CML TradeMachine Trade Ideas

Sirion · October 31, 2017

3 minutes ago, SBatch said:

@NikTam Thanks again for starting this thread. There seems to be significant interest which is cool. I do have a suggestion. Perhaps we can create a uniform post for each trade idea. For example, it could include just the symbol, expiration, strike/Delta and future exit date along with the link to the CML backtest with just one trade idea for each post. I think this will allow for members to follow the thread more easily.

My concern is to not flood the forum with posts for this type of trade when only a subset will be interested. Unlike the straddle trades, this isn't even a standard SO trade-style. Perhaps a CML Unofficial Trade Ideas subforum is in order?

SBatch · October 31, 2017

Just now, NikTam said:

@SBatch I think this is great idea and I would follow your lead on it.

Lets go with something like this:

XYZ - 40 Delta Call - Nov 17 Monthly - Close on 11/2 (Earnings 11/3 BMO).

CML Backtest Link

SBatch · October 31, 2017

3 minutes ago, Sirion said:

My concern is to not flood the forum with posts for this type of trade when only a subset will be interested. Unlike the straddle trades, this isn't even a standard SO trade-style. Perhaps a CML Unofficial Trade Ideas subforum is in order?

I don't know if that's necessary. There really isn't a lot of discussion or trade management necessary for these. They are very binary in nature. Members can manage them as they see fit, but the idea is to open them and then close them the session before earnings (unless a member chooses to put on a target/stop).

NikTam · October 31, 2017

@SBatch I would just add "3 day P-E" (or 7 day or 14 day) just to make it obvious without clicking on the link.

@Sirion This is set up as an Unofficial Trade Idea -- isn't it? (that was my intent)

Sirion · October 31, 2017

Just now, SBatch said:

I don't know if that's necessary. There really isn't a lot of discussion or trade management necessary for these. They are very binary in nature. Members can manage them as they see fit, but the idea is to open them and then close them the session before earnings (unless a member chooses to put on a target/stop).

I misunderstood your suggestion. I think what you have posted would be great.

NikTam · October 31, 2017

Yes -- simple and binary and not a need for a lot of discussion -- just a bit of encouragement and camaraderie.

Yowster · October 31, 2017

One thought - it seems all the open trades mentioned here are long calls. I understand the track record backs up the trades, but with this many open positions needing their stocks to rise, one significant market down day will hammer these trades. From a overall portfolio management perspective, it makes sense to look for some candidates to play with long puts (although these are probably harder to find since market direction has been up over the last few years). I know some of our VIX-based trades will benefit from bigger volatility spikes but it would only take a moderate down day or two to have a significant impact on these long call trades (and not have a corresponding large rise in VIX trades). I guess all I'm saying is be careful with having too many one direction trades on at the same time.

Khonsu · October 31, 2017

5 minutes ago, Yowster said:

One thought - it seems all the open trades mentioned here are long calls. I understand the track record backs up the trades, but with this many open positions needing their stocks to rise, one significant market down day will hammer these trades. From a overall portfolio management perspective, it makes sense to look for some candidates to play with long puts (although these are probably harder to find since market direction has been up over the last few years). I know some of our VIX-based trades will benefit from bigger volatility spikes but it would only take a moderate down day or two to have a significant impact on these long call trades (and not have a corresponding large rise in VIX trades). I guess all I'm saying is be careful with having too many one direction trades on at the same time.

I was having some of the same concerns as nowadays more of my account is being allocated towards a generally bullish sentiment. Do you have any recommendations on good hedges to look into?

NikTam · October 31, 2017

@Yowster You make a very good point. I've thought about it but have done nothing so far to mitigate. I had the VIX position for quite a while but my losses on that grew as I rolled it. Finally bailed. I know there are some premium selling positions in CML back-testing. I just don't have the time right now to explore all that. So I use OCO to get me in and out of trades. So I guess Stop Loss is my solution. And a very buoyant market with no end in sight -- until it ends.

NikTam · October 31, 2017

Just taken out of LYV on OCO sell order at 40% gain.

Sirion · October 31, 2017

8 minutes ago, Yowster said:

One thought - it seems all the open trades mentioned here are long calls. I understand the track record backs up the trades, but with this many open positions needing their stocks to rise, one significant market down day will hammer these trades. From a overall portfolio management perspective, it makes sense to look for some candidates to play with long puts (although these are probably harder to find since market direction has been up over the last few years). I know some of our VIX-based trades will benefit from bigger volatility spikes but it would only take a moderate down day or two to have a significant impact on these long call trades (and not have a corresponding large rise in VIX trades). I guess all I'm saying is be careful with having too many one direction trades on at the same time.

I'm going to try to limit my overall number of positions, and my "normal" allocation is a 1/4 SO position (2.5%).

It would be good to look to see if there are any reverse situations, but like you said it will be hard to find a stock with negative momentum into earnings (sears or kmart anyone?).

This is more feeling than having looked at the data, but individual stocks can resist the movement of the broader market sometimes, and it seems like these types of stocks (optimism into earnings) should be more likely than others to do so. I suppose we will wait and see.

If we have a few winners under our belt by the time it happens, the pain should be limited. I'd advise everyone against rapidly ramping up their position sizing for this exact reason.

-------------------

MAR - 40 Delta Call - Nov 10 Weekly - Close on 11/1 (Earnings 11/1 AMC) -

Opened 122 strike for 2.00 during dip

http://www.cmlviz.com/cmld3b/index.php?number=11777&app=news&cml_article_id=20171026_the-one-week-pre-earnings-momentum-in-marriott-international

greenspan76 · October 31, 2017

13 minutes ago, Yowster said:

One thought - it seems all the open trades mentioned here are long calls. I understand the track record backs up the trades, but with this many open positions needing their stocks to rise, one significant market down day will hammer these trades. From a overall portfolio management perspective, it makes sense to look for some candidates to play with long puts (although these are probably harder to find since market direction has been up over the last few years). I know some of our VIX-based trades will benefit from bigger volatility spikes but it would only take a moderate down day or two to have a significant impact on these long call trades (and not have a corresponding large rise in VIX trades). I guess all I'm saying is be careful with having too many one direction trades on at the same time.

3 minutes ago, NikTam said:

@Yowster You make a very good point. I've thought about it but have done nothing so far to mitigate. I had the VIX position for quite a while but my losses on that grew as I rolled it. Finally bailed. I know there are some premium selling positions in CML back-testing. I just don't have the time right now to explore all that. So I use OCO to get me in and out of trades. So I guess Stop Loss is my solution. And a very buoyant market with no end in sight -- until it ends.

You can also just use position sizing and limit your number of trades in each direction to mitigate the risk. For example, I use less than 1% of option portfolio per CML trade and have a limit of 10 trades at once, so worst case scenario is loss of less than 10% of portfolio. While I no longer hedge individual trades, I do carry an overall portfolio hedge using VIX, so its highly unlikely to lose 10% from these trades and not also make a nice offsetting gain on the portfolio hedge.

NikTam · October 31, 2017

@greenspan76 Points well made. My positioning is a bit more aggressive -- 1.5% - 2.5% is typical for me. I am also a small time player in futures and forex so I tell myself that I get some edge with market direction in that way. I've made all the typical mistakes over the past few years and the whole thing has become an obsession at this point. SO has been my best experience. And so far CML is living up to it's claims -- for me, at least.

Question: How far out do you go with the VIX hedge?

greenspan76 · October 31, 2017

8 minutes ago, NikTam said:

@greenspan76 Points well made. My positioning is a bit more aggressive -- 1.5% - 2.5% is typical for me. I am also a small time player in futures and forex so I tell myself that I get some edge with market direction in that way. I've made all the typical mistakes over the past few years and the whole thing has become an obsession at this point. SO has been my best experience. And so far CML is living up to it's claims -- for me, at least.

Question: How far out do you go with the VIX hedge?

I'm by no means an expert on proper hedging strategies, but I tend to open VIX hedges about 6-8 weeks out and try to roll them 2-3 weeks from expiration. But it can vary a little, depending on conditions. The primary purpose of my hedges is to protect against major market moves. I've been through plenty of ups and downs and am not concerned about normal fluctuations.

NikTam · October 31, 2017

13 minutes ago, greenspan76 said:

I'm by no means an expert on proper hedging strategies, but I tend to open VIX hedges about 6-8 weeks out and try to roll them 2-3 weeks from expiration. But it can vary a little, depending on conditions. The primary purpose of my hedges is to protect against major market moves. I've been through plenty of ups and downs and am not concerned about normal fluctuations.

Do you this is more effective than owning a put on the S&P 500 and rolling those?

Mary · November 1, 2017

@NikTam and @SBatch regarding creating a post line that is structured. Great Idea! I was beginning to wonder if the many trade suggestions would get lost in a helter-skelter box, so I am glad you were proactive in organizing the content.

I am wondering, if you might want to (assuming you can do this) put these "guidelines" at the beginning of this forum topic. It might help a member who comes across this topic to understand the protocol.

And thanks to both of you for all your contributions, I am a bit richer for it.

greenspan76 · November 1, 2017

Just now, NikTam said:

Do you this is more effective than owning a put on the S&P 500 and rolling those?

Not necessarily - they're just different. I guess it is fair to say I'm less concerned about a move in the S&P500, and more concerned about an increase in volatility because that is more of a threat to my portfolio. Granted, there is going to be a lot of correlation, but without going into the specifics of my portfolio beyond SO trades, I sleep better at night with the VIX hedges, so that's good enough for me.

NikTam · November 1, 2017

@greenspan76 Understood. I’m thinking that buying puts on S&P may be more effective for hedging pre earnings long calls since these are primarily not vol plays but mainly about price movement- would you agree?

greenspan76 · November 1, 2017

@NikTam Yeah, I think that's reasonable if you're primarily buying calls on stocks that are in the S&P 500.

RapperT · November 1, 2017

18 hours ago, Yowster said:

One thought - it seems all the open trades mentioned here are long calls. I understand the track record backs up the trades, but with this many open positions needing their stocks to rise, one significant market down day will hammer these trades. From a overall portfolio management perspective, it makes sense to look for some candidates to play with long puts (although these are probably harder to find since market direction has been up over the last few years).

Honestly that's part of my issue with these trades from a data standpoint. Nothing wrong with taking advantage of a bull market but, imo, these back tests are more indicative of overall market conditions than anything else.

Robustness is important with any strategy. That being said Im still taking some and my overall portfolio vega is mostly neutral (though that doesnt really mean I'm immune from danger if we experience large move in either direction).

Edited November 1, 2017 by RapperT

akito · November 1, 2017

23 hours ago, akito said:

opened MAR 11/17, 121 call for 2.5 debit. Using a later expiry to be more conservative

closed MAR position for 3.05 credit. 22% gain.

krisbee · November 1, 2017

Closed MAR for 30% 121 call

NikTam · November 1, 2017

Closed EXC for 22.7% loss. Really ugly candles this morning.

NikTam · November 1, 2017

7 Day P-E Long Call: NVDA - 40 Delta Call - Nov 10 Weekly - Close on 11/9 (Earnings 11/9 AMC).

http://tm.cmlviz.com/index.php?share_key=s_0_20171030080609_6KhurriOh9g6lbCs

Adding to my position I started with late yesterday.

Sirion · November 1, 2017

ADP closed for 1.55 (just under 25% loss) as it recovered a little from it's morning dip. I believe I got a favorable fill on this one. I wouldn't be surprised if this carried up further today, but this is the last day of the trade and it hasn't really ever shown good stuff.

Regarding this being a bull market only trade: this is why I'm only taking "the best of the best". If I see 9 wins 3 losses, I'm probably going to pass. 2 losses or less signals to me that it's LESS likely this is just a bull beneficiary and more a sign of a stock with "genuine earnings optimism". These are fuzzy terms, and I recognize that. If the market gets choppy and fearful, I will stop doing these trades most likely with one set of heavy losses.

@akito

@krisbee

Just curious if you're running a different trading plan: why are we taking earnings early here? That trade is supposed to go a while longer, and the cml backtest had a take-gains of 40% limit.

---------------

NVDA - 40 Delta Call - Nov 10 Weekly - Close on 11/8 (Earnings 11/9 AMC) -

Opened 217.5 strike for 5.60 shortly after opened higher

krisbee · November 1, 2017

Just now, Sirion said:

ADP closed for 1.55 (just under 25% loss) as it recovered a little from it's morning dip. I believe I got a favorable fill on this one. I wouldn't be surprised if this carried up further today, but this is the last day of the trade and it hasn't really ever shown good stuff.

Regarding this being a bull market only trade: this is why I'm only taking "the best of the best". If I see 9 wins 3 losses, I'm probably going to pass. 2 losses or less signals to me that it's LESS likely this is just a bull beneficiary and more a sign of a stock with "genuine earnings optimism". These are fuzzy terms, and I recognize that. If the market gets choppy and fearful, I will stop doing these trades most likely with one set of heavy losses.

@akito

@krisbee

Just curious if you're running a different trading plan: why are we taking earnings early here? That trade is supposed to go a while longer, and the cml backtest had a take-gains of 40% limit.

---------------

NVDA - 40 Delta Call - Nov 10 Weekly - Close on 11/8 (Earnings 11/9 AMC) -

Opened 217.5 strike for 5.60 shortly after opened higher

For me 30% threshold for a high risk call is fine. I could have got 40%, my GTC limit got filled when I was driving to work.

akito · November 1, 2017

I was using a later expiry and don't think I was going to see a 40% limit anyways. Exited early to be conservative. 20% to 30% was my target.

NikTam · November 1, 2017

I also just exited QGEN for what I paid for it -- 1.00. Stock gapped up this morning and had no effect on the call option. It's lightly traded so I suppose that's why. Interesting.

NikTam · November 1, 2017

So I'm in 14 day HD and a 7 day NVDA. RBC is languishing and I will exit on Thursday since earnings Monday the 6th BMO. Out of EXC and QGEN with a loss (-22.7%) and a trading cost loss (-1.9%) as noted above.

Edited November 1, 2017 by NikTam

IgorK · November 1, 2017

Bought earlier NVDA 215 Nov10 call for 6.40. Was 40 delta at this point. Looks like was a mistake. Oh well...

NikTam · November 1, 2017

I'm in the 215 for 6.50 for 25% of my position. I don't think it's a mistake at this point. I have another 25% at 6.00 for the 215 and the rest is 212.50 for 6.35.

Edited November 1, 2017 by NikTam

IgorK · November 1, 2017

Just now, NikTam said:

I'm in the 215 for 6.50 for 25% of my position. I don't think it's a mistake at this point.

Is it that volatile?

NikTam · November 1, 2017

NVDA is a beast. The probability is that it will be a P-E winner. 11: 1 over past three years -- but only 50/50 past 6 months. So I have my Stop Loss in place at 25%.

http://tm.cmlviz.com/index.php?share_key=20171101150227_yNTmWHmSFZUQyF7Y

Khonsu · November 1, 2017

@NikTam would you mind running a backtest into a long call position into earnings for JD? They report Nov 13 BMO. I'm curious if they're a high probability trade. Thanks in advance!

Maji · November 1, 2017

2 minutes ago, Khonsu said:

@NikTam would you mind running a backtest into a long call position into earnings for JD? They report Nov 13 BMO. I'm curious if they're a high probability trade. Thanks in advance!

Here is a scan of all of JD trades that the CML looks at...

Khonsu · November 1, 2017

10 minutes ago, Maji said:

Here is a scan of all of JD trades that the CML looks at...

Thanks Maji. Looks like a pre-earnings straddle may be worth considering further. I was actually more curious about a plain 40 delta long call though, like the recent trades in this thread for NVDA, MAR, TTWO, etc.. Any chance you can rig up one of those backtests?

Djtux · November 1, 2017

4 minutes ago, Khonsu said:

Thanks Maji. Looks like a pre-earnings straddle may be worth considering further. I was actually more curious about a plain 40 delta long call though, like the recent trades in this thread for NVDA, MAR, TTWO, etc.. Any chance you can rig up one of those backtests?

Like this ? http://tm.cmlviz.com/index.php?share_key=20171101155127_i3c2FnHmz6rke4lv

Khonsu · November 1, 2017

1 minute ago, Djtux said:

Like this ? http://tm.cmlviz.com/index.php?share_key=20171101155127_i3c2FnHmz6rke4lv

Yep, perfect. Thanks! Looks like a very low probability trade, good to know.

IgorK · November 1, 2017

Guys, does any one can help me how to set in IB TWS "Sell when X% loss or Y% gain" order? Do I need to chain orders? or there is something more simple?

Edited November 1, 2017 by IgorK

NikTam · November 1, 2017

@Khonsu I would only add the longer time frame is no better.

http://tm.cmlviz.com/index.php?share_key=20171101162139_5mZ7rCYJgANgEwhE

This is where the ProScan feature comes in handy. You can skip a lot of guessing about a ticker being a candidate.

NikTam · November 1, 2017

3 Day P-E Long Call: SYY - 60 Delta Call (no 40 available)- Nov 17 Monthly - Close on 11/3 (Earnings 11/6 BMO). Entered at 1.46.

http://tm.cmlviz.com/index.php?share_key=s_0_20171028070835_7vWHFeC8vW5mZ7rC

Chart looks very good so I took this one even though outside of some parameters.

Edited November 1, 2017 by NikTam

Maji · November 1, 2017

54 minutes ago, Khonsu said:

Thanks Maji. Looks like a pre-earnings straddle may be worth considering further. I was actually more curious about a plain 40 delta long call though, like the recent trades in this thread for NVDA, MAR, TTWO, etc.. Any chance you can rig up one of those backtests?

I see that Djtux already replied, so I won't post that.

If you look a couple of rows down, you will see that the two year performance of the Ticker in the pre-earnings haven't been that great. However, I will take a look at the RV charts and see if it is a trade worth stalking.

Thank you for bringing up the ticker.

NikTam · November 1, 2017

@Ophir Gottlieb Hope you're watching this forum -- any comments or suggestions would be welcome. We are using the CML tool and having some success but your expertise and knowledge would no doubt be helpful.

akito · November 1, 2017

8 minutes ago, NikTam said:

@Ophir Gottlieb Hope you're watching this forum -- any comments or suggestions would be welcome. We are using the CML tool and having some success but your expertise and knowledge would no doubt be helpful.

Pretty sure Ophir isn't an SO member (most likely for good reason) and thus cannot view our SO locked topics. Quote from Kim:

NikTam · November 1, 2017

@akito Yes I see your point. Ophir has used Public Forums but this is an SO member forum....He should join!

NikTam · November 1, 2017

Correction to the above about RBC: I will exit on Thursday since earnings are on Monday the 6th BMO

Edited November 1, 2017 by NikTam

IgorK · November 1, 2017

4 hours ago, NikTam said:

NVDA is a beast. The probability is that it will be a P-E winner. 11: 1 over past three years -- but only 50/50 past 6 months. So I have my Stop Loss in place at 25%.

http://tm.cmlviz.com/index.php?share_key=20171101150227_yNTmWHmSFZUQyF7Y

@NikTam Do you still have NVDA? I saw prices briefly go down to $5.00. At least bid.

2 hours ago, NikTam said:

3 Day P-E Long Call: SYY - 60 Delta Call (no 40 available)- Nov 17 Monthly - Close on 11/3 (Earnings 11/6 BMO).

http://tm.cmlviz.com/index.php?share_key=s_0_20171028070835_7vWHFeC8vW5mZ7rC

Chart looks very good so I took this one.

Bought for 1.40. had to step out, saw prices go down. Put order for 1.50 and it executed. Oh well. At last not a loss

Edited November 1, 2017 by IgorK

Sirion · November 1, 2017

Just now, IgorK said:

@NikTam Do you still have NVDA? I saw prices briefly go down to 5.$00. At least bid.

Bought for 1.40. had to step out, saw prices go down. Put order for 1.50 and it executed. Oh well. At last not a loss

I'm personally holding. It feels strange to not give a trade like this at least a day or two, given how volatile the underlying is. This adds risk, but given how the backtest works (only using EOD pricing) it doesn't seem right to stop-loss out on the first fluctuation down.

I think that would add more losers than winners (getting out the first time you cross 40% intraday most likely adds winners to the backtest, though probably lowering average win overall).

krisbee · November 1, 2017

http://www.cmlviz.com/cmld3b/index.php?number=11769&app=news&cml_article_id=20171022_the-one-week-pre-earnings-momentum-trade-in-nvidia

Entered NVDA 215 Nov 10 call now. 38 delta.

Article says to enter 7 days before. (which is tomorrow)

Earnings date is Nov 09 (according to volatilityhq.com)

NikTam · November 1, 2017

@krisbee That is correct -- tomorrow would be the 7 days to earnings date. I got in early.

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