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 ...