Tag Archives: Volatility

Archive, Retrospective

Retrospective for January 21

Posted on by Conor Browne

Adapting to Market Volatility: Insights and Strategies

Quick recap

Ernie shared his trading experiences and mindset, highlighting the importance of not focusing solely on win rate but also on preserving capital and being comfortable with small losses. The team also discussed the current state of the market, with Ernie predicting a potential rise due to inflation and the Federal Reserve’s monetary policy. They also discussed their trading strategies, with Ernie emphasizing the importance of managing premium decay and focusing on the directional aspect of the strategy. Towards the end, Ernie discussed the potential risk of overconfidence after a series of successful simulated trades.

Summary

Trading Strategies and Mindset
Ernie and Laura had a conversation about trading strategies and the mindset behind successful trading. Ernie shared his experiences, mentioning that his trading week was somewhat successful, with mixed results but no significant losses. Laura praised Ernie’s handling of challenges and his confidence in his methodology. They also discussed the importance of not focusing solely on win rate but also on preserving capital and being comfortable with small losses. Ernie emphasized the need to understand the edge and avoid risky strategies that could lead to big losses. Kevin agreed, highlighting the importance of accepting small losses.

Austrian Economics and Trading Insights
Kevin, Ernie, and Laura had a discussion about a book on Austrian economics. They appreciated the author’s storytelling approach and the comparison of Austrian economics to the evolution of conifers. They highlighted the importance of skills like controlling drawdowns and staying in the game. Ernie clarified the role of market makers in the stock market, emphasizing their role in providing liquidity rather than manipulating the market. Laura expressed interest in learning more about order flow, which Ernie acknowledged as challenging but important. The discussion concluded with Kevin emphasizing the need to learn from experienced traders.

Trading Strategies and Market Analysis
The team discussed trading strategies, with Ernie elaborating on a fisherman’s net analogy, comparing it to their wait-and-see approach. Kevin and Laura added their insights, noting that the added money butterfly does not significantly impact their strategy. Later, Dave raised concerns about changes in the meeting link and calendar, which Ernie acknowledged and attributed to user issues. Ernie also mentioned potential changes to the daily meeting link to improve functionality. The team also discussed the current state of the market, with Ernie predicting a potential rise due to inflation and the Federal Reserve’s monetary policy. Ernie also demonstrated a technical analysis exercise, predicting a value of 5,239 using an ABC correction. Towards the end, they briefly touched on astrology’s influence on the market.

Roundabouts, Boston Driving, Investing Strategies
The conversation covered various topics, beginning with a discussion about the reemergence of roundabouts in Connecticut and their presence in Massachusetts. The discussion then shifted to a humorous conversation about driving in Boston. The conversation took a financial turn when Ernie shared his intention to start investing in long puts, a strategy he believes will allow significant profits when the market collapses. Ernie also explained his trading strategies, emphasizing the importance of a capital-efficient trade with a minimum 1:9 reward-to-risk ratio. Jill, a new participant, sought clarification on short strikes on the butterfly, which led to a conversation about their trading strategies.

Trade Strategy and Volatility Management Discussion
Ernie Varitimos discussed the trade strategy that adjusts widths according to volatility and risk tolerance. He highlighted the importance of managing premium decay and focusing on the directional aspect of the strategy. Ernie explained that their profit management framework dictates when to exit a trade, not waiting for the market to pull back. Ernie also shared insights on the potential returns of their strategy, ranging from 25% to 1,000% return on risk. Herb Lauw added that he uses the volume profile to follow the trend and pick a direction. Ernie emphasized the importance of considering the overall volatility regime when determining the cost and potential profit of a trade. He also discussed the behavior of the premium in the final hours of the 0 dte te and how it decays, emphasizing the need to play both the premium decay and be in the right place at the right time to capture additional profit.

Trading Ranges and Volatility Adaptation
Ernie Varitimos discussed his approach to trading ranges in response to changing volatility. He stressed the importance of not treating every trading day the same and adjusting to specific conditions. He shared his experience that there is no significant difference in his performance or return, regardless of when he trades. Ernie also emphasized the importance of continuous adaptation and improvement in his strategy, which involves collecting a wide range of data and making micro adjustments weekly. He also shared his personal trading strategy, which involves putting on trades before the market opens or around 9:45 to 10:15. Finally, he explained the advantages and disadvantages of trading the E-mee features.

Ernie’s Performance and Strategy Discussion
Ernie Varitimos discussed his recent performance, which saw a drop in his win rate to under 50%. He identified a significant drawdown but clarified it wasn’t a major one and shared his strategy of becoming more conservative to protect against long losing streaks. Despite a 13 out of 15 losing streak, Ernie was only 1.6% down. He emphasized the importance of understanding the reasons behind mistakes and adjusting strategies accordingly. Ernie also discussed the use of the profit taker, explaining it was not mandatory but a tool to raise awareness. He also addressed questions about the impact of holding a trade through the day and the reliability of trading simulators. The discussion concluded with Ernie sharing some of his successful trades.

Simulator Practice for Trading Beginners
Ernie Varitimos discussed the importance of practicing on a simulator before using real money, suggesting that beginners should aim to do 1-2 trades a day. He emphasized the need to focus on execution skills rather than accumulating simulated dollars. Ernie also highlighted the potential risk of overconfidence after a series of successful simulated trades. Towards the end, he explained a strategy where insurance trades are placed three months out, with the goal of then investing in undervalued equities if the insurance pays off.

Archive, Zoom Daily

Daily Meeting for Friday January 19

Posted on by Conor Browne

Strategic Discussions on Directional Trades and Managing Risk in Market Volatility

• Discussion on Hull Moving Average: The meeting begins with a debate about the effectiveness of the Hull Moving Average as a directional indicator and its reliability in predicting market movements.

• Market Direction and Probability: Emphasis is placed on the acceptance that market direction is essentially a 50/50 proposition, and that long-term trends matter more than daily fluctuations.

• Volatility and Market Exposure: The conversation shifts to adjusting market exposure based on volatility, with strategies for expanding exposure in high volatility situations and contracting in low volatility environments.

• Implementation of Strategies: The participants discuss various strategies like the Batman and single out-of-the-money butterflies, focusing on their execution, risk-to-reward ratio, and the importance of staying within maximum daily risk limits.

• Experience Sharing and Strategy Testing: A portion of the meeting involves members sharing their experiences with different trading strategies, including an overnight Batman strategy and its performance analysis.

• Profit Management Framework and Decision Making: The meeting covers the application of the profit management framework, emphasizing the importance of being mechanical in trade entries and using the framework for making informed exit decisions.

Summary

The meeting was a comprehensive discussion on trading strategies, particularly focusing on the Hull Moving Average, the understanding of market direction as a probabilistic outcome, and the importance of aligning trades with market trends. The participants delved into various trading strategies, including the Batman strategy and single out-of-the-money butterflies, discussing their execution and risk management. Key insights were shared on adjusting market exposure relative to volatility and the significance of following a profit management framework for decision making. The meeting was interactive, with members contributing their experiences and insights, leading to a holistic understanding of risk management and strategic trading in volatile market conditions.

Archive, Zoom Daily

Daily Meeting for Thursday January 18

Posted on by Conor Browne

Comprehensive Analysis of Trading Strategies in 0-DTE

• Overview of daily market conditions and decision-making process for bullish or bearish trades, including consideration of recent economic reports.

• Detailed discussion on the use and setup of volume profile in trading, highlighting its role in identifying market structure and significant price levels.

• Insights into the effect of volatility on option premium decay, especially in relation to butterfly trades, and the rationale behind morning trading.

• Strategies for entering trades based on various factors, including risk tolerance, direction, and timing, with emphasis on morning sessions.

• Exploration of the profit management framework, including the impact of volatility on decision-making in different market zones.

• Q&A session addressing specific trading queries, such as last-hour trades and translating volume profile insights from futures to SPX trading.

Summary

This meeting included an assessment of the current market situation, including the influence of economic reports. The focus then shifted to a comprehensive tutorial on using volume profile in trading. Ernie explained its importance in identifying key market structures and price levels, such as support and resistance zones. A significant portion of the discussion revolved around the impact of volatility on the decay of option premiums, particularly in butterfly trades, highlighting why trades are often initiated in the morning when volatility is typically higher.

Further, the meeting delved into the strategies for entering trades, considering various factors like account size, risk tolerance, and market direction. The presenter underscored the importance of timing, particularly in the morning sessions, to leverage the benefits of higher volatility. Additionally, the profit management framework was discussed in detail, explaining how different market zones and times of the day affect trade management and decision-making.

The session also included a Q&A segment, where specific trading queries were addressed. These ranged from the effectiveness of last-hour trades to the applicability of volume profile insights from e-mini futures to SPX trades. The meeting emphasized the necessity of logging, journaling, and reviewing trades to develop a deeper understanding and consistency in trading. Overall, the meeting provided in-depth insights into various aspects of trading within the Zero DTE service, emphasizing the importance of strategy, market awareness, and disciplined review processes in successful trading.

Archive, Zoom Daily

Daily Meeting for Wednesday January 10

Posted on by Conor Browne

Trading Strategy, Discipline, and Process Over Outcome

• Strategy Emphasis: The meeting repeatedly emphasized the importance of adhering to a predefined trading strategy, highlighting the significance of process over outcome and capital preservation over profit-making.

• Role of Indicators and Analysis: There was a discussion on the utility and limitations of various indicators like volume profile and candlesticks, with a focus on how they contribute to situational awareness rather than being primary decision drivers.

• Managing Emotions in Trading: The discussion touched on handling emotions like euphoria and disappointment, stressing the need for detachment and focusing on process rather than individual trade outcomes.

• Scenario Planning and Decision Making: The importance of planning for different market scenarios and having preconceived action plans for each was highlighted to enable better decision-making under various market conditions.

• Trading in Different Volatility Regimes: The meeting covered strategies for trading in different volatility regimes, discussing when to hold or fold trades, especially near the end of the trading day.

• Developing and Refining Skills: The necessity for repetition, discipline, and continuous learning to develop trading skills and build intuition was emphasized, akin to mastering any skill or sport.

Summary

This session focused on refining trading strategy, understanding the use of tools and indicators, and managing emotions and decision-making in trading. Ernie, leading the discussion, emphasized the importance of process over outcomes, advocating for a disciplined approach to trading that prioritizes capital preservation. He discussed the utility of indicators like volume profiles and candlesticks in providing situational awareness but cautioned against relying solely on them for trade decisions. The conversation also delved into managing emotions such as euphoria and disappointment, emphasizing the need for detachment and focus on the trading process. Scenario planning was highlighted as a crucial aspect of being prepared for various market conditions. The session also touched on trading in different volatility regimes and the importance of continuous learning and repetition to hone trading skills. Overall, the meeting reinforced the philosophy of disciplined trading, focusing on process and strategy over short-term outcomes.

Archive, Zoom Daily

Daily Meeting for Monday December 18

Posted on by Conor Browne

Adapting Trading Strategies in Low Volatility and Diet Discussions

• Diet and Nutrition Focus: Discussion about Ernie’s red meat-centric diet, including his avoidance of chicken and pork, and preference for red ruminant meats like beef, bison, venison, and lamb.
• Dietary Health Benefits: Ernie explains the positive effects of his diet on his energy levels and health, mentioning his reduced cravings for sweets and carbs.
• Trading Strategy in Low Volatility: Ernie delves into his trading approach during periods of low market volatility, emphasizing the importance of quick profit-taking and the challenges posed by low liquidity.
• Technical Analysis and Trading Tools: Discussion on the use of various trading platforms like Thinkorswim and TradeStation, focusing on their analytical capabilities and suitability for different operating systems.
• Market Behavior and Entry Strategies: Insights into adapting trade entry times and strategies based on market volatility, with an emphasis on risk management and reward optimization.

Summary

In this daily meeting, Coach Ernie addresses a variety of topics, beginning with personal anecdotes about coping with a storm and power outage. He then shifts focus to his diet, discussing his preference for red meat and the benefits he has experienced, such as consistent energy levels and diminished cravings for sweets and carbs. The conversation moves to trading strategies, particularly in the context of low market volatility. Ernie emphasizes the importance of swift profit-taking due to the increased risk and lower liquidity in such conditions. He also discusses various trading platforms and their functionalities, underscoring their importance in effective technical analysis. The meeting wraps up with Ernie providing insights into market behavior, the timing of trade entries, and the importance of managing risk and maximizing rewards in trading strategies.

Archive, Zoom Daily

Daily Meeting for Thursday December 14

Posted on by ernie

Comprehensive Analysis and Strategy Discussion

• Market Trends and Volatility: Discussion on the importance of following market trends and adapting to varying volatility levels, highlighting the relationship between market conditions and optimal trading strategies.

• Trading Discipline and Detachment: Emphasis on the significance of maintaining a detached perspective in trading, avoiding biases, and the importance of consistent strategy application for long-term success.

• Role of Habits in Trading Success: Stressed the necessity of developing positive trading habits, understanding the root causes of bad habits, and implementing a systematic approach to improve trading practices.

• Utilizing Trading Tools Effectively: Shared insights on effectively using tools like Thinkorswim for detailed analysis and the importance of spending time in the analyzer for better trading decisions.

• Optimal Timing and Trade Execution: Explored strategies for optimal trade entry times, considering market volatility and price action, and the significance of being flexible with trade timings.

• Practical Advice on Trade Management and Risk: Offered practical tips on managing trades, understanding risk-to-reward ratios, and handling trade settlements and order execution challenges.

Summary

The daily meeting on December 14th covered a comprehensive range of topics essential for effective trading. The discussion opened with an analysis of current market trends and the impact of volatility on trading strategies. A significant focus was on the importance of discipline and detachment in trading, highlighting the need to avoid biases and the importance of following consistent strategies for long-term success. The role of developing positive trading habits was emphasized, along with a systematic approach to identify and correct bad habits.

The meeting also delved into the effective use of trading tools like Thinkorswim, underscoring the importance of spending time analyzing trades for better decision-making. Strategies for optimal trade timing were explored, emphasizing the need to be adaptable based on market conditions and volatility. Practical advice was shared on managing trades, understanding the nuances of risk-to-reward ratios, and handling the complexities of trade settlements and order executions. The meeting served as an insightful platform for sharing strategic insights and practical tips, enhancing participants’ trading skills and strategies.

Archive, Zoom Daily

Daily Meeting for Friday December 8

Posted on by ernie

Deciphering Market Patterns: A Deep Dive into 0-DTE Trading Analysis

• Trading Platform Limitations: Discussion on the challenges with TradingView’s early switch to new contract volumes, impacting market analysis.

• Channel Analysis: Examination of recent market patterns, noting similarities with previous dates and the recurrence of certain channel behaviors.

• Contract Volume Discrepancies: Analysis of the volume differences between December and March contracts, emphasizing the importance of trading volume in determining front contracts.

• Market Trend Observations: Insights into the current market trends, including the potential continuation of a sideways or slightly upward movement.

• Volatility and Market Direction: Exploration of the relationship between volatility levels and market trends, with a focus on historical volatility patterns.

• Strategic Trading Decisions: Discussions around various trading strategies, including the Batman strategy, and considerations for managing risks efficiently.

Summary

The 0-DTE daily meeting on December 8th provided a comprehensive analysis of current market conditions and trading strategies. The session began with a discussion on the limitations of the TradingView platform, specifically its early rollover to new contract volumes, which can skew market analysis. Participants examined the market’s recent behavior, noting similarities to patterns observed on specific dates in early December. The analysis highlighted the importance of considering trading volume when determining the front contracts, especially between the December and March contracts.

The discussion then shifted to overall market trends, with insights suggesting a continuation of the current sideways or slightly upward movement. The team delved into the relationship between volatility levels and market direction, comparing current conditions to historical patterns, especially noting periods of low volatility. The meeting also covered strategic trading decisions, such as the use of the Batman strategy and how different approaches to risk management can impact trading efficiency. The session concluded with a focus on making informed trading decisions based on a thorough understanding of market patterns and volatility trends.

Archive, Zoom Daily

Daily Meeting for Thursday December 7

Posted on by ernie

Optimizing Options Trading with Unbalanced Flies and Market Adaptation

• Utilization of unbalanced flies for cost-effective entry and favorable profit curves, especially in SPX trading.

• Discussion on the challenges of trading in low volatility environments, including the necessity for quick profits and constrained spreads.

• Examination of high volatility benefits, offering more room for profit, and reduced trade sensitivity to price movements.

• Insights into different market regimes’ impact on trading strategies, emphasizing market unpredictability and the importance of consistent approach.

• Technical demonstration of setting up and adjusting unbalanced flies in ThinkorSwim to maximize trade potential.

• Strategies for adapting trading methods to various market conditions, focusing on preserving capital and seizing market opportunities.

Summary

The session focused on adapting options trading strategies to different market conditions, with an emphasis on using unbalanced flies for optimal trade setups. The discussion highlighted the complexities of trading in low volatility environments, where quick profit-taking and narrow spreads become essential. Contrary to intuition, high volatility was presented as less risky, allowing for greater profit potential and ease of trade management.

A significant portion of the meeting involved a technical demonstration in ThinkorSwim, showcasing how to set up unbalanced flies. This strategy allows traders to enter trades more cost-effectively and with a profit curve that is more favorable for expected market movements.

The conversation also covered various market regimes and their unique impacts on trade outcomes. The unpredictability of the market was stressed, emphasizing the need for a consistent trading approach regardless of market conditions. Strategies were discussed for adapting to the market’s offerings, with a focus on preserving capital and being prepared to capitalize on opportunities as they arise.

Overall, the meeting provided valuable insights into strategic options trading, focusing on practical approaches to manage trades effectively in varying market conditions. The emphasis on consistency and adaptation to market unpredictability was highlighted as key to sustained trading success.

Archive, Zoom Daily

Daily Meeting for Friday December 1

Posted on by ernie

Navigating Volatility and Strategy in 0-DTE Trading

• Adapting to Low Volatility: Ernie highlighted the challenges of trading in low-volatility environments, suggesting narrower trade ranges and smaller trade sizes as strategies to mitigate risk.

• Trading Strategy Insights: Discussed how personal perception and intuition play a significant role in trading decisions, emphasizing the importance of experience and logging trades for better decision-making over time.

• Economic Indicators Analysis: Ernie analyzed current trends in gold prices and bond movements, hinting at potential economic shifts and their implications for traders.

• Impact of Market Reports and News Events: The discussion included how market reports and events like Powell’s speeches inject energy into the market and the importance of situational awareness during these times.

• Personal Trading Experiences: Ernie shared his experiences with managing distractions while trading and the impact of missed opportunities on overall performance.

• Question and Answer Session: The meeting included a Q&A session where Ernie addressed specific queries from participants, offering tailored advice and clarifying various trading concepts.

Summary

This meeting focused on several key aspects of short-term options trading amidst varying market conditions. Ernie discussed his personal experiences and insights, emphasizing the importance of adapting trading strategies to current market volatility and individual perceptions of market dynamics. Key topics included the impact of low volatility on trade sizes and the challenges of managing trades amidst distractions. Ernie also shared his perspectives on broader economic indicators such as gold prices and bond movements, suggesting potential future trends.

Archive, Zoom Daily

Daily Meeting for Thursday November 30

Posted on by ernie

Strategic Insights and Practical Approaches

• Discussion on Personal Trading Strategies: Insights into Ernie’s personal trading choices, influenced by his schedule constraints and account size, highlighting the adaptability of trading strategies to individual circumstances.

• Analysis of Market Volatility and Trade Timing: Exploration of how market volatility impacts trade decisions, with a focus on choosing between narrow and wide butterflies in different market conditions.

• Use of E-mini Futures and SPX Options: Comparison of trading E-mini futures versus SPX options, considering factors like time constraints, liquidity, commission costs, and tax implications.

• Technical Analysis Techniques: Introduction and discussion on the use of the Hull Moving Average and volume profile in determining trade direction and understanding market structure.

• Practical Trade Setup and Execution: Real-time observation and analysis of trade setups, including considerations for strike selection and understanding the risk-to-reward ratios in trade execution.

• Guidance for New Traders: Emphasis on the importance of patience, discipline, and developing an individualized approach to trading, rather than directly copying strategies.

Summary

The November 30th Zero DTE meeting provided an in-depth look into various aspects of trading. Ernie shared his personal trading strategies, emphasizing the importance of adapting to individual schedules and account sizes. The session delved into the impact of market volatility on trade decision-making, discussing the use of different butterfly spreads based on market conditions. There was a comparative analysis of trading E-mini futures versus SPX options, considering factors like liquidity and tax implications. Technical analysis techniques such as the Hull Moving Average and volume profile were introduced for determining trade direction. Practical aspects of trade setup and execution were covered, focusing on strike selection and understanding risk-to-reward ratios. For new traders, the meeting highlighted the importance of patience, discipline, and developing a personalized approach to trading, rather than simply replicating others’ strategies.