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CML TradeMachine Trade Ideas

NikTam

By NikTam
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NikTam Hero Member

NikTam

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I just got stop-lossed out of SQM for 16% loss.  You said it moved around a lot!  I thought I had my S-L set for 25% but obviously not....

I may get back in if I see a reversal.  But I can see this likely to be a very short-term kind of relationship!

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zxcv64
zxcv64

Having completed a 100 CML trades, I thought I would summarise my results.    Summary : 100 trades, 66 winners, overall profit of 12.1% PER TRADE.   Here is a detailed breakdown, w

greenspan76
greenspan76

This topic was a little more active a while back and I had intended to give an update on my results at the 1 year mark, but I've been busy with other projects the last few months. My first CML trade w

cuegis
cuegis

Here is an example of how I have used CML as an adjunct to the SO calendar trades, pre earnings. We know that those calendars , on their own, are very good trades, with a great success rate.

Posted Images

cuegis Hero Member

cuegis

Posted
Posted
54 minutes ago, NikTam said:

I just got stop-lossed out of SQM for 16Stocks are like people% loss.  You said it moved around a lot!  I thought I had my S-L set for 25% but obviously not....

I may get back in if I see a reversal.  But I can see this likely to be a very short-term kind of relationship!

I apologize. I wish your first experience with this had turned out with a profit. You can see what happened.

I caught a big fish early on, so I obviously have fond feelings for it, because those are very easy to work with.

But, I did warn you that , as you can see from the bigger picture, that runaway part of the bull mkt had stopped a few weeks ago.

This is always the tough time because you don't know if it is a pause, before  a resumption....or, is this a top.

I also got chopped up many times during these past few weeks.

But, even during this non ideal period, it is especially important to never chase this particular stock.

It has a strong tendency to have large spikes, in both directions, that are immediately reversed, at nearly some point everyday.....especially in the first 5-10 minutes of the day.

You did the right thing when you bought on a big enough pullback, and you didn't chase the market....but , it pulled back just enough more to stop you out.

Stocks are like people...they have very unique personalities, and you have to develop a longer term relationship with them to be able to know (as best as you can) how they will be most likely to behave in different conditions.

I dumped all of my Nov stuff today.

Then bought some Dec on the way down.

I'm still holding  those, plus the Jan that I already had.

K was a happy surprise for me today.

 

  • Upvote 1
Maji Hero Member

Maji

Posted
Posted
8 minutes ago, siddharth310584 said:

Wasn’t the entry for tomorrow ?

Yes, the entry is for tomorrow at the close. I believe it is 7 days before earnings... 

Sirion Hero Member

Sirion

Posted
Posted
Just now, cuegis said:

What do you mean by A/B

A/B testing is running two different options simultaneously in order to see which one performs better. It's often used in marketing, such as presenting a two different versions of a website randomly to 50% of the population in order to see which one gets better desired results (ad clicks, longer stay, purchases).

 

Just now, NikTam said:

@Sirion I exited NVDA yesterday morning at about BE.  

 

2017-11-09_9-56-19.jpg

Good choice. :|

IgorK Hero Member

IgorK

Posted
Posted
33 minutes ago, NikTam said:

Yes very glad to be out -- with NVDA the lack of enthusiasm so close to earnings made me nervous. 

Good stock for day trading :)

cuegis Hero Member

cuegis

Posted
Posted
2 hours ago, NikTam said:

AMAT 57/59.5 vertical filled at .75 -- expected move fits this spread

http://tm.cmlviz.com/index.php?share_key=20171109150809_ClqyXzTempJRiV8i   This is the long call, I went with vertical.  Results are similar.

I made the decision today that, for at least now, SQM has topped out.

I'm out until I see what develops. If that even , ever happens.

But, they do hold most of the lithium of anyone major players in the market so, that should be kept in the back of ones mind.

But, it offers no help with regard to timing!

Maji Hero Member

Maji

Posted
Posted
2 hours ago, NikTam said:

AMAT 57/59.5 vertical filled at .75 -- expected move fits this spread

http://tm.cmlviz.com/index.php?share_key=20171109150809_ClqyXzTempJRiV8i   This is the long call, I went with vertical.  Results are similar.

I believe the basic premise that Opheir offered for the bullish earnings trades was that the overall market is bullish and some of these stocks noticeably exhibit bullish behavior running up to the earnings. However, this week has been filled with corrections and that is showing up on the the various bullish positions that had perfect records over the last couple of years. I am on the fence on whether to get long calls for AMAT or not... anyway, I have till just before end of trading today... which is really the official entry point for the cmlviz trades. 

Thank you again for starting this thread and sharing your ideas.

Maji Hero Member

Maji

Posted
Posted

I took the bait... a very small allocation for Nov 17 57 Calls at 1.15... I waited to see the MACD crossover in the intraday charts and rolled the dice... 

NikTam Hero Member

NikTam

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I agree - it's obvious that this is a bull market strategy.  What is needed is a short-term bear market hedge position that's not too expensive.  Short the QQQ?  the SPY?  (Buy puts)  Would have to match up long call positions with appropriate index.

Edited by NikTam
Maji Hero Member

Maji

Posted
Posted
26 minutes ago, NikTam said:

I agree - it's obvious that this is a bull market strategy.  What is needed is a short-term bear market hedge position that's not too expensive.  Short the QQQ?  the SPY?  (Buy puts)  Would have to match up long call positions with appropriate index.

The few straddles I have are a hedge but I am net delta positive. If you consider my IRA and 401K, I am almost 100 positive delta... as is most of the investing public :)

NikTam Hero Member

NikTam

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So this hedge would cost $295 to recover a maximum of $1215.  Assuming the QQQ would accurately inversely track a portfolio of long calls and long call verticals -- naturally it would need to be a NQ portfolio of long calls and long call verticals.  This could be a week-long position and covers a 2% bear move (153 - 150 = 3   3/153 = 2%)

Looking back over past 6 months, 2% down-moves over 5 day periods are very common.

 

 

Edited by NikTam
Djtux Hero Member

Djtux

Posted
Posted (edited)
4 minutes ago, NikTam said:

 

So this hedge would cost $295 to recover a maximum of $1215.  Assuming the QQQ would accurately inversely track a portfolio of long calls and long call verticals -- naturally it would need to be a NQ portfolio of long calls and long call verticals.  This could be a week-long position and covers a 2% bear move (153 - 150 = 3   3/153 = 2%)

You might want to black out your account number and buying power just to be on the safe side.

Edited by Djtux
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IgorK Hero Member

IgorK

Posted
Posted
26 minutes ago, NikTam said:

So this hedge would cost $295 to recover a maximum of $1215.  Assuming the QQQ would accurately inversely track a portfolio of long calls and long call verticals -- naturally it would need to be a NQ portfolio of long calls and long call verticals.  This could be a week-long position and covers a 2% bear move (153 - 150 = 3   3/153 = 2%)

Looking back over past 6 months, 2% down-moves over 5 day periods are very common.

@NikTam  Is it your real account, or paper trading?

NikTam Hero Member

NikTam

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Posted (edited)

And here's another example:  AAPL.  I tweaked the entry to 8 days after earnings (instead of standard 2 days) which would be tomorrow, and results still very good.

http://tm.cmlviz.com/index.php?share_key=20171109231832_0gp061q4Iu1WQeUY

You could reinforce this trade -- or manage it if adverse conditions persist -- by buying shorter term (weekly) puts.  Right?  

 

MRK -- just took a huge tumble.  http://tm.cmlviz.com/index.php?share_key=20171109232535_gEVZqHqUqFvL6uKj  Entering 14 days after earnings.

 

INCY -- 100% across the board. http://tm.cmlviz.com/index.php?share_key=20171109233739_h6DjZ9s66gJ3B2bx  Entering 10 days after earnings (tomorrow).

 

 

 

Edited by NikTam
Maji Hero Member

Maji

Posted
Posted (edited)

@NikTam Thank you for highlighting those put credit spreads done post earnings... If one is bullish in the medium term, then these corrections provide a great opportunity to enter those bullish put credits at better prices. 

A few more for possible entry tomorrow...

HUM 11-0

http://tm.cmlviz.com/index.php?share_key=s_0_20171108181514_65Qx9zgBHv8o4lB8

LVNTA 10-1

http://tm.cmlviz.com/index.php?share_key=s_0_20171108094135_RPoHsjCzwyGkaJqY

SYY 10 -1 (Changed entry 3 days after earnings, and it still works)

http://tm.cmlviz.com/index.php?share_key=20171109235953_AK2aeYiEih0iIeTs

TM 10 -1 ( I changed the entry and exit days, and it still works)

http://tm.cmlviz.com/index.php?share_key=20171110000253_80Gwmc7NZjQG8zF7

 

Even look at NVDA... even though it PE call trade was a bust... (entry a couple of days later)

http://tm.cmlviz.com/index.php?share_key=20171109000648_cfX53QgCvNwGEkAf

 

I am tempted... 

Edited by Maji
Yowster Hero Member

Yowster

Posted
Posted
30 minutes ago, NikTam said:

And here's another example:  AAPL.  I tweaked the entry to 8 days after earnings (instead of standard 2 days) which would be tomorrow, and results still very good.

http://tm.cmlviz.com/index.php?share_key=20171109231832_0gp061q4Iu1WQeUY

You could reinforce this trade -- or manage it if adverse conditions persist -- by buying shorter term (weekly) puts.  Right?  

 

MRK -- just took a huge tumble.  http://tm.cmlviz.com/index.php?share_key=20171109232535_gEVZqHqUqFvL6uKj  Entering 14 days after earnings.

 

INCY -- 100% across the board. http://tm.cmlviz.com/index.php?share_key=20171109233739_h6DjZ9s66gJ3B2bx  Entering 10 days after earnings (tomorrow).

@NikTamAll these trades are selling 30 delta puts and buying 10 delta puts, and they have great win-loss percentages over the last few years.    But..... they are all quite bad from a risk/reward perspective with many of the trade iterations showing losses of 6x the credit received on a big gap downward.   So, if you were to have one big loss due to a big market drop it would take many winning trades to make up for one losing trade.   Selling low delta credit spreads does look enticing because of the high win-loss percentage, but you just have to experience on big loser on a big gap downward to realize that these great win-loss percentages don't matter so much when you have a huge loss and it will take many winning trade to make up for that one loss.    I experienced this first hand many years ago when I first started trading options, and I learned the risk vs reward lesson the hard way.  IMO, when selling credit spreads, better to do so with a better risk/reward setup even if it means having more losses.   Remember the SO RIC earnings trades of last year with a risk/reward setup similar, but not quite a bad as these?   There were more winning trades than losing trades, but one or two big losers dwarfed all the smaller% winning trades and made the sum of these trades a big loser.

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NikTam Hero Member

NikTam

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@Yowster  I certainly see your point.  The risk reward is typically 2:1 on these -- not great.  What if we bought a front month put to hedge a bearish downtrend?  Now the risk reward is closer to a 1:1 -- with upside on both extremes.  This is a 4:1 ratio of 8 short PCS verticals to 2 long puts,  but the long puts would expire along the way.  And buying more than one would further erode the premium of the longer term PCS.

Put Credit Spread + Long Put in front month.PNG

Edited by NikTam
NikTam Hero Member

NikTam

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The main assumption to the CML trades in general is that a bull market continues -- because a 3 year (or even 5 year) period is based on that recent history.  That's not so crazy for shorter term strategies, but to tie up money for a month on that assumption -- maybe not such a good idea?  I'm cooling off on the put credit spread strategy.  (However, some of these back-test very well even for two week period).  But the party could end tomorrow if the tax reform act goes down in flames -- or NK goes up in flames.

Bottom line:  I really like the 1-2 day profitable trades.  And the Pre-Earnings Momentum trades have gone that way fairly often according to my spreadsheet.

 

Yowster Hero Member

Yowster

Posted
Posted

@NikTamMy comment had nothing to do with bull market or bear market, it was purely based on risk vs reward.  When I followed your CML backtest links, I see trade iterations collecting credits of 1.00 on spreads of width 7.00 - so risking $6.00 to make $1.00.   Or collecting credits of 1.50 on spreads of width 10.00 - so risking $8.50 to make $1.50.  So the risk vs reward is somewhere between 5:1 and 6:1 (I'm not sure where you are getting the 2:1 that you mentioned).   Multiple things can cause big gaps down in stock price, overall market big downturn, analyst downgrade, etc - and a big gap down will cause you to lose a lot more than the credit you collected.   My point is that you cannot look simply a win-loss percentages on these low delta credit spreads trades because one significant loser can wipeout gains of many winning trades.

 

Regarding the 1-2 day profitable trades - these are great if they perform as planned and we certainly have been in a long term bull market that should help them.  For myself personally, I try to avoid being too delta positive on my options trades - with a lot of money in 401k being long the market, I don't want my options trading account to be more of the same.  I want to be non-directional with options trades and give them a chance to make money in both up and down markets, knowing that they can make money when other long market accounts decline.   This is not a knock against making these directional trades, its just my preference to stay non-directional with my options trades (and I think many people were drawn to Steady Options because of the non-directional aspect).

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cuegis Hero Member

cuegis

Posted
Posted (edited)
24 minutes ago, Yowster said:

@NikTamMy comment had nothing to do with bull market or bear market, it was purely based on risk vs reward.  When I followed your CML backtest links, I see trade iterations collecting credits of 1.00 on spreads of width 7.00 - so risking $6.00 to make $1.00.   Or collecting credits of 1.50 on spreads of width 10.00 - so risking $8.50 to make $1.50.  So the risk vs reward is somewhere between 5:1 and 6:1 (I'm not sure where you are getting the 2:1 that you mentioned).   Multiple things can cause big gaps down in stock price, overall market big downturn, analyst downgrade, etc - and a big gap down will cause you to lose a lot more than the credit you collected.   My point is that you cannot look simply a win-loss percentages on these low delta credit spreads trades because one significant loser can wipeout gains of many winning trades.

 

Regarding the 1-2 day profitable trades - these are great if they perform as planned and we certainly have been in a long term bull market that should help them.  For myself personally, I try to avoid being too delta positive on my options trades - with a lot of money in 401k being long the market, I don't want my options trading account to be more of the same.  I want to be non-directional with options trades and give them a chance to make money in both up and down markets, knowing that they can make money when other long market accounts decline.   This is not a knock against making these directional trades, its just my preference to stay non-directional with my options trades (and I think many people were drawn to Steady Options because of the non-directional aspect).

Always remember, the market always factors, into it's pricing, everything that is happening now.

Of course having a potential, theoretical, risk of $8.00, on a $10 wide spread, when the maximum possible gain , could only be $2.00, is being priced that way, based on where the full picture is at, right now.

Anyone would agree that to risk , for example, $8.00, to make,no more than $2.00 is a terrible bet.

But, where we are at now, because of where the market (options pricing) is,the numbers do make sense, if there is a 90% probability of making $2.00, and a 10% probability of losing $8.00.

This is how options pricing has always evolved into where it stands, at any given moment.

This is THE reason for the "extent" of the "contango" pricing in volatility products, as it has stretched itself to at this point.

The market will not allow you to inventory 9.5% VIX in you portfolio, for 1 year, for example.

Because, if you could, it would be a risk free trade.

Because,as we all know, if you could buy 9.5% VIX for 1 year, there absolutely would be many opportunties (even though they may only last 1-4 days), to sell it offat 15%++ at some point....or many times. But, that is the "known/unknown", and that is why there is not only contango but, the contango width, stretches wider, as the market continues to climb.

Edited by cuegis
NikTam Hero Member

NikTam

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I always learn a lot on this site; and yet not quite enough to give me confidence in a particular strategy -- which means I'm just not at that level of competence yet.  And it's not just the strategies but also the access and functionality needed.  Volatility trading is the hallmark of this forum, but I have found it difficult to get competitive fills on multi-legged strategies, especially those with wide spreads - calendars and hedged straddles are often not exactly nimble.  I am not a full-time trader, and I can't be at this point in my life.  So I look for simpler solutions.

greenspan76 Hero Member

greenspan76

Posted
Posted
7 hours ago, NikTam said:

This is a different strategy -- Selling a put spread and holding for about 30 days.  Entry would be tomorrow.  Very high success rate in all time frames.  Still a bullish strategy, but more of a just-hold-it's-own expectation and let theta work for you.  Definitely a longer commitment.  

http://tm.cmlviz.com/index.php?share_key=20171109225714_A1YyLM7i2G6feJt6

 

A little while back when I mentioned my trading stats on these CML-based trades, there were several put credit spreads included. Some of the early trades I made were as much as $4 risk for $1 potential gain, but most were closer to $1-$2 risk for each $1 of potential gain. Even the better risk/reward setups didn't seem to do well in real trading. The way I have them compiled, I just don't have time to dig deeper than the summary that my spreadsheet is automatically showing me already. But in case it is of interest: I've traded 14 CML-based post-earnings put credit spreads with 8 winners and 6 losers (backtested results were 10 winners/2 losers or better on all trades), an average loss of 4.8% and avg holding period of 21 days. On the other hand, I've traded 21 pre-earnings calls with 14 winners and 7 losers, an average gain of 9.6% and avg holding period of 5 days. I've also had really poor results with post-earnings Iron Condors (4 / -30.3% / 23) and really good results with both pre- and post-earnings straddles (11 / +18.3% / 12). I'm somewhat inclined at this point to avoid the put credit spreads, but I'm sticking with them at least until the end of the year to get a better idea.

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NikTam Hero Member

NikTam

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@greenspan76   Very interesting results - thank you for sharing.  I find it encouraging that your stats on Pre Earnings momentum trades are very similar to my own.  I will update my spreadsheet this weekend and share on this forum.  The results on pre- and post-earnings straddles are great; and I haven't done those yet.  So while the bullish bias persists, I will certainly add those to my trading plan.

cuegis Hero Member

cuegis

Posted
Posted
1 hour ago, NikTam said:

@greenspan76   Very interesting results - thank you for sharing.  I find it encouraging that your stats on Pre Earnings momentum trades are very similar to my own.  I will update my spreadsheet this weekend and share on this forum.  The results on pre- and post-earnings straddles are great; and I haven't done those yet.  So while the bullish bias persists, I will certainly add those to my trading plan.

Do you find your candidates first, strictly from CML,based entirely on "their" parameters, and then look at the charts of each one first to "weed" out, for example, the ones that the charts indicate to have a more bullish pattern when you choose the pre earnings, long delta trades....or any of their trades for that matter?

I have found that the CML machine is very good as a starting point. Just to bring things to my attention that I would otherwise never have found on my own.

Then, I do my own , additional analysis from there, to see if there are any (IMO) jewels, that are really worth doing.

Maybe , only following CML completely on it's own, is not the best way to use it.

Maybe it can be improved upon by further screening from you.

NikTam Hero Member

NikTam

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Posted

@cuegis like you I use CML as a starting point.  I find candidates using the Trade Machine then screen them using my own charts and indicators.  With an eye on liquidity, spreads, open interest, etc. and past experience with a stock, if any.

cuegis Hero Member

cuegis

Posted
Posted
3 minutes ago, NikTam said:

@cuegis like you I use CML as a starting point.  I find candidates using the Trade Machine then screen them using my own charts and indicators.  With an eye on liquidity, spreads, open interest, etc. and past experience with a stock, if any.

Some options that appear, at first glance,to be very illiquid (crazy bid/ask), upon further examination, and testing, on your own, with 1 lot orders, end up being very easy markets to consistently get good fills in.

Then there are others, that appear to be illiquid,and really are.

Don't alway's immediately assume that something is illiquid because, at first glance, you are seeing crazy wide bid/asks.

There are so many pre earnings calandars, that we have done here, for example, where the spread was like $1.10/$2.30, and then you bid $1.15 and are instantly filled.

You have to do further examination, with 1 lot orders to see which are the good ones.

A good starting point, obviously, would be if the underlying is very liquid.

  • Upvote 1
cuegis Hero Member

cuegis

Posted
Posted (edited)

Is that IB's TWS you are using?

It's what I use but, your's looks slightly different......

Hey, maybe it's a good idea to keep your account number blacked out.

I think someone else did this yesterday.

With IB's stealth security measures, I don't even know if anyone could do anything, even if they did get hold of your acct. number.

Edited by cuegis
krisbee Hero Member

krisbee

Posted
Posted
8 minutes ago, cuegis said:

Is that IB's TWS you are using?

It's what I use but, your's looks slightly different......

Hey, maybe it's a good idea to keep your account number blacked out.

I think someone else did this yesterday.

With IB's stealth security measures, I don't even know if anyone could do anything, even if they did get hold of your acct. number.

Yes, I'm using IB TWS. It's Trade log window. we can see last 7 days of trade in it, quick way to check P/L than thru website.

cuegis Hero Member

cuegis

Posted
Posted (edited)
8 minutes ago, krisbee said:

Yes, I'm using IB TWS. It's Trade log window. we can see last 7 days of trade in it, quick way to check P/L than thru website.

That's interesting,because I look at the "Trade Log" section many times everyday, and mine looks very different than yours.

I almost thought you were using TOS!

Edited by cuegis

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