The principle of least aggravation

I've been trading options for almost 4 years now, with intermittent success. I think I've finally found a winning strategy, thanks to Dan Sheridan and his team, from whom I learned not to fear "adjustments" and other valuable skills.

As I learned, I came to be interested in slightly nonstandard trades and to understand what features are desirable in a brokerage. I've tried four different brokerages now, and three have what I consider to be fatal flaws (for my purposes, anyway), so that leaves me with the fourth, which I'll discuss at the end of this post.

I spent 2+ years trading via OptionsXpress. There's a lot to like about this site: the UI is in many ways very nice, automatically doing things for you that should be automated (like adjusting the expiration dates on a butterfly spread to match when you change one of the wings).

Its fatal flaw, though, is being too inflexible about not-quite-standard trades, like the 1-4-3 butterfly I mentioned here last year. It also has a very funny idea of how to combine trades; try buying two nearby butterflies and watch what happens. It breaks them apart and recombines them into 2 call spreads, a butterfly, and a condor. Sheesh:

I've recently been trying OptionsHouse ... the low-price leader. They do get the job done, but ...

• They have a clunky UI, with none of the nice features of the OX website. You have to do every step by hand, including assembling the sale of a spread that you bought.
• They have a strange way of handling not-quite-even butterflies -- they make them 2 spreads and apparently charge margin for each! For example, I tried to put in a butterfly 850-910-950 and got a "you don't have enough margin" message. I put in a help request and this '2 spread' bit was explained ... I widened the spread to 850-910-960, still a debit spread ... and the system accepts it.

These 2 issues I might have lived with, but this week I tried to put in a calendar on the new extended weeklies -- you sell the 8-day-out one and buy the 15-day-out one. This is a debit spread with limited risk, but I got this red warning text as if I were trying to sell naked calls. I called their help line and got some unhelpful explanation. I suggested this might be a bug in their system, and the guy said no, that's what they intended ... OK, they're going to have to live without me ...

I've just spent a couple of months with Interactive Brokers. I had high hopes ...

There is a lot to like:

• Terrific execution, even (especially?) of open-outcry index options like RUT and SPX
• The best security of any brokerage or bank I've seen, with a brilliantly designed two-factor authentication scheme

But ...

The UI is baffling. Actually they have at least 2 UIs and possibly more, depending on how you count. There is Web Trader, via which I entered my first butterfly spread. I then launched their "Trader Workstation" .. and it's a bunch of Java UI code flying in very loose formation.

What do I mean by baffling? I thought I was buying March 2013 expiration options ... there was a web menu that had 'Mar 2013' as one of the items but then some dates below that, presumably weeklies. I chose 'Mar 2013' and thought I was all good.

I found out two days later that I actually bought a spread on the March 1 expiration extended weeklies without realizing it! This is ... the second time I've made this mistake on their site, and two strikes is out. 

I was going to insert a screenshot of the Trader Workstation menu ... but the first time I tried to run the Linux version:

The brilliantly designed two-factor authentication scheme is

missing one of the factors on Linux ...

So that leaves me consolidating with ... drum roll please ... ThinkOrSwim. To be abbreviated TOS below ...

I have only traded intermittently with TOS, trying other brokerages when I was experimenting with the 1-4-3 trade ... $179.95 commissions for a +10/-40/+30 trade ... $24.50 on OptionsHouse.

But:

• I got a break on the commissions through Dan Sheridan's company, and I'm no longer focusing on that 80-contract trade but a butterfly which takes only 40
• Other than the commissions, I realized earlier today that I've never had a single other issue with TOS!

They're not as good at security as Interactive Brokers, but they do have a standalone program (runs on Windows, Mac, Linux) that is easier to secure than a browser-based setup. Its UI is complex but usable, and there are videos posted on its site that tell how to do anything I ever wanted to do.

So: I'm going to stop messing around with brokerages and just use TOS to make money ... although I hear Fidelity's site is nice ... :-)

Probiotics is going Yuckily mainstream

I've been seeing 'Probiotics' mentioned various places for years. But this result is going to thrust it into the mainstream.

This way of looking at disease posits that there are not only microbial "germs" but a human biome that is largely protective of human health even when these normally pathological "germs" are present.

Broad-spectrum antibiotics kill not only the germ targeted but other helpful bacteria that are normally on "our side," the probiotics advocates claim.

It looks like they're right!

Clostoridium Difficle is a bacterium that causes severe intestinal disease ... but mostly among people who have been using antibiotics, often in hospitals.

A study just published trying the ancient remedy of fecal transplant: that's transferring fecal matter from a healthy person to one suffering from C. Difficle. The study group showed this technique to be so effective (15 of 16 patients helped) versus the control groups using standard antibiotic therapy (3 of 14 and 4 of 14) that the study was halted. It was thought to be unethical to continue when the study group was getting such profoundly better results.

The transplant apparently restores a full suite of helpful bacteria to the suffering patient, restoring C. Difficile to its rightful place in the background, causing no further harm.

Have some yogurt!

References:

The New York Times article
"Germs are Us" from the New Yorker
The Wild Life of Our Bodies

LED flashlights: Lessons learn from an early adopter

I've been buying LED flashlights for a couple of years now. I made a mistake or two along the way and thought you might be able to benefit by my experience.

First: it doesn't make any difference how many lumens you have if you can't afford the batteries to generate them. I bought my lovely wife a Frontgate "500 lumen" model that came with free imprinting of one's name ("Kate!") Maybe it really was putting out 500 lumens (one of our neighbors said that they thought it was a motorcycle coming down the street), but the original 4 CR123A photo lithium lasted probably 10 days or two weeks, used probably 30-40 minutes per day.

The price to replace them: $6.49 each, retail, and it takes 4 to run the thing. You can get them for $1 each or so, online, but, I thought, why not use rechargeable ones?

I tried this, but the only 'RCR123A' batteries I could find are made by Tenergy, and they have some unfortunate characteristics for use in flashlights. They go out without warning. I found this out being 40 minutes away from home on a walk one night, and the flashlight just went dark with 2 seconds warning.

It turns out that 131 lumens is plenty. I ordered a Maglite rated at this that uses 3 D cells and it's fine for our dark nights. The instructions say "don't use rechargeable batteries" and to that I say "bah!"

I tried our eneloops, which are AA batteries that come with a D-sized shell. This didn't work to start with, but I looked at the cap end of the flashlight that connects to the bottom of the battery. It was too wide for the little AA eneloop, so I stuck in a square of aluminum foil and voila! These batteries work fine in this flashlight, and get dim slowly rather than cutting off quickly and leaving you in the dark.

Evidence cited in support of open offices ... but is it true?

I just today read a University of Michigan Study from 2000 that concludes that "radical collocation" type open offices show significant productivity benefits over more private workspaces.

Maybe, but I have some questions about this study that may require another look at the results:

1. There was no control group. There were six groups studied, but none of the study groups were using "closed" offices. The study groups' results were scored against an existing corporate baseline of productivity.
2. The productivity gain, while impressive, is within range of the 10 to 1 difference that's been measured in the literature repeatedly. This means that the 4x improvement could easily have been due to the particular programmers chosen rather than the office environment's effects as cited.
3. Finally, there's the Hawthorne effect! All groups knew they were being studied, which has been shown repeatedly to increase productivity no matter what details of changes in the environment are made!

Does anyone know of a controlled study of both kinds of offices compared against each other with no change other than the office space styles between groups? Or of a similar study of 'closed' offices against baseline data collected from 'open' offices?

Maybe 'radical collaboration' does work better, but the Michigan study does not prove the point to my satisfaction. 

You thought your interview schedule was a challenge?

A couple of coworkers have been doing enough interviews of prospective candidates to be getting a bit burned out on the process. Here's one that might put their challenges in perspective:

I, uh, LOLed at this one. This is, of course, Pearls Before Swine. It's even available in daily newspapers for us Old People. :-)

Why do we allow a storm to bring the market down?

Since the rise of electronic trading, the stock and related markets seem to me to be nearly identical to other network services. Amazon.com and Google do not allow a single weather event or earthquake or whatever to disrupt normal operations.

The standard way of doing this is to set up distributed data centers in geographically stable but widely separated places. Why can't we have this for our markets as well?

 I speculate that it may be the illusion that the fading market makers have that their personal involvement is required for the functioning of the markets. One official was quoted "we could have opened the electronic trading markets but didn't want to endanger our employees who have to be present to run it." Clearly if you have one data center in New Jersey, one in Chicago, one in Seattle and one in Hawaii this won't happen.

Yes, you will lose the femtosecond response you're getting from being right next to the New York data center, but so will everyone else. Until power is restored, anyway. (I enjoyed Scott Patterson's book Dark Pools on the rise of electronic trading, which got me thinking about this.)

Comments please!

Tamiflu apparently doesn't work after all ...

Here's a disturbing video on selection bias in the publication of medical results. The economic incentive to publish only positive results has clearly overwhelmed the regulatory and public outrage response up to this point, but clearly we're better off as a society if we cease to fool ourselves about drugs or anything else. Comments?