The million-dollar traderbot

The trade I described last week is possible to manage "by hand" with the addition of contingent orders, alerts, and so forth. In fact I'm testing this right now on a paper trade account:

• started with $25000 last week
• currently $27000 or so (+ 8%) ... I can't tell exactly because option prices are wacky after the close on Friday; net liq says $28039 but I don't believe it.

But! Futures trading is 24 hours per day, 5+ days per week and it's not possible to watch all the time.

Even with contingent orders, on some platforms it costs margin/buying power to put all those orders on -- you really need every side of every trade.

It works much better with a software "traderbot" to watch it closely 24/7 and to put in the order only when the strike is actually breached!

The algorithm is very simple:

for each short put strike:

       if futures_position_is_on:

             if the underlying price > short put strike:

                  close_futures_position()

             else:

                  pass

       else:

           if the underlying price < short put strike:

                  open_futures_position()

           else:

                  pass

(similarly: loop through short call strikes and do the same checks)

Then sleep for 1 second, and do it over again!

So How Good Is This?

I'm just getting started doing this, but I think the setup keeps it from losing more than one in every 45-60 trades, if that. Let's say one per year ...

If we make 8% every two weeks (as the example above) then we can do that 26 times per year ... and that comes out to a 7.39X return on starting capital. So 7.39 x $25000 == $184750 ... and then let's say we lose one $4750 at the end of the year, leaving $180000. This is all perfectly scalable, so starting with $250,000 you come out with $1,800,000 ... and so forth.

This is all entirely speculative at this point, but I don't see why this can't be true ...

Another Promotion Starts Now

Anybody signing up as a new client now to January 31 gets 6 months free .... Take a look!

More next week ...