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 ...

Fat-fingered trade leads to profitable insight

I typically put on all trades with the same strikes for the few accounts I'm trading for. But week before last, I wound up with one account short the 2770/2800 call spread in SPX, when no other account had this.

Anyway, I rolled this out 2 days when it was in the money, but just "straight across" (same strikes,  not further away from the money),  thinking that since the market top was something like 2809 months ago and we have plenty of trade war pressure that it would come in a few points any time ...

But it didn't for several expirations (Monday, Wednesday, Friday) for SPX and I kept rolling it ... and making around $2000 every couple of days in this account (on 4 contracts, risking about $10000) ...

I finally figured out what was happening and that I needn't limit this to the fat-fingered account but could get my other accounts in on this profitable action.

So for as long as this lasts I'm going to run this trade "until my hands bleed"  (as Sosnoff would say ...)

What could go wrong?

First, the market could burst way up past 2800. I'll be really, really surprised if this happens ... but I should be able to roll 'up and out' and still for a small credit several times to make sure this ends profitably.

The other possibility:

If this happens, volatility spikes and I can go back to the previous system and make a better return than I have been making previously.

But the lovely thing about just selling this call spread without the (much less profitable) put spread (because it's further away) ... We're then immune to the "meteor strike" problem ... so I am going to bump up the risk a bit to 25%/25%/25% (so 75% will be "in play" for a few hours Monday, Wednesday and Friday) ...

Otherwise this week: AMZN behaved, returning about 5.7% on risk ...

Here's to further sideways action!

Back on track and considering the value of rolling

I lost my 3rd trade in a row on Monday's expiration (details below), but since then:

• 2 SPX expirations, both winners
• the Fabulous NDX a.m. settlement trade was also available this week, winning again

About that third loss in a row: the short SPX strike for Monday the 14th was at 2720 ... the futures market was up all night and the market came back during the day, but not enough. It closed at 2730.13, a 30% or so loser (since the wings were $30 wide; I was long the 2750 call).

But the next day the market was down into the right range, closing at 2711, and only up to 2722 on Wednesday the 16th. So if I had rolled the call wing out and up to short 2730 and long 2760 for Wednesday expiration (for an extra small credit), that would have worked. Alternatively, I could have rolled laterally (sticking with 2720/2750 strikes) out to Wednesday (larger credit) and rolled again to Friday when that showed problems for Wednesday. Friday close was back to 2712, so that also would have worked for full profit.

I hope not to have to put this into practice for the rest of the month ... there are only 5 more expirations in may and I'd just as soon have them all expire worthless without rolling.

But I'm comfortable taking more risk with the rolling strategy on the call side; if the "meteor strike" comes while this extra trade is on, all it does is reduce the overall loss. The "put wing" will already have expired worthless, so an extra one of these rolling for profitability is OK.

Another change I'm considering for next month: substituting certain relatively volatile underlyings (AMZN, TSLA, etc.) for the Monday->Friday trade. This should make a bit more money than doing the trade on SPX at its currently depressed volatility.

The rolling ability for this kind of back-and-forth market is metaphorically a protection for our new growth:

More next week!