NDX weekly trade wins again: 8 for 9!

I did put a short /ES trade back in for just 1 contract, unfortunately selling a 2nd put against it on Friday:

I had heard (via Tastytrade) that there might be some weirdness the last hour, and boy no kidding!

But back to the NDX trade: it worked again! Now 8 in a row and 8 for 9: 88.9%! And I got $1.86 credit, which is 22.8% return on capital. Wahoo!

That's enough of a test; I'm taking this into "production" next week using 1/2 the Kelly Criterion.

Given the assumptions that I'm going with (11 for 12 wins on average, returning 20% on average bet), the full Kelly Criterion recommends betting just over half your account on every trial. That's a little too exciting for me, but 1/2 that seems OK: 25% of the account.

More next week ...

NDX weekly trade: 7 in a row and 7 for 8!

I did give up on the short /ES futures trade just as it was about to start working:

It stopped going straight up, which is all you need to make money selling puts against the futures contract(s) ... I trust I'll have another opportunity later for this ...

But back to the star of our show: the NDX weekly trade. It won again this week, for 7 in a row and 7 for 8: 87.5% and counting:

Unfortunately I put this trade on at the minimum volatility of the morning and only got $1.00 for it (11.1%) ... based on action later in the morning I could have set an order to fill at $1.35 and got that later ...

Once again, the study I saw showed this trade winning 11 for 12 (91.7%) and we're getting in range of that.

Visualizing 17 in a row! More next week ...

I'm just about to give up being short ....

Another week of the relentless skyward climb of the S&P 500:

Right now the brokerage I'm using is down so I don't have the exact damage number, but I'm down at least 40% this month despite all the credit I've collected selling puts .... If present trends continue I can just close the short S&P futures and sell the puts naked!

That should flip the market over ... but now for the good news:

That's 6 for 7 in the NDX weekly trade ... 91.7% is 11 for 12, so we're still on track for that.

If the S&P isn't down on Monday I'm going to give up on my short strategy and move to this weekly NDX trade in my own account.

Watch this space ...

Another mixed week ... NDX trade now 5 for 6, /ES suffers again

It's now looking like the 91.7% results were on target; 5 for 6 is 83.3%  ... Actually I was girding myself for a loss this past week:

... as my short call was at 6370. But the trade is marked not on the opening but after all 100 of the NDX 100 stocks open, and marked under the symbol NDS. That squeaked in:

and all 4 legs expired worthless, as a good Iron Condor is supposed to. I sold the spread for $1.77, which is a 21.5% return ....

On the short /ES trade: bleah! Here's the 5-day chart:

I did pay back to myself the extra $750 I had put in to meet a margin call last week. But then I got too excited during Wednesday's market dip and sold another 1 contract. The bounce straight up from there leaves me with $18009.09 of the $28134 or so I started with. Splut!

I started by just leaving the 3rd contract without selling a put against it, so I'd get the complete benefit of any further market meltdown. Not so ... I finally sold that 3rd put on Friday with 2 others, thinking I could get $1000 credit per week to make it back (assuming the market would just stop going up!)

But no: I'm in margin call again so will have to close that third /ES short contract and put pair ... but maybe not until close on Monday so I get all weekend plus Monday's theta ...

We'll see .... More next week!

NDX trade 4 for 5, short /ES whomped again

First the annoying news:

The then-incipient tax cut burbling its way through congress late last week sent the market into a frenzy of buying, up to 2658 and change before closing Friday at 2642.75. This leaves me with $20677.87 ... I did actually cut down the size of the trade I had on by 60%, thank goodness! But the sharp upmove really caused damage ... it was even worse on Thursday.

But: buy the rumor, sell the news (I hope!) The Senate passed its version late Friday night so with any luck that will allow a bit of down movement in /ES ...

Now for the good news: the NDX weekly trade is now 4 for 5 (80%):

Thursday to Friday a.m. it was down, but not quite enough to damage the trade ... close was 6315.56, not touching the short 6310 put ... I sold this one just after 11 a.m. PST on Thursday and got $1.75 in credit ... that's a 21.2% return ($1.75 / $8.25) ... Just need to do that 91.7% of the time as advertised .... more next week!

Mixed results: short /ES clobbered, NDX now 3 for 4

For weeks the /ES had been bouncing down from 2585 or less ... until I started to rely on this! Silly me:

I met a margin call on Thursday with an extra $750.00 to go with the $28137 I started with. And the market continued up on Friday, so I'm left with $24130.32 ... I should know better than this by now ... I'm going to cut my position size down early Monday and put the rest into the NDX trade.

... which won again this time, returning $1.40 (16.2%) ... in fact I think I dodged a bullet on this one as I sold not the 16 delta but one was the 20 delta ... meaning it wasn't 1 standard deviation, quite.
But the trading in /NQ was weak enough that this one won again: now 3/4 or 75%.

More next week ....

Update: 2 more successful weeks ... and another leg of the trading plan now in place

I've been moving for the last week so missed last week's post ...

We are in the process (after 17 years!) of moving from a house we had built and where we'd lived since 2000. The new house is a rental:

... that looks kind of like this, but on more acreage (no houses around). Our little cockapoo Myla likes the place ...

(This is one of Myla's cousins I found on the Internet.) The only trouble for Myla is those other cousins that are around:

So we have to watch her ... But back to the subject at hand!

Last week I made the NDX trade just before expiration, which only yielded 75 cents: on a $10 wide spread that's 8.1%, and Monte Carlo simulation says that's not profitable even winning 91.7% of the time.

So just to try this out, the next day I put on at 8:30 Pacific a 1-day 1-standard deviation Iron Condor in our favorite volatile vehicle: TSLA. I got 15% on this one ... and 8.1 + 15 == ... 23%, just like last week's fabulous one.

So that's one thing I can try: when I get less than 15%, try a 1-day trade the next day to make up the difference, in whatever is volatile: TSLA or NFLX are two to try.

This week I got the trade in one hour before the market closed and got filled at $1.35 ... around 15% just for this one. It worked again so I didn't do anything extra on Friday.

So the NDX trade is now 2 for 3: 66.666667% winning ..

The other "trade leg" I put on this week is short /ES futures, selling puts against them every week.
I started with $28137 last Tuesday ... got filled at $2070.50 and sold the 8-day 2060 puts against these for $9.50 each (i.e. $475 each, since they're $50 per $1 of options in these futures).

As I write this, the futures have settled back to $2575.75 ... but the puts have collapsed to $2.65 so I'm showing a profit: up more in the options than I've lost in the futures.

And I can sell another batch of puts next week ... and the next. So this looks really good!

 More next week ...

Reconsidering routine use of the futures to save the Iron Condor ... because the projected results are so good without it

Despite my enthusiasm in my last post for using  /NQ futures to overcome any loss in an NDX iron condor going wrong, I am reconsidering the routine use of such futures.

The trade I made on Thursday worked, making this test session 1 and 1: 50%. But the futures graph was very different on this past Thursday and Friday:

I put on this trade late Thursday a.m.:

• Sold the 6270 Call
• Bought the 6280 Call
• Sold the 6170 Put
• Bought the 6180 Put

... for a $1.90 credit. This gives $1.90 / ($10 - $1.90) = a 23.456% return.

After you put on this trade, the only chart you need to look at is the NDX settlement number, which goes under a different symbol called NDS:

... and as you can see by the NDS value from Friday, this trade worked and all 4 legs expired worthless, for a full profit.

If we can really do this 91.7% of the time (make 23%), and we risk 25% of our stake every time, the 1-year (52 week) Monte Carlo results are like this:

• Starting stake $55,000
• Mean value  $281,043
• Standard deviation: $181,147

So the ending results should be between $100K and $462K 68% of the time ...

(I think I can improve this trade by widening it a bit ... for example sell the 6280 calls and buy the 6290 calls ... so what if this returns "only" 18% or 20% if you win 93.5% of the time ...) 

For this test I'll keep doing the "one standard deviation" but will check results against the "one standard deviation and one more strike wide" version. Last week it would have made no difference whatsoever ...

The risk you have to be willing to stomach doing this trade this way is: now and then you will lose 25% of your account. You'll make enough to cover this, many times over. But if you can't stand this you'll have to cut down the amount you risk, which will reduce your expected return.

The Kelly Criterion is even wilder: it suggests risking 57% of your stake on this trade. Great when it works, but hoo boy! I'd suggest being damned sure of the 91.7% win rate before doing this ...

NDX weeklies + /NQ hedge = $$$$$$! Sweet!

I just mentioned in my last post how one might use an /NQ hedge to move a losing iron condor into the winning column:

I only realized over the next night that this the /NQ hedge is the key to bringing the win rate from 91.67% to 95% or even 100%! I can imagine some weird reversals in /NQ in the middle of the night, but if carefully managed it looks like one would just lose a bit on /NQ and win the main trade ...

Then with the Kelly Criterion you can pick how much of your trading stake to risk each week ...
The formula suggests betting almost 62% of your money on a trade that returns 15% and has a 95% chance of winning. I can understand that one wouldn't want to do that if not sure of that 95% win rate yet, and in any event the Kelly Criterion is known for producing results that are distinctly volatile:

... and you can still get excellent results using 1/2 or 2/3 the suggested bet of the Kelly Criterion.

Anyway, here's the plan:

• Sell N (1 to the number you can stand!) NDX iron condors (or even sell strangles) at one standard deviation (delta 0.16, or 16% probability in Tastyworks) .. do this within 3 hours of the close every Thursday.
• Set a buy market order when the /NQ price gets halfway (or better! in case it zooms as it did last Thursday to the short call strike price) and a sell market order for /NQ 1/2 the way down to the short put.

That's it ... management of the /NQ position is left as an exercise to the reader (and something I'll be experimenting with working on getting to that 100% win rate!)

Note that the Friday morning NDX price is marked under symbol NDS, not NDX.

Questions?

NDX, not SPX ...

I found an old email reference to this trade I mentioned: 91.7% winners on a weekly NDX trade, not SPX:

So I tried it yesterday:

• sold the 5990 put
• bought the 5980 put
• sold the 6100 call
• bought the 6110 call

This is a '1 standard deviation Iron Condor' ... for which I received $1.79 in one account and $2.00 in another account. The $2.00 credit give a nice round number for calculating the potential rate of returen: Max risk = difference in short and long strikes ($10) - credit received ($2) X 100 = $800. $200 / $800 = 25% return ... in less than 1 day.

But a funny thing happened:

All of these had earnings after the close (just after 1 pm PST), and they all had huge profits, which sent the /NQ (Nasdaq 100) futures on a tear:

If you had looked at this even at 5pm PST Thursday when it was flirting with 6100 and then bought 1 /NQ futures contract to hedge ... you'd have made over $2000 ($20/point), swamping the $800 loss you took on the weekly trade.

Next time, perhaps ... I'll try this again next week, not falling for the fallacy: "well if it's 91.7% winners and we got the loss out of the way the next 9 or 10 in a row should work, right?" I hope so, but the fact is the next trade has the same 8.3% chance of failure as the last one ... not much, but not out of the question.

Anyway, I'm 0 for 1 on these so far: $800 down (actually $804.something with the tiny commissions in Tastyworks ...) 

I'll try it again next Thursday and post the results again next weekend.

Trump crazy rally and my mistake hurt results but ...

This guy mentions Tax Cut and the market rockets up:

I've been doing mostly neutral trades for my own (currently small) account, as well as making a mistake "The S&P 500 will never get above 2520 this cycle, will it?" It did:

In any event, I've been trying the "trade small, trade often" Tastytrade method a bit ... overall it's less risky than the way I was trading before, but also less profitable.

So overall I'm now down to net liq $3599.77 ... which is down just about 10% overall.

I am pretty sure I have $55K or so coming into this account within the next couple of weeks and here's my plan for it:

(1) Continued Tastytrade canoodling, especially with higher-volatility stocks like TSLA
(2) Some earnings trades, selling a (small) 2-day iron condor just outside the expected move
(3) Short futures contracts ... probably 2 or 3 of these, selling puts against them every week
(4) For 25% of the account balance, stepping out of the Tastytrade arena and moving on to Ralph Vince (but using a trade idea from 2013 Tastytrade -- though I can't find the video right now):

Sell a 1 standard deviation SPX Iron Condor weekly option near the end of trading (1:15 PM Pacific) every Thursday, taking advantage of the (excess) premium in the options that remain because even though you can't trade SPX after Thursday 1:15, the actual settled price doesn't come through until Friday a.m., in a vehicle called SET.

I could just swear I saw at some point a customer-published study showing that this trade (or actually
the short strangle: an Iron Condor without the protective wings) works 91.67% of the time.

Assuming that, I'm "safe" risking 25% of my account every week ... each trade making about 15% on margin, so 91.67% of the time making 0.25 * 0.15 = 3.75% per week ... most weeks. If you do that successfully 10 weeks in a row, you gain 44.5% for those 10 weeks:

A monte carlo simulation running this 10000 times shows this hugely profitable ... but I have enough experience by now that I'm just going to test this with 1-lots (risking about $400 per trade) for 10 weeks in some of the (long suffering) people's accounts I am still trading ...before putting it to the 25% test in my own account.

I'll publish the results of the first such test this weekend!

Today's result: up 12.4% since July

I had to pull $2500 out of the account before I got started, so revised basis is $4000. Today's Net liq is $4497.24, which is up 12.4% ....

I'm trading more volatile options lately, not just SPY ... TSLA returns up to 25% ... in about 3 weeks!

More results as they become available ...

Going live with a small account

I funded a Tastyworks account two weeks ago and am going to just post its profit/loss data here ... I think I've proven the neutral trade sufficiently for myself, and I hope for you readers.

I started with $6500 on July 13, and so far the "net liq" in the account is ... $6512.23. As you'll recall, the trade has more room to the downside, so the market lately hasn't been optimal:

But by putting only 1/4 of the stake in every week, this keeps a big chunk from being whipsawed to a Trump-inspired loss all at once.

Also note: this is net of commissions.  Tastyworks commissions are so low, this is very helpful in trying to keep trading profitably.

More soon ...

Bumping along the top!

Well, the S&P 500 didn't go down, but it has started just bumping along the top:

This is ideal for our neutral trade, except for volatility being so low. But this pattern allows us to swing back to a profit on the futures trade, just selling a put every week for another $300 or $400 (at this volatility level) ...

Result charts are like this:

The neutral trade:

Trade Date	Symbol	Result	Profit/Loss	Comment
02/06/2017	SPY	Lost	-18%
02/13/2017	SPY	Lost	-16%
02/21/2017	SPY	Won	+15.4%
02/27/2017	SPY	Won	+17%
03/06/2017	SPY	Won	+15.3%
03/13/2017	SPY	Won	+12.9%
03/20/2017	TLT	Lost	-1.4%	Dumb!
03/27/2017	SPY	Won	+9.6%
04/03/2017	SPY	Won	+6.6%	18 days long
04/10/2017	SPY	Won	+11.1%	only 14 days!
04/17/2017	SPY	Won	+6.7%
04/25/2017	SPY	Won	+8.9%
05/01/2017	SPY	Lost	-5.0%
05/08/2017	SPY	Won	+5.0%
05/15/2017	SPY	Won	+6.1%
05/22/2017	SPY	Won	+2.0%
05/30/2017	SPY	Open
06/5/2017	SPY	Open
06/12/2017	SPY	Open

The short /ES futures trade:

Trade Date	What	Qty	Credit Received	Net Liq Change Since Start
04/25/2017	/ES Put	-1	$362.50	$0
05/03/2017	/ES Put	-1	$487.50	+$70.00
05/12/2017	/ES Put	-1	$337.50	+$1250.00
05/17/2017	/ES Put	-1	$500.00	+$1250.00
05/26/2017	/ES Put	-1	$262.50	-$100.00
06/02/2017	/ES Put	-1	$325.00	-$312.50
06/09/2017	/ES Put	-1	$450.00	+$150.00
06/15/2017	/ES Put	-1	$325.00	+$350.00

Another neutral trade is going on tomorrow morning ...

What goes up must eventually come down ...

Something in the news last week sent the market further up to hit more record highs:

This hurt both sides of our trades; the short futures position got hammered ... as I write this the S&P futures price is 2435.50, which is 51.75 points above where I sold it short ... at $50 per point, that's $2587.50.

But! I sold another put for a credit on Friday: a $325 credit, so I'm down only $312 or so on the futures trade. And I'll sell another put every week, forever, and eventually the market will stop going up and even ... go down!

I had to take a 5% loss in one of the neutral trades to meet a margin call on the futures position; the other neutral trades I have on are hurting but not dead yet. Charts below:

Trade Date	Symbol	Result	Profit/Loss	Comment
02/06/2017	SPY	Lost	-18%
02/13/2017	SPY	Lost	-16%
02/21/2017	SPY	Won	+15.4%
02/27/2017	SPY	Won	+17%
03/06/2017	SPY	Won	+15.3%
03/13/2017	SPY	Won	+12.9%
03/20/2017	TLT	Lost	-1.4%	Dumb!
03/27/2017	SPY	Won	+9.6%
04/03/2017	SPY	Won	+6.6%	18 days long
04/10/2017	SPY	Won	+11.1%	only 14 days!
04/17/2017	SPY	Won	+6.7%
04/25/2017	SPY	Won	+8.9%
05/01/2017	SPY	Lost	-5.0%
05/08/2017	SPY	Open
05/15/2017	SPY	Open
05/22/2017	SPY	Open
05/30/2017	SPY	Open

Trade Date	What	Qty	Credit Received	Net Liq Change Since Start
04/25/2017	/ES Put	-1	$362.50	$0
05/03/2017	/ES Put	-1	$487.50	+$70.00
05/12/2017	/ES Put	-1	$337.50	+$1250.00
05/17/2017	/ES Put	-1	$500.00	+$1250.00
05/26/2017	/ES Put	-1	$262.50	-$100.00
06/02/2017	/ES Put	-1	$325.00	-$312.50

Trump rally reboots ... but can't last forever!

I cashed out the  another trade for a profit this morning: 8.9%. But the "Trump Rally" is hurting results a bit:

If not for the up move of the last few days this trade would've made up to 17% or so.

Also, the short futures segment has suffered under this move ... though the credit received in selling puts has it still just below breakeven. And we get to sell another put every week!

Charts below ... The main trade is now 9 for 12: 75%.

Trade Date	Symbol	Result	Profit/Loss	Comment
02/06/2017	SPY	Lost	-18%
02/13/2017	SPY	Lost	-16%
02/21/2017	SPY	Won	+15.4%
02/27/2017	SPY	Won	+17%
03/06/2017	SPY	Won	+15.3%
03/13/2017	SPY	Won	+12.9%
03/20/2017	TLT	Lost	-1.4%	Dumb!
03/27/2017	SPY	Won	+9.6%
04/03/2017	SPY	Won	+6.6%	18 days long
04/10/2017	SPY	Won	+11.1%	only 14 days!
04/17/2017	SPY	Won	+6.7%
04/25/2017	SPY	Won	+8.9%
05/01/2017	SPY	Open
05/08/2017	SPY	Open
05/15/2017	SPY	Open

Futures:

Trade Date	What	Qty	Credit Received	Net Liq Change Since Start
04/25/2017	/ES Put	-1	$362.50	$0
05/03/2017	/ES Put	-1	$487.50	+$70.00
05/12/2017	/ES Put	-1	$337.50	+$1250.00
05/17/2017	/ES Put	-1	$500.00	+$1250.00
05/26/2017	/ES Put	-1	$262.50	-$100.00

Finally a down tick lets us cash out the oldest trade ...

It looks like the Trump vs. Comey story is finally affecting the market:

It was down enough this a.m. early for me to finally get the April 17 trade off for a 6.7% profit.

Once again, the trade characteristics are such that there's more room on the downside than the upside. The market was somewhat down on April 17 when I put this trade on and the market's flirting with 2400 the past few days kept it just barely unprofitable. Normally I would have taken it off last Friday, 21 days until expiration (June 2 expiration for these particular options), but I wanted to give it a few days to see if there would be this profitable down move ... and it worked!

The charts are now like this:

Trade Date	Symbol	Result	Profit/Loss	Comment
02/06/2017	SPY	Lost	-18%
02/13/2017	SPY	Lost	-16%
02/21/2017	SPY	Won	+15.4%
02/27/2017	SPY	Won	+17%
03/06/2017	SPY	Won	+15.3%
03/13/2017	SPY	Won	+12.9%
03/20/2017	TLT	Lost	-1.4%	Dumb!
03/27/2017	SPY	Won	+9.6%
04/03/2017	SPY	Won	+6.6%	18 days long
04/10/2017	SPY	Won	+11.1%	only 14 days!
04/17/2017	SPY	Won	+6.7%
04/25/2017	SPY	Open
05/01/2017	SPY	Open
05/08/2017	SPY	Open
05/15/2017	SPY	Open

That's a 72% win rate on these, finally.

The futures trade is doing well also:

Trade Date	What	Qty	Credit Received	Net Liq Change
04/25/2017	/ES Put	-1	$362.50	$0
05/03/2017	/ES Put	-1	$487.50	+$70.00
05/12/2017	/ES Put	-1	$337.50	+$1250.00

More details as they become available!

Short /ES and "reducing basis": an illustration

The S&P futures market went straight up yesterday after the jobs report:

If you'll remember from my first post on this subject 10 days or so ago, I sold the futures contract at 2383.75. It gains or loses $50 per point, so at yesterday's close of 2399.25 it's lost 15.5 points: $775.

But! I've also sold two puts, the first for $362.50 (I closed it out for $5) and the other for $487.50. So that's $845 total, giving me a small profit even after this move against the position.

This latest put expires next Friday, at which point I will sell another on for another $300 or $400 ... following the market up if necessary (though I hope not!)

The charts:

Trade Date	Symbol	Result	Profit/Loss	Comment
02/06/2017	SPY	Lost	-18%
02/13/2017	SPY	Lost	-16%
02/21/2017	SPY	Won	+15.4%
02/27/2017	SPY	Won	+17%
03/06/2017	SPY	Won	+15.3%
03/13/2017	SPY	Won	+12.9%
03/20/2017	TLT	Lost	-1.4%	Dumb!
03/27/2017	SPY	Won	+9.6%
04/03/2017	SPY	Won	+6.6%	18 days long
04/10/2017	SPY	Open	+11.1%	only 14 days!
04/17/2017	SPY	Open
04/25/2017	SPY	Open
05/01/2071	SPY	Open

Trade Date	What	Qty	Credit Received	Net Liq Change
04/25/2017	/ES Put	-1	$362.50	$0
05/01/2017	/ES Put	-1	$487.50	+$70.00

More next week ...

First week of short /ES: results

The S&P futures market has gone back to trading in a tight range:

This is one of the modes that pay handsomely for short /ES futures (with the addition of short puts).
A few minutes ago, the results were like this:

Down $75 on the futures contract itself (i.e. 1.5 points in the wrong direction), but up $255 on the expiring put, now worth only $100 after we sold it for $362.50 last week. So net we're up $180 on the trade at the moment.

I also put on another of the neutral trades this morning so the results are now:

Trade Date	Symbol	Result	Profit/Loss	Comment
02/06/2017	SPY	Lost	-18%
02/13/2017	SPY	Lost	-16%
02/21/2017	SPY	Won	+15.4%
02/27/2017	SPY	Won	+17%
03/06/2017	SPY	Won	+15.3%
03/13/2017	SPY	Won	+12.9%
03/20/2017	TLT	Lost	-1.4%	Dumb!
03/27/2017	SPY	Won	+9.6%
04/03/2017	SPY	Won	+6.6%	18 days long
04/10/2017	SPY	Open	+11.1%	only 14 days!
04/17/2017	SPY	Open
04/25/2017	SPY	Open
05/01/2071	SPY	Open

The /ES profit is currently $180, as mentioned above.

I'll post again when there's something to report ...

The other leg of the trading plan: /ES futures and "reducing basis"

A neutral trade like the one I've been using of the basis of the strategy I'm evaluating is vulnerable to events such as:

That cause market reactions like:

To protect against this sort of thing there are some things one can do. My favorite is to sell short S&P futures contracts and then sell puts against those short contracts.

The characteristics are like this: S&P "e-mini" futures contracts (symbol /ES) move $50 per point, or $12.50 per 25 cent "tick" ... I sold 1 contract today at 2383.25, then one put for "7.25" ... times $50 = $362.50 in credit I received for selling that put.

When the market goes down sharply, this trade pays off nicely and cushions some of the (assumed) losses one would get on the neutral trade in a sharp down move.

Additionally, selling one put against the short /ES contract lets one be "right" and make a profit even when nothing happens or the market goes just a bit up! Even if it goes sharply up, it eventually stops and this trade catches up to any losses with the sale of puts.

Effectively each put sale "reduces the basis" of the trade price, in this example, giving 7.25 more points before we start to lose. It's as if we sold at 2390.50!

This gives an extra chart sitting next to the standard chart we've been using:

Trade Date	What	Qty	Credit Received	Net Liq Change
04/25/2017	/ES Put	-1	$362.50	$0

I'll update the 'Net Liq Change' once a week; the number changes continually.

The standard chart now looks like this:

Trade Date	Symbol	Result	Profit/Loss	Comment
02/06/2017	SPY	Lost	-18%
02/13/2017	SPY	Lost	-16%
02/21/2017	SPY	Won	+15.4%
02/27/2017	SPY	Won	+17%
03/06/2017	SPY	Won	+15.3%
03/13/2017	SPY	Won	+12.9%
03/20/2017	TLT	Lost	-1.4%	Dumb!
03/27/2017	SPY	Won	+9.6%
04/03/2017	SPY	Won	+6.6%	18 days long
04/10/2017	SPY	Open	+11.1%	only 14 days!
04/17/2017	SPY	Open
04/25/2017	SPY	Open

Volatility collapsed after French election yielding another win

Sunday was the French election, which the markets liked. The S&P futures market was up sharply starting yesterday on the news that Marine Le Pen is probably not going to win.

Instead, this guy, Macron, is in first place and almost every other party in France has pledged to support him to beat Le Pen.

He's a former finance guy who won't blow up the EU. So the market is happy.

How this affected the trade I'm doing: it's a credit spread that benefits by lowered volatility. The volatility crashed this morning, letting me get out of the April 10 trade for an 11.1% gain. The chart now:

Trade Date	Symbol	Result	Profit/Loss	Comment
02/06/2017	SPY	Lost	-18%
02/13/2017	SPY	Lost	-16%
02/21/2017	SPY	Won	+15.4%
02/27/2017	SPY	Won	+17%
03/06/2017	SPY	Won	+15.3%
03/13/2017	SPY	Won	+12.9%
03/20/2017	TLT	Lost	-1.4%	Dumb!
03/27/2017	SPY	Won	+9.6%
04/03/2017	SPY	Won	+6.6%	18 days long
04/10/2017	SPY	Open	+11.1%	only 14 days!
04/17/2017	SPY	Open

That's back up to 70% winners; 80% if you don't count the small dumb loss from 3/20.

Ordinarily I would have put on another trade this morning, but I am waiting until tomorrow to see if we can get a little higher volatility going.

Advice to those considering trading

Interest rates continue to be extremely low, making the standard retirement scenario a problem:

Even if you have $1 million, the risk free rate of return is about 2%. So you'd get ... $20,000 per year.

So if you have less: $200000 or $300000, what then? Keep working until you die?

Not necessarily; there are ways that can produce a much higher return ... at the expense of taking more risk. So the first question to answer for yourself is: Am I willing to take more risk?

The one-question risk tolerance test: Are you willing to eat at Chipotle?

After Chipotle's "little problem" some people refused to go back there. What about you?

If you pass that test, you have to choose someplace to start. I posted elsewhere a list of resources for beginning traders, so you can start with that.

If you're just going to do one thing to start, watch Confirm and Send on Tastytrade for 90 days. That should give you an overview of their research. Then Google around for anything you don't understand.

One caveat about Sosnoff and Tastytrade: despite their "trade small, trade often" mantra there are other ways to make a profit. Sosnoff is sometimes wrong, but never in doubt!

Another winner!

Cashed out the April 3 trade just now for a profit ...

This one wasn't quite as profitable as some others, but i also didn't hold it as long: only 18 days.

I'm moving toward a 25-day trade time: sell at 46 DTE, buy back around 21 DTE. This avoids some of the risk of the days toward expiration but captures a lot of the collapse in option value starting around day 45.

Chart is now like this:

Trade Date	Symbol	Result	Profit/Loss	Comment
02/06/2017	SPY	Lost	-18%
02/13/2017	SPY	Lost	-16%
02/21/2017	SPY	Won	+15.4%
02/27/2017	SPY	Won	+17%
03/06/2017	SPY	Won	+15.3%
03/13/2017	SPY	Won	+12.9%
03/20/2017	TLT	Lost	-1.4%	Dumb!
03/27/2017	SPY	Won	+9.6%
04/03/2017	SPY	Won	+6.6%	18 days long
04/10/2017	SPY	Open
04/17/2017	SPY	Open

That's up to 67% winners, including the dumb loss a couple of weeks ago. This rate should become 80%+ in the next few weeks ...

Back on track: up 9.6% for the trade closed this a.m.

I made the right decision taking a small loss on the TLT trade I took off last week, as in fact it zoomed up to the point I would have lost 15% instead of the small loss I did have to take.

But back to the current one:

Here's the results chart as of this morning:

Trade Date	Symbol	Result	Profit/Loss	Comment
02/06/2017	SPY	Lost	-18%
02/13/2017	SPY	Lost	-16%
02/21/2017	SPY	Won	+15.4%
02/27/2017	SPY	Won	+17%
03/06/2017	SPY	Won	+15.3%
03/13/2017	SPY	Won	+12.9%
03/20/2017	TLT	Lost	-1.4%	Dumb!
03/27/2017	SPY	Open	+9.6%
04/03/2017	SPY	Open
04/10/2017	SPY	Open
04/17/2017	SPY	Open

Dumb mistake yields small loss

I took the March 20 trade off today for a small loss: 1.4%. I missed the chance yesterday to get it off for a small profit.

The dumb mistake I made was to use TLT, an ETF for the bond market, when I had been using SPY that tracks the S&P 500.

The problems are twofold:

(1) the risk graph is skewed with more space to be profitable on the downside than on the upside:

(2) Bonds are inversely correlated with stocks:

(3) And stocks are right near record highs ... and bonds are relatively very low. So a small move down in stocks and up in bonds (seemed very likely to me), and this trade loses.

I had a chance to get out yesterday briefly for a tiny profit but missed it, so the chart now looks like this (with two columns added to give the symbol and a comment)

Trade Date	Symbol	Result	Profit/Loss	Comment
02/06/2017	SPY	Lost	-18%	Trump rally
02/13/2017	SPY	Lost	-16%	Trump rally
02/21/2017	SPY	Won	+15.4%
02/27/2017	SPY	Won	+17%
03/06/2017	SPY	Won	+15.3%
03/13/2017	SPY	Won	+12.9%
03/20/2017	TLT	Lost	-1.4%	Dumb!
03/27/2017	SPY	Open
04/03/2017	SPY	Open

Glad to have gotten that mistake out of my system while testing small ...