The Worst Week of Ben's Trading Career So Far (Patreon)

Had an 18k drawdown last week.

The earnings trade ruined me. It was the worst week I've ever seen, and it began (literally) the day after I doubled the size of the strategy. 

Such is life.

Don't let this scare you away from the earnings trade if you do it. This is just due to sizing it to an obscene level and getting unlucky, not the edge being gone or something like that. It's still a good trade. 

I took a hard look back and asked "wOulD I hAvE mAdE thE sAmE dEciSionS I dID giVeN tHe InfOrMaTioN I hAd At tHe TimE" and the answer was

When I reconcile my results with the backtest, I can see where the problem emerged. 

Would I have not doubled my size in this, I would have been slightly positive for the year with this strategy, right in line with the backtest.

This takes me YTD negative while The S&P is up +15%. That's a bad feeling. I think I'm still beating since inception, but I'm too scared to check. 

Was at Subway the other day and fortunately they're hiring entry level positions (with dental and 401k matching if you can make it to a supervisor role). I have an interview later this week. 

Gonna be taking a break from markets until they open tomorrow morning.

Here's another kind of trade I found 

I noticed this while look at the crypto prediction markets the other day. 

Above you have two contracts. One of them settles on November 30th, and one of them settles at the end of the year. 

Below you can see the settlement date for each contract, the number of days until expiration, and the price of each. On the left side you can see, given the price, how much each contract is expected to decay every day. 

If there's no specific catalyst making a ceasefire more likely before the end of November, the implied daily decay of these contracts should be the same. That means either the November is too expensive, or the EOY is too cheap. 

There would be two ways I see to structure a trade around this. 

You could sell the YES outcome on the November 30th contracts and buy an equal amount of the YES on the end-of-year contracts. The front contracts should lose more value per day then the back ones on average.  

You'd then close the EOY contracts when the front expires. 

You'd probably want to spread this bet around to many different trades like this, as there will be some variance around the outcome for any individual trade. Sometimes you might get unlucky if the  event materializes.

Another way to do this would be to equal dollar decay/day weight the contracts. Basically selling the front expiration contracts, and buying the back expiration, weighting them such that every day you make as much on the front as you lose on the back (assuming this linear decay model). 

In this example, you'd buy 2.37x as many EOY expiration ones as you'd sell November ones. 

This essentially gives you an option with slightly positive theta, where you make a small amount of money if the event doesn't happen, but make a good amount if it does. 

Portfolio Update

I don't feel anything anymore