candreouTrade 59 Report post Posted January 3, 2019 I have recently been playing around with the Option Expiration Week strategy on the S&P 100 index. The link to the paper can be found at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1571786 This strategy basically goes long S&P 100 index (or equivalent ETF) at the beginning of the monthly option expiration week (on the Monday) and closes out the position on the Friday Close. e.g. For January 2018 Long ETF OEF on 15 Jan 2018 at the Market Open Price Close ETF OEF on 19 Jan 2018 at the Market Close Price Looking at the statistics we can see the strategy has : Win Rate = 70% Loss Rate = 30% Avg Win = 1.12% Avg Loss = -1.17% The backtest was run from start of 2013 to the end of 2018. @Yowster, @Kim, I was wondering if you could make any suggestions on how and if we could model this strategy using options. I think this would be really useful, since there is a lot of additonal Academic Research and great quant strategies we could apply option trading too, once we know there is an edge in trading the strategy on the underlying. Our edge would be to be able to trade these strategies as best we can, using options. Share this post Link to post Share on other sites
cuegis 683 Report post Posted January 3, 2019 37 minutes ago, candreouTrade said: I have recently been playing around with the Option Expiration Week strategy on the S&P 100 index. The link to the paper can be found at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1571786 This strategy basically goes long S&P 100 index (or equivalent ETF) at the beginning of the monthly option expiration week (on the Monday) and closes out the position on the Friday Close. e.g. For January 2018 Long ETF OEF on 15 Jan 2018 at the Market Open Price Close ETF OEF on 19 Jan 2018 at the Market Close Price Looking at the statistics we can see the strategy has : Win Rate = 70% Loss Rate = 30% Avg Win = 1.12% Avg Loss = -1.17% The backtest was run from start of 2013 to the end of 2018. @Yowster, @Kim, I was wondering if you could make any suggestions on how and if we could model this strategy using options. I think this would be really useful, since there is a lot of additonal Academic Research and great quant strategies we could apply option trading too, once we know there is an edge in trading the strategy on the underlying. Our edge would be to be able to trade these strategies as best we can, using options. 90% of that backtest was done during a raging bull market. You can test the same basic idea in the new version of Trade Machine using the filters that have been added to prevent you from entering these trades during a bear market. It is an excellent filter that was added just for this purpose. Share this post Link to post Share on other sites
Kim 7,475 Report post Posted January 3, 2019 I think 90% of bullish strategies would return good results during this period of time. How to trade it? You could sell SPX put credit spread structured around ATM, which means around 1:1 risk/reward. So for $5 spread, you would get around $2.50 credit, and just play the odds. But that means being ready to 100% losses if you let it expire ITM. Share this post Link to post Share on other sites
dfwjf92jfd 40 Report post Posted January 3, 2019 Looks potentially overfit to me... It would be interesting to backtest this strategy for 2006-2012...I'd be happy to do it myself if I have the time later today or tomorrow... I run my own backtests so am not using any third-party tool, so I can model any trade...I'd be interested to see the results of this if I get a chance... Share this post Link to post Share on other sites
candreouTrade 59 Report post Posted January 3, 2019 2 hours ago, Kim said: I think 90% of bullish strategies would return good results during this period of time. How to trade it? You could sell SPX put credit spread structured around ATM, which means around 1:1 risk/reward. So for $5 spread, you would get around $2.50 credit, and just play the odds. But that means being ready to 100% losses if you let it expire ITM. I initially though the same, but you will get hurt on a lot of these trades over the long run as most the time you can’t setup a 1:1 most of the time. It is more like a 1:0.78 Share this post Link to post Share on other sites
