Tuesday, June 16, 2009

[TheOptionClub.com] Question for Michael




Hi Michael,

for past couple of months i have been trying to replicate your trading method, so now i have a question regarding determination of action points.
From what i know you have been using 1.5 sigmas both daily and hourly. I wanted to ask you what price are you using for calculating the sigmas? I started to use my last action price or where the price of unerlying was when i last adjusted, but you were also talking about how the gaps also determine your action, so i was wondering if it makes sense to calculate the sigmas also with previous days closing price and measure the sigmas from the open? If i do that to im afraid that i could end up with a bit too much action points.
Then, my question is do you hold the sigmas constant once you calculate them? Since as each day pases they are changing, not dramaticaly but if say no action was taken for a week or so they do change due to passage of time.
Also, do you use hourly sigmas anymore if nothing happens in a day that action was taken (under presumption that i use last action price for calculation), since they kinda lose value as time goes by.

Thank you.
Igor

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