NOPE is a loaded dice

NOPE is a loaded dice

Okay, here is a back-tested strategy:

• Short: +30 for entering short, and +15 to exit. Per @purpledevilduckies, +30/+15 were the back-tested optimal entry/exit NOPE values to go short, and showed a historical success rate of 70%. The median time for a successful reversion trade in this backtest was ~40 minutes between entry and exit.
• Long: -60 for entering long, and -30 to exit. These two values for long entry/exit are only “rule-of-thumb”, and so are subject to change in the future if there come about more definitive findings.

If you are new to trading, understand that this might be good, but actually it shows something amazing (that NOPE is a loaded dice).

But I think it’s a bad way to trade unless you are a quick robot (for reasons see earlier blog).

It’s a proof of concept, a proof of an edge.

It shows that NOPE is the loaded dice.

My intuition, is saying it’s likely extremely sub-optimal, probably profitable, but definitely sub-optimal.

Unless you are running a bot where self disciple is free (it’s emotionally hard to not hang on when you are losing), where you’d be okay with making tiny bets and your time is essentially free (because you are doing other things with your life, like shit-posting on twitter). (Lily, you are awesome, if you are reading this, thanks by the way).

I think the stock market is a mean reverting but trending market.

So I’ve been trying to optimize my trader equation for that based on NOPE.

I don’t use technical analysis, it seems like garbage and astrology.

Also, if you are new to trading… You should be aware that traders go to lunch…Yes… Lunch, matters.. in global equity prices as shocking as it might seem. The afternoon is a sleepy time typically and trends or fades often…

In the morning:

People trade. Direction is uncertain. IV is high.

Sell your options in the morning at open.

After awhile, the IV and rapid movements settle down a bit.

I’ve decide not to trade NOPE prior to 9:15 am CST, I don’t think it’s reliable enough (outside a quick scalp possibly and my fingers aren’t that quick) and the IV is higher (my theory is less hedging is necessary for expensive options) see GameStop gamma squeeze v. 1.0 retail vs v. 2.0 million dollar hedge fund option purchases for examples. Also options volume is much lower, so it might have less effect on price due to that.

See this for reference about times of day:

Common Intra-Day Stock Market Patterns

I don’t know if the direction parts described in the article are true.

But options are more expensive in the morning because the market moves rapidly in more uncertain directions.

And, after lunch, volume is down, movements are slower, then once 2pm CST hits volume picks up, and at 2:55–3pm CST the closing auction happens.

Big money moves markets. Small traders like you and me are gnats on the hide of an elephant, we don’t move, we only ride. And big money trades at open-lunch and 30 minutes till close, and especially the last 5 minutes of market open.

https://www.nyse.com/network/article/nyse-closing-auction?utm_source=homepage&utm_medium=banner

Feel free to violent argue with me in the comment section.

The best way to learn is to be wrong on the internet.