Another winning week: "production" NDX and testing the TSLA trade

The NDX trade is now 10 for 11 ...

and TSLA's test trade is 1 for 1!

Volatility is still (of course) very low, so I didn't get a huge amount of credit on either trade. For NDX I got credit between $1.25 and $1.29 (14.3% to 14.8%) and for the TSLA trade I got 32 cents (on a 2.50 wide Iron Condor) so that's 14.7% ...

The Kelly Criterion calculator gives the optimal risk amount for the NDX range, assuming the previously published 91.7% win rate, as about 1/3 of the account ... which is a bit more than I risked for these. I was at about .8 Kelly for a couple of the accounts. But anytime you win, it's OK!.... I'll have to watch this while volatility is so low. Also it's impossible to fine-tune in small accounts with the number of contracts risked going up in $800+ chunks.

But the NDX 10 for 11 is 90.9% ... and one more win brings it to the mythical 91.7%!

More next week ...

NDX trade wins AGAIN ... but profit was shaved a bit

That's 9 in a row and 9 for 10 overall on the NDX weekly trade!

I did start "production" this week, risking 25% or so of the accounts where I was doing this. Volatility is still quite low so I didn't get as much premium as I have been getting normally. In 3 different trades I got:

• $1.42  (16.55%)
• $1.35  (15.61%)
• $1.20  (13.64%)

But a funny thing happened on the way to getting these full results:

I had sold the 6220 call, and the NDS report for Friday (where the NDX settles and that's how the trade's results come out) was 6220.84. This means that $84 of the potential profit didn't happen, so yields were:

• $1.42 - $0.84 = $0.58  (6.16%)
• $1.35 - $0.84 = $0.51 (5.38%)
• $1.20 - $0.84 = $0.36 (3.73%)

I'll take it! But ... getting the NDX trade filled is weird and difficult. The prices bounce around so and the markets are 'wide' (i.e. the bid/ask spread is probably 50 cents wide on this spread) ..

So I'm going to start testing an alternative (or an adjunct; I can do both): Tesla! Symbol is TSLA and its chart looks like this for the last week:

Putting on a 1 standard deviation smallest iron condor on Wednesday the 3rd would have returned $0.66 ... but on a $2.50 wide iron condor, so return for that would be ... 35.89%! And it would have worked this week ....

So I'm going to start running this ... probably early Thursday morning for 2 days next week, for 10 or 20 weeks just to see how often it works. It should be much easier to fill than NDX, and I can use the 20 weeks of data as a rough estimate (I'll certainly assume that it wins less often than the results show,  and that it returns a bit less) ... and then I can use the Kelly Criterion again if and when I decide to take it into "production." ...

Watch this space next week ....

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!

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 ...

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.