Dancing with the one (NDX) that brung me, maybe?

I settled on the a.m. settled NDX trade earlier this year as the only trade I'd need to do. But the 4-day NDX p.m. settled one (at .08 short delta) is now 3 for 3 and should win in the 90% range or better, I think.

I tested one again this week, and an acid test it was, with the market sharply down Monday and Tuesday:

The down move finally paused on Wednesday and I should really have taken the trade off for 90% of its profit, but I missed that opportunity and just let it run through expiration Friday, where it expired worthless with plenty of room left (short 6400 puts; closed at 6527). Profit was $1176 on a risk of $13824: 8.5% for 4 days. Not bad!

Otherwise ... I closed out the /ES short positions after the market hit 2655 ... I thought that was enough of  a down move and I didn't want to lose $100 point when it started to go up. But I was early! I left $2000 on the table and it was down 17 again on Friday closing at 2632 ... so I certainly could have held on for a while longer.

It wasn't anything to do with Brexit, but AAPL:

Finally, the Golden Butterfly paid off handsomely:

Gold futures went nowhere after I put the trade on last Sunday evening ... Tastyworks still doesn't support Good 'Til Cancelled orders, which worked to my benefit on this one. I sold the spread for $10.20 and would have bought it back for $7.65 (1/4 of the credit for this kind of trade), but by the time I looked at it was down in the $5.50 range and I got it filled for $5.60, almost double what I was expecting.

Overall a great week for the good guys ... your $200,000 account was up another $15000!

More next week ...

The joy of being short ... at the right time! (Your $200,000 account: up $18K!)

The down move came a week late, but what a move:

I held on to my two short futures contracts and sold 4 2670 puts against it for just the couple of days ending Friday. I have two remaining that expire next Friday the 23rd.

I've been enamored of the idea of selling puts against a short position, sometimes to my detriment. But despite the prospect of a typical Santa Claus Rally,

I think there's enough weirdness around with Brexit

... and of course the ongoing shenanigans in Washington:

That it seems a lot more likely to me that we'll get a more nearly flat market ... which will be perfect for what I'm planning:

(1) Continuing to sell 2 (at least!) puts against my 2 short /ES futures contracts ... occasionally I may sell an extra couple, as I did last week for a couple of days ...

(2) NDX: 4-day Iron Condor, Monday to Friday, short strikes at the .08 delta (i.e. waay out wide) and at least 50 or 60 point wide wings.

(3) A mix of commodity futures, including the Golden Butterfly since I finally remembered the adjustment of selling another one! This worked well (I made $500 in a couple of weeks) the last time I tried this.

Your $200,000 account was up about $18000 last week ... Wahoo!

I give up (mostly) predicting market direction after a near miss this week

I thought that since the Democrats were widely expected to take the House of Representatives that that would be negative for the market. So on Monday I sold 1 /ES future short at 2722.25.

Unfortunately:

On Wednesday midday with the market continuing to soar, I sold another /ES futures contract short at 2801.50, thinking what a great opportunity that was. It wasn't until Friday, until the market went down below 2780, closing at 2778.75.

Unfortunately the SPX closes at 1 PST and not 2 PST along with the /ES futures, so it missed a couple of points of down move.  This is an issue because I'd also sold short the 2775/2785 call spread in SPX, for $2.50 to $2.55 credit. So loss closing at 2781.01 was $351 for a one-lot, less than half of what it could have been (and that I was resigned to on Wednesday ...)

We're now in position to do what I've tried to do previously when NOT in this position: sell puts against short futures contracts. I have two on right now (expiring Friday Nov 16) and can sell two for the next few weeks at least (I think!) for $1000 or more per week.

(Note: this doesn't mean $1000 profit per week. Depends on the movement of the underlying futures price. I'm ahead on the one I sold short at 2801.50 and behind on the one I sold at 2722.25).  Effectively I'm "reducing the basis" of these ... if I sell one put for $500, that's 10 points for /ES futures, effectively as if I'd sold the losing short at 2732.25 instead of 2722.25 ...

In other action ...

I've continued to sell futures options strangles and butterflies, small, and mostly have won on these. In fact I made $500 on yet another gold (/GC) butterfly with an adjustment I remembered from Dan Sheridan's butterfly guy Mark Fenton: you just sell another butterfly:

This worked beautifully and I'm going to continue to experiment with it.

But I think NDX can continue to be the "bread and butter" trade ... It's "expiration week" coming up this week on the 16th, where NDX settles in the a.m. instead of the p.m. So I'm going to load up on this trade again, at 9:45 a.m. PST Thursday:  "one standard deviation" Iron Condors with very wide wings. That's short at the .16 delta and long 50 to 70 points away.

On "non-expiration" weeks I think the .08 delta NDX trade from Monday to Friday should work at least as well: 91.7% for the a.m. settlement and I'm assuming at least 90% for the Monday-to-Friday p.m. settled trade.

More next week ....

NDX 2 and 0, SPX 1 and 1 ... futures mostly still winning; AAPL wipes out a millenial

Volatility calmed down a bit this week (the Vix was down, closing at 19.15). Our friend NDX:

... was still volatile enough to pay well ($4.38 on a 1-lot, with short strikes at 6475 and 7270) ... it never got near those short strikes and I held it to expiration today for its full $438.

On the S&P 500 I moved to SPY and just sold a strangle for "78 cents" way out wide ... and closed it a day early, just taking $68 of the $78 dollars I would have gotten on that one.

If these two trades really pay off 90% of the time, with "wide wings" I should be able to make a good living trading them (along with the once per month a.m. settled NDX trade) ... fingers crossed!

The futures trades I have on are mostly paying off, still, but they mostly don't have frequent enough expirations to use like the NDX and SPX trades we're trying ... but I'm leaving them on this week because they shouldn't be too troubled by....

Next week is the U.S. election, and with the Democrats all but sure to win the house and the market today only holding up a little bit at the end because of this:

Trump says 'I think we'll make a deal with China' on trade

But this was seen as just a transparent attempt to prop up the stock market before the election ... which gave me a chance to sell /ES futures contracts around 2722 when they bounced late in the day.

Everybody in the world is expecting the Democrats will take the House of Representatives this election, which will mean only one thing for the market:

I am thus staying out of the neutral trades this week and instead just sold futures contracts and a 'bear call spread' on SPX in the non-futures-capable accounts I am trading. (These return about 30% for the week all by themselves.)

Finally, AAPL told the world that they aren't going to report sales numbers anymore, and that was not popular:

Tim Knight reported that one millenial who's gotten used to putting everything into this trade got wiped out this time ...

Let's be prudent out there ... more next week!

Pipe bombs and volatility, SPX, NDX, futures

There's nothing like watching the market for your just about to expire (neutral) options spread when you get this news:

Pipe bombs were sent to George Soros, CNN, other "liberals"

This whacked my SPX trade for a total loss ... This was one of the low points (Wednesday at 1pm PDT of an extraordinarily volatile week:

I'm still trading futures options, but I've decided to try SPX and NDX 4-day spreads at the .08 delta: SPX Friday to Wednesday and NDX Monday to Friday in hopes of juicing the results between Fabulous NDX monthly trades. Bad timing for the SPX last week, but the NDX came in for full profit after bouncing around like a ping-pong ball on Friday. (It actually never got too close to my short strike at 6725).

And (duhhh ...) I can test this with SPY and QQQ ... I've dropped back to using SPY (a short strangle, at 247 and 275.5 (i.e waay out wide). Tomorrow morning I'm going to put on a 50-point-wing wide NDX iron condor and a QQQ trade also (strangle or condor).

I'm going to try all these for 10 weeks ... I speculate that they should work in the 90% range, but we'll see.

Futures options are not quite as fabulous when doing strangles/condors as with butterflies, but I'm still using them also as part of the mix. But with volatility at such hugely elevated levels lately, it's too tempting to mix in equities. The VIX closed Friday at 24.16!

More next week ...

NDX trade: can it keep your house from sliding into the ravine?

Try talking to your contractor about this one?

Some friends of our family got an estimate of $300,000 to shore up their house from sliding into the ravine behind the house. (It doesn't look nearly this bad, but $300K to fix, still.)

It turns out that our friends have enough funds from another real estate sale to fix their own place, but if you did (or if you do) have something similar, what could you do about it?

The NDX monthly options, for traditional reasons, don't last until the end of day Friday of their expiration day. Instead, they settle based on the symbol NDS, which is the daily settlement value of NDS. It's valued whenever the 100 stocks in the index have their opening trade, usually in the first 30 minutes after opening (i.e. just before 7am Pacific time.)

There was a study published on Tastytrade showing that trading this NDX settlement overnight with a "1 standard deviation iron condor" (example/details below) ... works 91.7% of the time (i.e. 12 for 13). I've since verified that for myself; I traded this one weekly until Nasdaq removed it from all but the monthlies last February ...

In the couple of losses I've seen on this trade, I've never seen it go very far "into the money", especially after I "widened the wings" of my condor trades.

Given all this ..

It struck me that it made sense to risk even more on this trade that I have been doing. So I risked $30,500 on this trade:

• short the 7060 put
• long the 6990 put
• short the 7250 call
• long the 7320 call

I put the trade on when the index was around 7150 ... when next I looked it had dropped to 7080! But it recovered and actually spiked the next morning on settlement to 7247 ... just within the short call, so fully profitable.

I sold 5 of these for a $9.00 credit each (i.e. $900), so that's $4500 (minus maybe $100 in commissions and fees, so let's say $4400. That's a 14.4% return.

Back to your problem with the sliding house ... If you could scrape together $200,000 to put into this trade, you'd (for example) have made 6.5 times the $4400, or $28600. It's reasonable to assume your winning this trade 5 times in a row, ramping up with increased capital. Volatility will vary, so you won't necessarily make as much as $9.00 all the time ...

In 5 months you could expect to make $100,000 extra, for whatever you can do with that (put 1/3 down on the $300,000 loan you need to fix your house?)

And you could lose $80000 or even $100000 if an extreme loss happens at the wrong time ... this is very unlikely (losses when they do happen are likely to be more like $20K to $30K) ...

So: maybe not an everyday strategy, but if you have only a few months to keep your house from crashing, maybe worth considering?

Finally, your virtual $200,000 account ... was up about $14000 last week. I wouldn't have risked more than $100,000 of this account on this trade, without a house teetering on the brink ...

S&P 500 down 4.5%; your virtual $200,000 account + 0.1%

Finishing up the butterflies that were a drag on futures results limited our gains this past week, but the S&P tanked Wednesday and Thursday and we didn't get any of that on us.

A couple of the butterflies we had on continued to hurt results; I am mostly giving up on these and going to short strangles (on futures only) and iron condors with wide strikes.


Futures options pay better than equities, and the diversified bunch of trades I had on after Wednesday's sharp down move wasn't bothered at all:

So: I'll keep on a widely diversified bunch of futures options trades: strangles if I can afford them and otherwise iron condors with wide wings. I'll add an occasional equity trade as well, favoring those that are highly volatile (and therefore which pay better!) I plan to keep around 75% of my futures-enabled accounts in play (not all them are ... the IRAs don't get futures and futures options until later this year on Tastyworks. For those I still limit exposure to 30-40%.)

And one week of every four ...

This is "expiration week" when the Fabulous a.m. settled NDX trade is available Thursday and Friday. I'm going to hit it hard this week, as it should make about 20% on margin (while risking not much more than that, given 75-point wide wings on the iron condor) ... since over time this trade has shown a 91.7% win rate, the only wish I have for it is that i could do it every week, like in the good old days of earlier this year!

More next week!