Slow learner I am (the right way to get more credit); Amazing Technical Analysis or just lucky?

I went back to "no rolling" last week as regular readers will remember. But I didn't move the short call strike back out to the .08 delta, and was bitten by this for Wednesday expiration. (I didn't have a Monday-expiring trade on this week as I had done the Thursday NDX a.m. settled one last week instead of the normal Wednesday to Monday one.)

And the market bit me on Wednesday; I was short the 2835 call but we had a spike late Wednesday the ran the close up to 2846. It was Trump:

... claiming a deal:

Fortunately the wider "wings" proved their worth; this was only a 16% loss (on the amount at risk) instead of the 100% it would have been if the wings had been 5 or 10 points wide.

I must be a slow learner sometime ...

I got away with it this time, having sold the 2825 call expiring today (July 27) ... but that was the .16 delta ... if not for the (moderately) sharp downturn today I'd have lost this one too.

I was just trying to get a little more credit ... $3.60 (7.8%)  instead of $2.40  (5.0%) or so ... That's OK but this is the wrong way to accomplish this.

The SPX is in record high territory, making its volatility (and therefore the credit we get with these trades) very low.

But there are other underlyings; AMZN, TSLA, CMG that could be used on the Monday -> Friday trade at least, possibly on the Friday to Wednesday trade also (closing early) ... Let's look at the returns these give! All of these are current (Sunday afternoon 7/29) prices and are the wiiide .10 put and .08 call spreads, with wings sized proportionally to the SPX 50-point wings

AMZN with 30-point wings gives 2.50 or so, about 9.1%.

CMG with 15-point wings gives 0.85 or so, about 6%.

TSLA with 15-point wings give 1.65 or so, around 12.1%.

So I'm going to use one of these for at least one of the three trades per week while SPX volatility is so washed out, and for the SPX trades I'm going to stick with the .10/.08 deltas, cheap though they may be.

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I've generally been ignoring technical analysis, thinking it not useful for what I'm doing and generally that there should be no connection between chart patterns and future prices (other than what chartists inject into the market in "it looks like a head and shoulders top so I should sell!"

But an amazing (or just lucky?) bit of technical analysis this week by a colleague ... He predicted: S&P close around 2845 on Wednesday and a pullback after that ...

Closing price on Wednesday was 2846 ... only after the Trump Deal To Make A Deal announcement late in the trading day ... So what happened? How is TAC (Technical Analyst Colleague) doing this?

• He just got lucky
• He's actually psychic and just uses the chart info the way psychic readers use palmistry or Tarot cards
• There's some deep connection between the charts and underlying reality and the quantum level

Anyway, I'm reading up on the subject to figure this out and will have book reviews later in the week.

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Here's the result chart so far:

Expiration	Underlying	Long put	Short put	Short call	Long call	Credit Received	Result
07/16/2018/	SPX	2680	2730	2810	2860	$3.60	Won 100%
07/18/2018/	SPX	2700	2750	2820	2870	$3.95	Won 100%
07/20/2018/	SPX	2700	2750	2835	2885	$2.40	Won 100%
07/20/2018 (a.m.)/	NDX	7260	7310	7410	7460	$5.99	Won 100%
07/25/2018	SPX	2705	2755	2835	2885	$2.40	lost 16% of amount at risk
07/27/2018	SPX	2695	2745	2825	2875	$3.50	Won 100%
07/30/2018	SPX	2720	2770	2850	2900	$2.60	Still open
08/01/2018	SPX	2730	2780	2870	2920	$2.15	Still open

Totals: 5 wins, 1 loss (83.3%), 2 still open. More next week ...

Wrong data but good results

I misremembered the S&P 500 high price, thinking it was 2807 or so ... my colleague reminded me that it was actually 2872 last January in that last spasm before the little correction in early Feburary:

But assuming that there was strong "resistance" starting with 2800 worked well this week:

The peak close was 2815, which was short of the 2820 strike where I had a short call placed.

Also, the Fabulous NDX trade was available again this week, and that worked for almost $600 per contract profit (2 contracts on the $20K account I was trading on this yielded almost $1200).

My previous publication of Monte Carlo results has me feeling a little sheepish after last week's goof, so once again I'm just working on 100 trades on this system and keeping close track and will extrapolate from there. Here are the first 5 in detail:

Expiration	Underlying	Long put	Short put	Short call	Long call	Credit Received	Result
07/16/2018/	SPX	2680	2730	2810	2860	$3.60	Won 100%
07/18/2018/	SPX	2700	2750	2820	2870	$3.95	Won 100%
07/20/2018/	SPX	2700	2750	2835	2885	$2.40	Won 100%
07/20/2018 (a.m.)/	NDX	7260	7310	7410	7460	$5.99	Won 100%
07/25/2018/	SPX	2705	2755	2835	2885	$2.40	(still open)

More next week ...

It didn't take a meteor strike ... the next 100 trades from here

I had a less than perfect week trading ...

I had previously posted that I shouldn't lose 30% for anything but a meteor strike or terrorist attack.
But a couple of cascading errors had the same effect.

First of all I have to remind myself:

ANYTHING CAN HAPPEN AT ANY TIME!

I started last Sunday thinking for sure the market would be down with the latest trade war stuff going on ... I shorted the S&P futures at the open last Sunday afternoon and it went straight up from there.

I finally closed it Monday a.m. for a $1000 loss, bringing my scalping results just below even (-$40) for the year so far.

I compounded the problem early Monday a.m. by selling too-close call spreads, which went 'in the money' almost immediately.

Finally, I was thinking that I could move my short strikes closer (1 standard deviation instead of the .10 delta) and just roll my way out of any problem, based on my experience rolling 'straight across' last month.

Not so this one either ... then I made one final error ... I was hearing from all quarters about the technical indicators pointing straight up at least until Friday the 13th. So instead of holding on for a down move (which finally came Wednesday) I sold at a loss on Tuesday ...

So adjustments from here:

• I'm moving back out to at least the .10 delta, except in cases where we're right at record highs (like now). In that case I'm willing to sell the call short strike just above the record high, if at least 20 points away from the money currently.
• I'm making the 'wings' of the iron condors I'm selling even wider, going from 30 points to 50 points for SPX, with proportionally as wide wings for other trading vehicles like AMZN and TSLA.
• I'm mostly going to give up rolling. The success I had before this incident was an unusual situation, I reckon, so I am going back to 'set it and forget it'.
• I'm ignoring technical analysis ... except, as mentioned above, I expect 'resistance' at record highs

How this works in practice .... I have two trades (plus a scalp) on currently:

Expiring Monday the 16th:

          1 SPX 2680 put

         -1 SPX 2730 put

         -1 SPX 2810 call

          1 SPX 2860 call

Expiring Wednesday the 18th:

          1 SPX 2700 put

         -1 SPX 2750 put

         -1 SPX 2820 call

          1 SPX 2870 call

I expect both of these to win ... credit was $3.60 for the first and $3.95 for the second,  7.7% and 8.6% return, respectively.

My next 100 trades will be based on these parameters, and I'll track the statistics carefully as always.

(And the scalp: 1 short /ES future from 2806 on Friday ... I'll take this off on Sunday afternoon or Monday, a.m. for at least a small profit, I think.)

I expect the main SPX trade to work 90% or more of the time, but even when it doesn't the wide wings should make the losses generally much less than 50%. For example, even if the market zooms up past 2810 for Monday's close, how far will it go? 2820? Breakeven is actually 2813.60, so that's only a 15.9% loss ... versus 100% if we used 5-point wings.

More next week ...

Market ignores trade war end of this past week; fun with projections!

The Friday short strike (2750) was breached and didn't come back in time:

So I rolled the call spreads I had expiring on Friday to Wednesday the 11th, straight across (same strikes ... I couldn't get filled initially trying to roll to Monday the 9th), getting an additional 2.85 in credit!

So I'm visualizing trade war consciousness (and/or some other gravity pull) for the market for the first part of the week so I can get this rolled trade off for a winner.

Now, on to projections ...

First, 6 weeks ago I wanted to see if I could project out 6 weeks, and the projections came out around $60K ... but instead the $50K or so account wound up Friday worth ... just over $75K! Why? I wound up accidentally finding a super-profitable roll and otherwise taking a bit more risk exploiting this ...

Let's try extrapolating again ...

I'm trading 3 accounts, all big enough to be able to support the 30-wide wings of the SPX Iron Condor I'm running ... In these I'm up 28%, 50%, and 33% ... in the last seven weeks or so.

First, let's take the weakest one (28%) and extrapolate simply 1 year and 5 years ... For 1 year, that's 7 times (49 weeks) and 5 years 35 times. Those projections:

1 year: up 5.629X or 562.9%
5 years: up 5653.910X ... or 565391.0% ...

So starting with $50k, that's $281474.50 after 1 year ... and after 5 years:

$282,695,000 ....

This is unlikely, I'd say ... So if I went back to design a Monte Carlo simulation that captures the rolling technique and variants of that ... let's see ... 1  year assuming 87.5% wins, risking 20% of the account, earning 15% on each win, losing a varying amount over the 30-point-wide spread:

theMacintosh:butterfly mark$ ./mca.sh /tmp/30roll.out 

min: 49864.586 

mean:  867389.75 

max: 3391457.5 

stddev: 412456.66 

Assuming the same except winning only 80% of the time:

theMacintosh:butterfly mark$ ./mca.sh /tmp/roll.80.30.out 

min: 17945.24 

mean:  299413.6 

max: 1755201.6 

stddev: 178602.64 

Still 6X mean gain ... 

Let's start with this week! More details as they become available ...

Market pauses for the 4th of July; I left money on the table but that's OK!

Every trade has to balance two impulses:

I looked at the market early Monday a.m. and my "too risky" trade was showing a small profit at the time, so I closed it out.

It turned out that I left money on the table:

... as after gyrating up to the 2730+ range a couple of times, the SPX swooned at the close back down to 2713, which would have left my trade fully profitable.

But! The biggest account I'm trading is still up ... 65.5% since I started in February, most of that in the last 6 weeks. So ... I can't complain!

More details and a new Monte Carlo Simulation on Sunday ...