CMLviz Trade Machine

[NikTam 163]

@Darcy MacDonald thank you for sharing that - very helpful and gives me a similar idea to pursue.  

[cuegis 683]

10 hours ago, NJ_KenRob said:

@cuegis When you are using the backtester, what execution fill type do you use?

I was already asleep when the new software came out at midnight, so I am just playing with it for the first time now.

As far as "execution fill type", I usually have it set at mid market.

If it is a less liquid stock then I will use "halfway between mid market" .

I never use sell on bid / buy on ask because , in real life, I wouldn't do that.

[bam1960 53]

 

Ophir

When I try to enter your trade on nvda the result just blinks and not getting results

[cuegis 683]

My custom trade results are just flashing, in the 1st box only, with no results being filled in as well as what someone else has described.

I am only using one stock and trying to do a simple calendar....30 day sell, 60 days buy.

I was sleeping at midnight last night, so this is my first time to try this thing out.

[Ophir Gottlieb 62]

34 minutes ago, cuegis said:

My custom trade results are just flashing, in the 1st box only, with no results being filled in as well as what someone else has described.

I am only using one stock and trying to do a simple calendar....30 day sell, 60 days buy.

I was sleeping at midnight last night, so this is my first time to try this thing out.

Yeah, we have had this report a few times. We're working on it -- hopefully a patch today. It's a little odd bc it works on most browers/computer combinations.

 

We'll straighten it out, sorry for the trouble.

[cuegis 683]

6 minutes ago, Ophir Gottlieb said:

Yeah, we have had this report a few times. We're working on it -- hopefully a patch today. It's a little odd bc it works on most browers/computer combinations.

 

We'll straighten it out, sorry for the trouble.

Thanks...

I'm using Windows 10 with Chrome browser

[Ophir Gottlieb 62]

6 hours ago, cuegis said:

Thanks...

I'm using Windows 10 with Chrome browser

 

We have identified what we are confident was the issue. It was related to the needing to upgrade existing users to the pro accounts. Everyone should be good to go. Please let us know if you continue having any problems through support@cmlviz.com

 

 

 

 

 

[Ophir Gottlieb 62]

It looks like MSFT is a reasonable candidate for the long / short straddle pre-earnings trade.

http://tm.cmlviz.com/index.php?share_key=ixlLJiwwS3NrQZZt

 

2-years

 

1-year

[netleo 3]

@Ophir GottliebMore technical question on a login: I have noticed that tm.cmlviz.com login page is not secure and doesn't use https: to process login information, while the main site is secure. Could you please take a look - it seems strange - I definitely don't want my credentials to be stolen in the simple unencrypted packet. Thank you,

[Kim 7,943]

Trying to backtest SXVY, with 90 days rollover. getting 12 trades for 3 years backtest (as expected) BUT: when changing to "Gains above 50%" and -And Open Next Trade Immediately , the number of trades goes down to 2. Any idea why this is happening?

[Ophir Gottlieb 62]

7 minutes ago, Kim said:

Trying to backtest SXVY, with 90 days rollover. getting 12 trades for 3 years backtest (as expected) BUT: when changing to "Gains above 50%" and -And Open Next Trade Immediately , the number of trades goes down to 2. Any idea why this is happening?

Yes, we have a new bug in stops and limits. We're addressing tomorrow. But very good to know -- don't use stops and limits right now.

 

This bug crept up with the new custom release today, which is weird, but, it happens. 

Edited June 15, 2017 by Ophir Gottlieb

[Ophir Gottlieb 62]

11 hours ago, Kim said:

Trying to backtest SXVY, with 90 days rollover. getting 12 trades for 3 years backtest (as expected) BUT: when changing to "Gains above 50%" and -And Open Next Trade Immediately , the number of trades goes down to 2. Any idea why this is happening?

All fixed.

[MPro 0]

Backtest details (stock price, subsequent option pricing ) for VXX seem to be inaccurate. Please advise. Will backtest be useful with all the reverse splits?

[Ophir Gottlieb 62]

1 minute ago, MPro said:

Backtest details (stock price, subsequent option pricing ) for VXX seem to be inaccurate. Please advise. Will backtest be useful with all the reverse splits?

 

Stock splits should be fine. Can you send a link to your back-test and show us the place where it looks wrong?  Also, please email support@cmlviz.com

[MPro 0]

For instance the VXX on July 3, 2014 has a CML stock backtest price of 27.17 vs. a Think or Swim platform close of 108.68.

[Javier 99]

I also subscribed it and looks very well, easy and powerful.

[Ophir Gottlieb 62]

50 minutes ago, MPro said:

For instance the VXX on July 3, 2014 has a CML stock backtest price of 27.17 vs. a Think or Swim platform close of 108.68.

This is not support. Please email support@cmlviz.com and please include the link to your back-test (if you don't send a link, support will simply reply "please send a link to your back-test).

 

This is where you can share your back-test link.

[Ophir Gottlieb 62]

30 minutes ago, Javier said:

I also subscribed it and looks very well, easy and powerful.

Great!

[cuegis 683]

I don't know whether I have found a bug or, is this just the way the program deals with "Contango"...when the stock (VIX) is at a MUCH higher price 90 days from now.

Whenever you come across a backtest that gives triple digit returns 100% of the time, you first have to forget about the program and just allow your mind to think, and use common sense, to decide if what you are seeing makes common sense in general..

So, I backed into this thing by doing that first......Finding something that you pretty much know is going to work most of the time, and then verify it through the backtest.

So, I know my idea is sound but, when doing the backtest, I have come out with results that actually does produce 100% winners, and triple digit returns.

http://tm.cmlviz.com/index.php?share_key=ig6EwABtuTbrgpGx

Basically, I am using the "contango" pricing of the VIX as my "edge" and buying put spreads 90 days out from now.

I would buy something along the lines of long 40-50 delta and short 20-25 delta put verticals. So, ignore the results (which are just as good) of the boxes that have 80/40 (delta).

I also added 50% (take profits) and 50% (stop loss) to the parameters.

The results speak for themselves.

I would expect the results to be very good, but this is just way too good, so, here is where lies the potential bug.

When I open up the box and go back to look at the exact trades that were done in the backtest, the deltas are all completely wrong....very wrong, and all of the time.

For example, with a stock (VIX) price of $20, and I want to be buying a 40 delta put, it is buying the 21 put and claiming that the delta is 39%.

Most of the other examples are far more extreme than that. (ex. Vix at 18,the 50 delta put is the 21 put).

Obviously  I love this test, and it would be hard to find better,and more consistent results anywhere but, I just want to know that what I am looking at is correct!

All of the trades seem to follow the parameters I have setup but, in every case, all of the deltas are completely wrong.

The only way I could make any sense of this apparent bug would be if you are using "Todays" VIX price as "Stock Price", and then since you are using options that are 90 days away, they are based on a different priced underlying.

Is that what is happening in this test?

 

.

[Ophir Gottlieb 62]

4 minutes ago, cuegis said:

I don't know whether I have found a bug or, is this just the way the program deals with "Contango"...when the stock (VIX) is at a MUCH higher price 90 days from now.

Whenever you come across a backtest that gives triple digit returns 100% of the time, you first have to forget about the program and just allow your mind to think, and use common sense, to decide if what you are seeing makes common sense in general..

So, I backed into this thing by doing that first......Finding something that you pretty much know is going to work most of the time, and then verify it through the backtest.

So, I know my idea is sound but, when doing the backtest, I have come out with results that actually does produce 100% winners, and triple digit returns.

http://tm.cmlviz.com/index.php?share_key=ig6EwABtuTbrgpGx

Basically, I am using the "contango" pricing of the VIX as my "edge" and buying put spreads 90 days out from now.

I would buy something along the lines of long 40-50 delta and short 20-25 delta put verticals. So, ignore the results (which are just as good) of the boxes that have 80/40 (delta).

I also added 50% (take profits) and 50% (stop loss) to the parameters.

The results speak for themselves.

I would expect the results to be very good, but this is just way too good, so, here is where lies the potential bug.

When I open up the box and go back to look at the exact trades that were done in the backtest, the deltas are all completely wrong....very wrong, and all of the time.

For example, with a stock (VIX) price of $20, and I want to be buying a 40 delta put, it is buying the 21 put and claiming that the delta is 39%.

Most of the other examples are far more extreme than that. (ex. Vix at 18,the 50 delta put is the 21 put).

Obviously  I love this test, and it would be hard to find better,and more consistent results anywhere but, I just want to know that what I am looking at is correct!

All of the trades seem to follow the parameters I have setup but, in every case, all of the deltas are completely wrong.

The only way I could make any sense of this apparent bug would be if you are using "Todays" VIX price as "Stock Price", and then since you are using options that are 90 days away, they are based on a different priced underlying.

Is that what is happening in this test?

 

.

 

The delta of a VIX option is based on the futures price, not the spot. This is not an oddity with our software, this is what put-call parity commands, bc the futures are tradeable while the spot is not. 

 

If you are looking at 90 days out, then it makes perfect sense that a 40 delta put would be the 21 strike while the spot was 20. It's likely that the futures index was ~25, so a 21 strike as 40 delta sounds right.

 

You can also use the VXX, which is a bet on contango and has been a winning call spread sale for all 9-years the ETN has existed. 

 

 

Edited June 15, 2017 by Ophir Gottlieb

[voland777 0]

56 minutes ago, Ophir Gottlieb said:

 

The delta of a VIX option is based on the futures price, not the spot. This is not an oddity with our software, this is what put-call parity commands, bc the futures are tradeable while the spot is not. 

 

If you are looking at 90 days out, then it makes perfect sense that a 40 delta put would be the 21 strike while the spot was 20. It's likely that the futures index was ~25, so a 21 strike as 40 delta sounds right.

 

You can also use the VXX, which is a bet on contango and has been a winning call spread sale for all 9-years the ETN has existed. 

 

 

You are absolutely correct. I would only point out that this is true for all options. Delta should always be calculated based on the forward price of the asset that matches the expiry. I guess people tend to forget this fact because rates have been so low for a considerable period of time, making forwards to be very close to spot. Obviously, VIX forwards are much different from spot.

[cuegis 683]

1 hour ago, Ophir Gottlieb said:

 

The delta of a VIX option is based on the futures price, not the spot. This is not an oddity with our software, this is what put-call parity commands, bc the futures are tradeable while the spot is not. 

 

If you are looking at 90 days out, then it makes perfect sense that a 40 delta put would be the 21 strike while the spot was 20. It's likely that the futures index was ~25, so a 21 strike as 40 delta sounds right.

 

You can also use the VXX, which is a bet on contango and has been a winning call spread sale for all 9-years the ETN has existed. 

 

 

This was what I figured was happening. I couldn't think of another reason.

But, my only question is....when I open the box to go back to beginning, and view each individual trade, in the column that says "Stock Price"......what stock price are they showing in that column?

For example, if it June 15th today, and todays' (June) VIX future is 11, and all of my opening trades are set to be 90 days from now, will the "Stock Price" that shows up in that column be Sept VIX Futures price? Which would probably be somewhere around 13.50

[cuegis 683]

"You can also use the VXX, which is a bet on contango and has been a winning call spread sale for all 9-years the ETN has existed. "

 

Yes, you would expect that because it is based on all of the same underlying dynamics.

It is a very unusual situation for 2 reasons.

1- Contango provides an edge, if you go out like 90 days (or even more) for example

But, even more important is

2- The VIX,VXX etc. spends like 98% of it's time trading in a range that is , at least, 2 points below where 90 day forward VIX is trading.

And, if we get a spike to 29, for example, spikes tend to last 1-5 days at most and will revert back to the ("mean") trading range just as quickly as it spiked up.

It spends 99% of the time in the range, and 1% of the time having a "spike".

That is a big part of the reason why selling OTM VXX call spreads has been a constant winner for 9 years.

Edited June 15, 2017 by cuegis

[Ophir Gottlieb 62]

9 minutes ago, cuegis said:

This was what I figured was happening. I couldn't think of another reason.

But, my only question is....when I open the box to go back to beginning, and view each individual trade, in the column that says "Stock Price"......what stock price are they showing in that column?

For example, if it June 15th today, and todays' (June) VIX future is 11, and all of my opening trades are set to be 90 days from now, will the "Stock Price" that shows up in that column be Sept VIX Futures price? Which would probably be somewhere around 13.50

 

We do not have futures prices in the Trade Machine, which means we are showing spot prices.

[cuegis 683]

1 minute ago, Ophir Gottlieb said:

 

We do not have futures prices in the Trade Machine, which means we are showing spot prices.

So, what you are "showing" is the "spot" price as the "stock price", but, the calculations are being based off of the the futures price of the options that you are trading?

If "spot " VIX is 11, and you want to buy a 50 delta put, 90 days forward, then Trade Machine will have you buy the 13.50 put, because Sept is trading at 13.50, so that would be a 50 delta ATM put.

[Ophir Gottlieb 62]

1 minute ago, cuegis said:

So, what you are "showing" is the "spot" price as the "stock price", but, the calculations are being based off of the the futures price of the options that you are trading?

If "spot " VIX is 11, and you want to buy a 50 delta put, 90 days forward, then Trade Machine will have you buy the 13.50 put, because Sept is trading at 13.50, so that would be a 50 delta ATM put.

Yes. We show the spot in the trade details but options are based on futures, which means all option trades in the back-test are based on futures.

[cuegis 683]

2 minutes ago, Ophir Gottlieb said:

Yes. We show the spot in the trade details but options are based on futures, which means all option trades in the back-test are based on futures.

Perfect. That is what I thought was going on. At least I can feel more confident in what I am looking at.

This could have been a potential area for some confusion, but you got it all right!

These are great trades aren't they? So many things coming together at once, working for you.

[Ophir Gottlieb 62]

Just now, cuegis said:

Perfect. That is what I thought was going on. At least I can feel more confident in what I am looking at.

This could have been a potential area for some confusion, but you got it all right!

These are great trades aren't they? So many things coming together at once, working for you.

 

It's a very crowded trade so when it turns bad it can be magnified, but basically it has worked for almost a decade. I have a really simple approach which has made my trading IQ much higher:

 

If I like a trade that has worked for a long time in a row, I go ahead and do it until it loses without worrying 'when it will stop.' I know that my last trade will be a loser, but until then I get to ride a wave without any real mental pain. 

[cuegis 683]

2 minutes ago, Ophir Gottlieb said:

 

It's a very crowded trade so when it turns bad it can be magnified, but basically it has worked for almost a decade. I have a really simple approach which has made my trading IQ much higher:

 

If I like a trade that has worked for a long time in a row, I go ahead and do it until it loses without worrying 'when it will stop.' I know that my last trade will be a loser, but until then I get to ride a wave without any real mental pain. 

Yes, I agree but, since none of these type of trades have "open ended" risk, then when that final ,losing trade, happens, it will just be a "normal" routine loss. Not something that will put you out of business.

No bull market lasts forever.

Someday ( which can be any day from today until xxx years from now) we will have a 2008/2009, then the VIX will eventually figure out what it is going to do moving forward.

Maybe we will have 5 years of a (VIX) trading trading range between 20-35! And the futures will go into backwardation.

Then  there will be a new "edge" that might take some time to figure out.

[Ophir Gottlieb 62]

 

Timing Is Everything With Options

 

Date Published: 2017-06-15 
Written by Ophir Gottlieb 

LEDE 
With the market selling off and mega tech especially under fire, we need to examine when being short options is appropriate -- or at least has been most appropriate in the past. 

Microsoft Corporation (NASDAQ:MSFT) is the long forgotten mega cap while media darlings Apple Inc, Facebook Inc, and Alphabet Inc garner all the headlines. But the lack of attention hasn't removed the opportunity in options, especially after earnings. 

The difference between professional traders and non-professionals is usually access to information and mindset. We can address both with this analysis on Microsoft Corporation where we look at an option trade right after earnings that has been a winner without a loss for an entire year, and has been a loser only once in the last three-years. 

The Trade After Earnings 
It's a fair question to ask if trading options every month is worth it -- is it profitable -- is it worth the risk -- especially now. So, there's an action plan that measures this exactly, and the results are powerful not just for Microsoft, but for Apple Inc (NASDAQ:AAPL), Facebook Inc (NASDAQ:FB) and Alphabet Inc (NASDAQ:GOOGL) as well. 

Let's test the idea of selling a put spread only in the month after earnings. Here's what we mean: 
 

Our idea here is that after earnings are reported, and after the stock does all of its gymnastics, up or down, that two-days following the earnings move and for the next month, the stock is then in a quiet period. 

If it gapped down -- that gap is over. If it beat earnings, the downside move is already likely muted. Here is the set-up: 
 

More explicitly, the rules are: 

Rules 
* Open short put spread 2-days after earnings. 
* Close short put spread 29-days later. 
* Use the option that is closest to but greater than 30-days away from expiration. 

And here are the results of implementing this much finer strategy: 
 

 
Back-test Link

It's almost too good to be true -- a 71.6% return on 12 trades, where 11 were winners. We do note that the one loser came in February 2016 where the test sold a 53/50 strike put spread at $0.66 and ended up buying it back for $1.53 -- so a $0.87 loss on an original $0.66 credit. 

All the other trades over the last three-years were winners. 

Here's what we see over the last year: 
 

 
Back-test Link

Now we see a 42.2% return over the last four earnings cycles, but the beauty of this approach has not just been superior returns, it doesn't tie up capital for months that aren't profitable. Since this was just four-months of trading, that's over 160% annualized returns. 

Finally, here are the last two earnings cycles (six-months): 
 

 
Back-test Link

Remarkably consistent -- with a 22.1% over six-months and 42.2% over the last year. 

As an aside, this logic of finding the month of lowest risk to sell put spreads also worked remarkably well and remarkably similarly across the board in Apple Inc, Facebook Inc and Alphabet Inc. 
 

 
Back-test Link

WHAT HAPPENED 
To see how to do this for any stock and for any strategy, including covered calls, with just the click of a few buttons, we welcome you to watch this quick demonstration video: 
Tap Here to See the Tools at Work

Thanks for reading. 

Risk Disclosure 
You should read the Characteristics and Risks of Standardized Options. 

Past performance is not an indication of future results. 

Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment. 

Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition. 

The author has no position in Microsoft Corporation (NASDAQ:MSFT) as of this writing. 

Back-test Link

 

 

 

 

 

 

 

[NikTam 163]

@cuegis  Looked at your VXX trade back test results and went to TOS to duplicate the trade (after hours).    On TOS my Order Confirmation Dialog tells me that my max profit will never be more than my max loss (my cost).  Does this sound right to you?  VXX trade.pdfVXX trade.pdf

BUY +10 VERTICAL VXX 100 15 SEP 17 14/11 PUT @1.83 LMT [TO OPEN/TO OPEN]
12.17 BE Stock Price
$1,170.00 Max Profit
$1,830.00 (not including possible dividend risk)
$1,830.00 + $20.00 = $1,850.00  Max Cost
($1,850.00)
$26,403.39
$26,403.39

Edited June 16, 2017 by NikTam

[Yowster 9,174]

31 minutes ago, NikTam said:

@cuegis  Looked at your VXX trade back test results and went to TOS to duplicate the trade (after hours).    On TOS my Order Confirmation Dialog tells me that my max profit will never be more than my max loss (my cost).  Does this sound right to you?  VXX trade.pdfVXX trade.pdf

BUY +10 VERTICAL VXX 100 15 SEP 17 14/11 PUT @1.83 LMT [TO OPEN/TO OPEN]
12.17 BE Stock Price
$1,170.00 Max Profit
$1,830.00 (not including possible dividend risk)
$1,830.00 + $20.00 = $1,850.00  Max Cost
($1,850.00)
$26,403.39
$26,403.39

@NikTamThis is a vertical (same expiration for short and long) of width 3, so the most this vertical would be worth is 3.00.   So your max profit is 3.00-1.83=1.17.   Your max loss is what you paid, 1.83.

[NikTam 163]

@cuegis  Yes, but a 3 wide is what you get with the deltas you back tested.   I don't get why this is potentially such a great trade.

Edited June 16, 2017 by NikTam

[cuegis 683]

13 hours ago, NikTam said:

@cuegis  Looked at your VXX trade back test results and went to TOS to duplicate the trade (after hours).    On TOS my Order Confirmation Dialog tells me that my max profit will never be more than my max loss (my cost).  Does this sound right to you?  VXX trade.pdfVXX trade.pdf

BUY +10 VERTICAL VXX 100 15 SEP 17 14/11 PUT @1.83 LMT [TO OPEN/TO OPEN]
12.17 BE Stock Price
$1,170.00 Max Profit
$1,830.00 (not including possible dividend risk)
$1,830.00 + $20.00 = $1,850.00  Max Cost
($1,850.00)
$26,403.39
$26,403.39

I don't understand the problem (if any).

We do plenty of trades where you risk $4 to make $1.50.

But , that is the whole game. If "that" trade had a 95% probability of being profitable, and a track record going back 3 years to validate it, then it might be something we do on a regular basis.

The concept of "Risk:Reward" is something that is not part of the thinking of an options trader.

It has always been the basis of other forms of business decisions. Not options.

Options decisions are based on probabilities, NOT risk/reward.

This trade, or some similar variation of it, produced triple digit returns, with 100% winners, when I ran it through the Trade Machine.

But you would never do a trade just because the Trade Machine shows perfect results.

After you see those results, then you have to use your own mind and think the entire thing through, and decide if there is a common sense reason to back up why this thing is working.

Having some form of negative deltas, either through a long put spread, or short call spread, or other, in the VIX/VXX products, going out 90-120 days, has a REAL reason why it works.

It is because of the "contango" pricing structure, plus the fact that the VIX spends 99% of it's time in a trading range that is 2-3 points ("spot") below where you are selling it.

And, even if there is rare spike, up to 30, for example, it only last 2-4 days at most, then returns to its 10-12 trading range.

[Civicguy 15]

16 hours ago, Ophir Gottlieb said:

 

 
Back-test Link

 

 

Hope you guys don't mind this extremely rookie question. 

In IB, how would I set up a trade like the above 

Sell 35 Delta Buy 15 Delta Put

 

Not really sure how to translate the above to a trade. 

Sorry. 

[voland777 0]

2 minutes ago, Civicguy said:

 

Hope you guys don't mind this extremely rookie question. 

In IB, how would I set up a trade like the above 

Sell 35 Delta Buy 15 Delta Put

 

Not really sure how to translate the above to a trade. 

Sorry. 

In the Option Trader, include the "Delta" column if it is not already there...trade options whose deltas are closest to the proposed setup

[lamarochs 0]

Quick Question:

Is there a way to set up a trade with a monthly expiration but sell it on a weekly basis?

Thanks.

 

 

 

 

[Ophir Gottlieb 62]

1 hour ago, lamarochs said:

Quick Question:

Is there a way to set up a trade with a monthly expiration but sell it on a weekly basis?

Thanks.

 

 

 

 

Give me a clear example - I think there is a way to do it.

[RapperT 336]

6 hours ago, cuegis said:

The concept of "Risk:Reward" is something that is not part of the thinking of an options trader.

It has always been the basis of other forms of business decisions. Not options.

 

.

not to get too side tracked, but do you really believe this?  Probability + risk+ expectancy...all should be considered (unless its the 80s and we are market makers working .25 cent spreads etc..lol)

I agree with you that we should just use the CML machine as a starting point.  It sure saves a lot of time.

[RapperT 336]

@Yowster have you been able to build the strangle/straddle ratio trade?  When I try to build it the short strangle opens the week  before earnings instead of opening at the same time as the long straddles.  i've tried anywhere from 7-10 rollover period for the short legs

Edited June 17, 2017 by RapperT

[Ophir Gottlieb 62]

11 minutes ago, RapperT said:

@Yowster have you been able to build the strangle/straddle ratio trade?  When I try to build it the short strangle opens the week  before earnings instead of opening at the same time as the long straddles.  i've tried anywhere from 7-10 rollover period for the short legs

Just tell me what the trade is and I'll show.

 

But be specific.

[RapperT 336]

1 hour ago, Ophir Gottlieb said:

Just tell me what the trade is and I'll show.

 

But be specific.

oh sweet, thanks:

*Long 5 straddles, opening any time from 10-30 days pre earnings (should be able to customize that piece, but not longer than 30), expiry immediately following earnings

*short 2, 40ish delta strangle (to start, obviously can change delta):  these short legs should open the same time as long straddles but will expire in 5-9 days (whatever the next weekly is before earnings, but at least a week out).  depending when long legs are opened, these legs may roll once or even twice in some cases.

* if rolling short legs is an issue, dont worry about it.  Just selling the weekly spread once is what im most interested in but the option to roll would be nice

*entire trade will close 1 day before earning

 

hopefully that was clear.

 

WBA example

 

Edited June 17, 2017 by RapperT

[ocr008 12]

3 hours ago, RapperT said:

oh sweet, thanks:

*Long 5 straddles, opening any time from 10-30 days pre earnings (should be able to customize that piece, but not longer than 30), expiry immediately following earnings

*short 2, 40ish delta strangle (to start, obviously can change delta):  these short legs should open the same time as long straddles but will expire in 5-9 days (whatever the next weekly is before earnings, but at least a week out).  depending when long legs are opened, these legs may roll once or even twice in some cases.

* if rolling short legs is an issue, dont worry about it.  Just selling the weekly spread once is what im most interested in but the option to roll would be nice

*entire trade will close 1 day before earning

 

hopefully that was clear.

 

WBA example

 

NVDA My Strategy 6           Custom Earnings Trading and Timing With Options in Nvidia (NVDA), Amazon (AMZN) and Facebook (FB)

My Strategy nvda -                                        your strategy

Expiration: 30 Days-                          same

Risked:

$1860 

Total Return:

‑$235                                                                            +801

% Return:

-12.6%                                                                            +87.5%

Commissions:

  $160

% Wins:

37.5%

Wins: 3                                                                                     wins 7

Losses: 5                                                                                        losses  1

Gain: $330

Loss: ‑$565

the same

  Strategy Name   

 

Shares of Stock    

 

Direction	Type	Delta	Rollover	Contracts
Long Short	Call Put

Short

Call

50 delta

7 day roll

5x

 X 

Short

Put

50 delta

7 day roll

5x

 X 

Long

Call

50 delta

30 day roll

5x

 X 

Long

Put

50 delta

30 day roll

5x

 X 

why I have different results you have 7 wins I only have 5

 

 

    

Custom Earnings Handling

Open Position Days

Before Earnings
After Earnings   

Close Position Days

Before Earnings
After Earnings    

 

 

 

[RapperT 336]

@ocr008 i dont have CML machine result for this trade yet.  I cant get the short legs to open at the right time.

My actual trade results are 7 wins and 1 loss (assuming RHT doesnt recover in the last couple days into earnings), I can post the details a bit later

[cuegis 683]

7 hours ago, ocr008 said:

NVDA My Strategy 6           Custom Earnings Trading and Timing With Options in Nvidia (NVDA), Amazon (AMZN) and Facebook (FB)

 

 

My Strategy nvda -                                        your strategy

Expiration: 30 Days-                          same

Risked:

$1860 

Total Return:

‑$235                                                                            +801

% Return:

-12.6%                                                                            +87.5%

Commissions:

  $160

% Wins:

37.5%

Wins: 3                                                                                     wins 7

Losses: 5                                                                                        losses  1

Gain: $330

Loss: ‑$565

the same

  Strategy Name   

 

Shares of Stock    

 

Direction	Type	Delta	Rollover	Contracts
Long Short	Call Put

Short

Call

50 delta

7 day roll

5x

 X 

Short

Put

50 delta

7 day roll

5x

 X 

Long

Call

50 delta

30 day roll

5x

 X 

Long

Put

50 delta

30 day roll

5x

 X 

why I have different results you have 7 wins I only have 5

 

 

    

Custom Earnings Handling

Open Position Days

Before Earnings
After Earnings   

Close Position Days

Before Earnings
After Earnings    

 

 

 

I don't understand why you need to overcomplicate this with calls AND puts.

There is only 1 strike , 2 expirations, and 1 delta in this trade.

That is called a "Calendar".

If you did this same exact test using only puts OR calls, the results would be exactly the same.

Edited June 17, 2017 by cuegis

[izzo70 22]

@Kim Will you be using this tool to add to the list of SO strategies (i.e. post earnings)?  If strategies arise that out perform one or some of our current strategies, will we try them out?   Or is it more for individual use and strategizing outside of official SO trades.  (If this has already been addressed i apologize in advance as i didnt read all 10 pages of post.) Thanks

Edited June 17, 2017 by izzo70

[ocr008 12]

9 minutes ago, izzo70 said:

@Kim Will you be using this tool to add to the list of SO strategies (i.e. post earnings)?  If strategies arise that out perform one or some of our current strategies, will we try them out?   Or is it more for individual use and strategizing outside of official SO trades.  (If this has already been addressed i apologize in advance as i didnt read all 10 pages of post.) Thanks

 

On the test saying 

buy 50 d and c 30 days 

sell 50 d and c 7 days 

and the results are not the same 

 

[RapperT 336]

purpose of my request is to back test the effect of offsetting regular earnings straddle with a lower ratio of strangles.  It certainly could be considered a ratio time spread but the goal is to use CML to optimize the ideal ratio on certain underlyings and how soon to enter the trade, roll, etc etc.

 

[Yowster 9,174]

40 minutes ago, RapperT said:

purpose of my request is to back test the effect of offsetting regular earnings straddle with a lower ratio of strangles.  It certainly could be considered a ratio time spread but the goal is to use CML to optimize the ideal ratio on certain underlyings and how soon to enter the trade, roll, etc etc.

 

@RapperTI think the screen prints below are the setup you want (example is 2:5 short to long ratio)... IMO, while this backtest is nice, for this particular trade it does not capture the most important trade entry criteria - that is the RV of the long straddle at trade open time and how it compares to the average RV level of the ATM straddle on earnings day (as shown by the implied move on sites like OptionSlam).  Simply put, you want the credit received by the short strangle to basically cover losses on long straddle if it declines to the average RV level on earnings day and you don't have gamma gains from stock price movement - this means that you want to avoid trade entry when RV is elevated.  This is a learning I've had using this trade - I closed a successful RHT trade on a big move and immediately rolled to new strikes, but by doing the roll immediately my new long strangle was a higher IV and has since declined (so best to wait for RV to get back to more normal levels).

Edited June 17, 2017 by Yowster

[RapperT 336]

thanks @Yowster, but we wouldnt want to close the entire trade 5 days prior to earnings (in all cases).  That's the piece I cant seem to get right.  That and having the shorts set to 7 day roll and opening when I have the long open.

I would only really (initially) be backtesting underlying that I identified as having necessary IV run up into earnings to make sense as earnings straddles (to your RV point)

 

I'll play with your set up, interested to see what @Ophir Gottlieb comes up with

 

Edited June 17, 2017 by RapperT