at 0.14 !!

Now whats the significance of these dates ? Who knows ? I will tell you , it seems thats the first time he noticed the erroneous pricing and decided to carry on with this method thats why he lost money at Feb and couldnt make any gains , lets look at his system performance :

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I am not angry , actually i am having fun :smile: