Re MCProTrader system

I like that idea. It´s simple enough and it encourages trade leaders once more to trade their own system because then they have a longer track record “since autotrading started”.

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Looked through strategy… Looks legit… I do wonder if auto-traders get same execution, since it required options writing, and with quite a few people on board this strategy could run into some liquidity issues…

Also, I do hope people realize what are the potential risks of writing UVXY calls… I hope the strategy creator hedges these positions…

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please enlighten us to the dangerous of writing the uvxy calls as we are not options experts. I have read that writing options have unlimited risk just like shorting stocks but most people have stops in place and never let it get to that level. Are options any different?

They are different in the way that you can employ margin and overleverage your account even easier than with stocks. With UVXY or VXX short calls you have even greater risk because a tail event or even just a smaller one of the strong corrections will burn your account completely if overleveraged. Let the VIX spike to 30 or 40 and many systems with short Calls on these instruments will be bankrupt.

But the danger is not so obvious because you can sell far out of the money calls on VXX or UVXY so they don´t get in problems most of the time. So it is possible to have 1 year of nice and quite stable track record with such a system and suddenly blow up when sh** hits the fan.

There may be systems which actually manage risk somewhere down the line but these can definitely be considered as advanced systems and aren´t that easy to find nor to develop.

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Options pricing has convexity. There is a nonlinear movement in their pricing, especially on what were out of the money options when a shock happens. Some shocks happen outside option trading hours and even if they happen during trading hours you may find no asks trying to buy them back on a “stop”. It only takes one 20-30x move to the bad side in your options price that you sold naked on significant leverage to learn the value of vertical spreads :slight_smile:

Writing options isn’t dangerous if either appropriate leverage is used / understood, and/or one buys further out of the money options to hedge these risks, since those will explode in value even more on a relative % basis for the aforementioned reasons, and therefore lessen the blow (and also define risk to prevent untimely margin calls).

Selling naked calls on a long volatility instrument with any kind of leverage is a trainwreck waiting to happen, because the underlying already can move in a non-linear fashion and on top of that now you have an option that will stack that effect.

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I am autotrading another options writing system called Bigtrader. The chart looks fairly consistent and safe. Can you take a look at it and tell me what you think. thanks

As I am a model developer I don’t want to comment too much on the viability or suitability of someone elses model.

Things to ask options model developers revolve around do you sell naked options? What kind of notional risk (leverage) are we taking? Have you stress tested a flash crash event? If you are selling naked leveraged options on single stocks, what happens if it is taken over? What happens if it turns out to be an Enron? What happens if it gets a 50% haircut on a surprise earnings pre announcement? If we are leveraged naked why not sell vertical spreads instead? Is it because we don’t make money with this strategy with vertical spreads? If not then aren’t we basically just selling catastrophe insurance?

One really needs to understand the risks being taken with options strategies, and the model developer should be able to thoroughly articulate the risks and rational for what the are doing. There can be somewhat valid reasons for selling naked, like vol skew, or more likely bid/ask spreads on less than super liquid options, but the temptation is to leverage 4-5x naked in order to juice the returns, especially in this low vol environment…

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what system have you developed I would like to check it out. please link me.

I am trading MCProTrader at IB. No need to ask the developer about stress testing because IB do that automatically. This morning they sent me the loss predicted by their model under a stress scenario holding the current strategy positions - 190% of my account. Something to think about.

The developer/trader has some skill though he did dismiss the questions asked about why he doesn’t use TOS as it being “too much work”. Make of that what you will.

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Nice to confirm this… By going over trade log, I had the feeling that this strategy has potential of total account wipe out and then some… And don’t get me started about “masterfully” exiting those positions… When VIX gaps up overnight from 15 to 25, not much you can do there…

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One must always wonder why systems with great returns aren’t traded by their own developer. Just another reason I never trade non-TOS systems. No skin in the game at all leads the developer to take hidden risks (that they probably know of) to create a very smooth equity curve (selling option premium or doubling down on losing trades – same thing) and attract subs. Also one must wonder why someone with a 100%+ return system in 4-5 months even needs sub revenue. They should be making tens of thousands of dollars a month from trading revenue if they traded their own system with decent scale.

But this is the cycle of trading life on C2. Begins with the high flyers attracting sub interest and ends with sub tears couple months later. Forex, Gold, Vol, all the same. Whatever is flavor of the month.

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Hi Elemental, do you mind to share, what TOS model do you use? N for how long have you used each models. Thx

Nothing right now. I’ve been burned a few times in the past, even by TOS systems, so I’m very cautious now. Of course many subscribers have had great success with non-TOS systems, but your mileage may vary.

When looking at a system that looks like it has excessive risks, I sometimes try to consider - say we eliminate the risky components as much as we can. Does the system still have any merit, or was all of the performance a result of hidden risks?

For example, in this case, taking only the long options trades seems to still be profitable on its own, and the risk is more easily quantifiable. However, with those trades we have the execution inaccuracy issue described above.

In the case of ConservProfit - what if you trade the system with no averaging down (limit size to maximum 2 minilots - never allow scaling), using a fixed stop (say as max dd per trade of this size), and not holding it over the weekend. Of course, those changes will significantly affect the results.

This is a bit like imposing risk management rules on traders. The question if there is any value remaining in the timing itself when those restrictions are added requires a trade by trade analysis.

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Up to today I also was a subscriber of MCProtrader, I was curious how the system will be doing with actual subscribers on board. On March 5 the developer sent out a nice, lengthy and comprehensive message to his subscribers, mentioning among other things that he has achieved financial freedom many years ago and is also managing now funds of high net worth clients. He says that in his personal trading account he has achieved a 25% CAGR over the last 10 years and for his clients a 17% CAGR since 2010.

So I asked him if he could set up a second, more conservative system with a targeted return of 20% to 25% rather than his present super aggressive system which he created based on a challenge of a friend. He declined, so I quit his system.

One has to ask oneself, why would he put up a system targeting 100%, without TOS certification, when he himself could “only” achieve 25%? ( Actually, achieving 25% over 10 years would be outstanding). Is he just trying to see how long it would take till he runs the system into the ground and how many subscribers he can take with him?

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I made a stress test with InteractriveBrokers as well.
(IB account management > reports > risk > stress test)
The results were scary, and I was following only with 50%-scaling.
After the cancellation, my margin cushion got much better, too.

With 20+ years experience, the trader is very knowledgeable,
but I don’t want to take that huge risk. (> Murphy’s law :wink: )
I hope everything will go well for this strategy and its subcribers.

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Can someone at C2 explain why fake trades prior to the mid-Feb start date (for autotraders) are still counted in the record? They’re obviously rigged and designed to improve the stats significantly. Is it any surprise why the leader shifted gears from playing the spread on cheap options (impossible to do in real life but a great way to create a beautiful equity curve) to selling high IV options (basically selling catastrophe insurance)?

Classic bait and switch that really needs to be addressed by C2 management especially since this guy is even using the equity curve as a marketing device for his money management business. Total charlatan peddling dangerous products to naive investors who are lured by the smooth equity curve that is mainly the result of exploiting loopholes in C2 limit orders.

Even more amazing that someone in this thread showed how much of a sham those earlier trades are yet C2 does nothing about it with respect to this guy’s strategy.

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As I argued above:

"The simplest solution is to add a column to the Leader Board (and to the Grid) showing Annual/Cumulative return since Autotrading began. You can’t ignore the pre-Autotrading returns because that is the only method by which new Trade Leaders can get any subscriptions. And weighting pre- and post-Autotrading returns would be a nightmare. . . .

If you did this, smart investors here would then give very little attention to returns BEFORE Autotrading began and let some other brave soul be the first subscriber to begin Autotrading on that strategy."

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I’m fine with pre-autotrading returns being shown in cases where the trades are apparently legitimate, but this guy obviously exploited limit order loopholes to fabricate a deviously misleading equity curve that has no basis at all in reality.

This sort of fakery was shown to Matt earlier (to ludicrous effect) in this thread yet this guy still gets away with it and uses it as advertising material to lure in naive traders (both to his C2 strategy and to his personal money management business) who probably don’t even realize (a) that he shifted gears on his trading strategy (from buying cheap options and playing the spread to selling high IV options) and (b) the pre-autorade history is a complete fabrication based solely on the use of a C2 loophole that absolutely cannot be replicated in real trading.

The last time I saw such outright fakery was with HFT VIX SCALPER and at least he had the courtesy of not accepting subscribers and it was eventually shut down. I’m sure this MCProtrader got the exploit idea from this guy too since there was a thread on VIX SCALPER’s ludicrous returns late last year.

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To keep in perspective:

Bernie Madoff attracted tons of investors by just promising between 10% and 12% compound annual returns. This guy claims that in his own account he had a 25% CAGR over 10 years and in his client’s account a 17% CAGR, of course he does not give any business address or any other verifiable background information and uses lame excuses for not getting TOS certified. At 25% CAGR over the last 10 years he would have beaten 99.9% of all the hedge funds in the world.

I guess with all those gullible subscribers on C2 he saw a fertile ground for his scheme to create a system targeting 100% CAGR over 3 years.