Welcome to SteadyYields

[SBatch 3,134]

We are pleased to expand our services offerings with a new strategy called SteadyYields.

Here are the service parameters:
 

• Tailored for short term active traders
• Minimum portfolio size - $25,000
• Underlying -TLT, TMF
• Average holding period - 2-4 weeks
• Number of trades per month - 3-5 plus adjustments
• Profit target - 400%+ annually

 

This is a very active, aggressive and volatile strategy. Members can reduce the portfolio volatility by reducing positions sizing and/or adding additional hedging. 
 

The impact of commissions is not as significant as SteadyVol's VIX portfolio, but we still recommend trading with a low or no commission broker (like Tradier or FirstTrade). TMF & TLT are extremely liquid, scaling up will not be a problem.
 

SteadyYields is a trading strategy that takes advantage of the correlation between long dated Treasury Bonds and Crude Oil. The correlation has treasury yields trailing the price of crude oil by about three weeks +/-. Here is some good research on this phenomenon:

 

https://seekingalpha.com/article/3271415-is-crude-oil-correlated-to-the-10-year-u-s-treasury-note

 

https://www.sciencedirect.com/science/article/abs/pii/S030142072100502X

 

https://www.youtube.com/watch?v=isv9WUzVeHA

 

The strategy uses credit and debit spreads about 30-45 days from expiration. The spreads are designed to take advantage of the direction oil has provided, whether that be long, short or neutral. Please see this thread for an example of a live trade:

 

https://steadyoptions.com/forums/forum/topic/9468-crude-oil30-year-treasury-yield-correlation/

 

Here is an excerpt from the thread:

 

There is a definitive correlation between Crude Oil prices and the 10 year Treasury yield, led slightly by crude. That's the edge. The option trades around this are endless. It makes sense, higher crude price, higher inflation, higher yields. However, in my opinion it is mainly driven by the petrodollar system.

 

1 year chart 10 Year Treasury Bond:

 

1 Year chart Crude Oil:

Sure looks like the 10 year yield is about to move higher very soon.

 

And there's the bounce:

 

As can be seen above, the direction of crude about 3-4 weeks out is used to determine the direction of near term Treasury yields. Treasury yields and bond prices move inversely, so yields and crude move inversely to the price of TLT/TMF. The $10,000 model portfolio will hold 50% in the strategy spreads and 50% in hedges and neutral positions. As always, we will report returns on the whole account. 

I estimate the max drawdown to be about 20% in a massive Black Swan event, where the strategy spreads were 100% bearish on treasuries. However, the target for each trade is about 40% and I expect to average closing two trades per month. The trades were up about 70% on risk for the SO March portfolio. 

The strategy does not require PM (Portfolio Margin).

How do we report performance?
The monthly returns are calculated as the sum of all trades closed for the month. The P/L is always calculated on the entire account. For example, the April credit spread required $5,020 capital and was closed for $2,360 gain or 47.0% on $5,020 capital. This was reported as 23.6% gain on the entire account. A total of 3 trades (credit spreads or iron condors) have been closed in April, for a total return of $4,010 or 40.1% gain on $10k account.
 

You can find the tracking performance spreadsheet here. It shows all closed trades along with total P/L. The model portfolio is $25,000 and all trades are based on the $25,000 portfolio. You can scale the number of contracts up or down, based on your portfolio size and risk tolerance.

[Tamas 29]

@SBatch What do you suggest for those who can't buy TLT because they are European? Would using European alternative ETFs be suitable? Thanks

[SBatch 3,134]

2 hours ago, Tamas said:

@SBatch What do you suggest for those who can't buy TLT because they are European? Would using European alternative ETFs be suitable? Thanks

DTLA

[Buck H 31]

Is this a time sensitive strategy or should it be fairly easy to follow for those of us that are not full time traders and are not always online to be able to follow trades quickly?

[SBatch 3,134]

22 minutes ago, Buck H said:

Is this a time sensitive strategy or should it be fairly easy to follow for those of us that are not full time traders and are not always online to be able to follow trades quickly?

It will not be time sensitive. Because I am informed weeks in advance of what I believe TLT/TMF will do, it will be made quite clear to the membership well before the trades are placed.

[JKT 0]

@SBatch Good day to you! Is this strategy liquid enough to be traded with a larger account size? If not, what is the recommended ceiling?

[SBatch 3,134]

7 hours ago, JKT said:

@SBatch Good day to you! Is this strategy liquid enough to be traded with a larger account size? If not, what is the recommended ceiling?

TMF & TLT are extremely liquid, scaling up will not be a problem.

[TH1 0]

Hello, what broker do you use? My current broker charges USD 14 for opening and closing a spread which eats a substantial part of the profit especially if adjustments are made. Thank you.

[SBatch 3,134]

3 minutes ago, TH1 said:

Hello, what broker do you use? My current broker charges USD 14 for opening and closing a spread which eats a substantial part of the profit especially if adjustments are made. Thank you.

Firstrade and Speedtrader.

[Infineo 25]

1 hour ago, SBatch said:

Firstrade and Speedtrader.

How is the fill in Firstrade? And are they really 100% free with no charges on options contracts? 

[SBatch 3,134]

8 minutes ago, Infineo said:

How is the fill in Firstrade? And are they really 100% free with no charges on options contracts? 

Fills are good, they clear with Apex, same as Tradier. There are no commissions on most options, only pass thru fees on index options.

[InvestTrader 21]

On 3/22/2024 at 1:17 PM, SBatch said:

DTLA

@SBatch, the European replacement to TLT is DTLA. What would the the replacement to TMF?

[SBatch 3,134]

12 minutes ago, InvestTrader said:

@SBatch, the European replacement to TLT is DTLA. What would the the replacement to TMF?

Closest is TYD. It is 3x the 10 year instead of 20 year, but pretty close. Or one could buy far dated, DITM calls on TMF.

[Jlproperties 4]

Scott, 1st of all thanks for the great trades!  My portfolio thanks you!  2nd, with Steady Vol you have a “Current Positions” page that lets us make sure we are caught up with all the new trades and details. Could you have a page like that for Steady Yields?  Would REALLY help!  Thank you!

[InvestTrader 21]

9 minutes ago, SBatch said:

Closest is TYD. It is 3x the 10 year instead of 20 year, but essentially the same.

It looks like, I'm not allowed to buy TYD too.
What would be the consequences of following this strategy without the ETF's hedge? 

[NJ_KenRob 158]

2 minutes ago, InvestTrader said:

It looks like, I'm not allowed to buy TYD too.
What would be the consequences of following this strategy without the ETF's hedge? 

You could still use DTLA to hedge...

Edited April 3 by NJ_KenRob

[SBatch 3,134]

1 minute ago, InvestTrader said:

It looks like, I'm not allowed to buy TYD too.
What would be the consequences of following this strategy without the ETF's hedge? 

The hedge is there to protect capital and gain in a Black Swan event that has treasury yields moving sharply lower. A DITM far dated TMF call would provide the same. Frankly, it may be better, and I'm considering swapping. The reason being, we would get an IV pop on a Black Swan event that would juice the TMF calls. It would also allow me to get more flexible by scaling its size to increase or decrease the hedging based upon the strategy spreads the portfolio is holding. I will likely swap tomorrow.

[Vkleniko 23]

will the direction of the hedge be flipping depending on the direction of the main spread rates bet (CPS vs CCS)?

[SBatch 3,134]

Just now, Vkleniko said:

will the direction of the hedge be flipping depending on the direction of the main spread rates bet (CPS vs CCS)?

No, as stated, it is for yields unexpectedly moving sharply lower.

[Masoud 0]

Hi SBatch, I would like to join this service, But I am with interactive Brokers and they charge me 1.55 for each TLT & TMF contract. Do you believe the strategy still will be profitable with that much commission?

[dreamtrader 26]

9 minutes ago, Masoud said:

Hi SBatch, I would like to join this service, But I am with interactive Brokers and they charge me 1.55 for each TLT & TMF contract. Do you believe the strategy still will be profitable with that much commission?

You can consider Tradier https://steadyoptions.com/forums/forum/topic/3318-tradier-brokerage-special-offer/

[Fiscelan 2]

1 hour ago, SBatch said:

The hedge is there to protect capital and gain in a Black Swan event that has treasury yields moving sharply lower. A DITM far dated TMF call would provide the same. Frankly, it may be better, and I'm considering swapping. The reason being, we would get an IV pop on a Black Swan event that would juice the TMF calls. It would also allow me to get more flexible by scaling its size to increase or decrease the hedging based upon the strategy spreads the portfolio is holding. I will likely swap tomorrow.

As an European also being restricted in trading US ETF, I welcome the switch to TLT / TMF calls! That makes it a viable strategy for Europeans now, thanks. Not to mention the extra juice with IV as mentioned.

[zxcv64 755]

I don't want to beat a dead horse, but with regards to comms, I was also a little concerned before taking this trade, but I realise that I had absolutely no reason to be.

I wasn't able to get into the second leg of the trade and missed one of the adjustments, but in total I traded 80 contracts and paid around $37 in comms whilst earning around $1,040 in profit. My capital at risk was around $2,500, so the comms made up a mere 1.5% of the whole trade. I couldn't ask for anything more. (I'm with IBKR.) Due to low comms, and good liquidity, I see this strategy is very scalable. Not sure what the official guidelines will be for the upper limit, but once I get comfortable with it, I'll be scaling it up significantly.

 

The next bit is not a recommendation, but just an FYI.....

 

I wanted to see if I could replicate the trade using the the 10 year future, /ZN, cos TMF and /ZN follow pretty closely as the below chart shows (the bars are /ZN and the line is TMF). So, I sold a CCS on /ZN - to my surprise the comms were much higher on this than on TMF options. Plus, there are complications in trading futures options (need to close before First Notice Day, delivery, etc), so I will not be doing this going forward.

[Todd 8]

I'm excited to start trading this strategy.  I like the thesis and the edge of the trigger to the trade.  Two quick questions:

1.  When you post the next trade, will it be based on the increased account value of the model portfolio, or the original $10,000?  Just checking so I can scale properly.

2.  I'm thinking of an alternate hedge of an .80 delta call in Jan 2026, possible also selling a May OTM call at about .25 or .30 delta to nullify the time decay.  Your thoughts?  Again, love the strategy.

[SBatch 3,134]

On 4/4/2024 at 10:29 AM, Todd said:

I'm excited to start trading this strategy.  I like the thesis and the edge of the trigger to the trade.  Two quick questions:

1.  When you post the next trade, will it be based on the increased account value of the model portfolio, or the original $10,000?  Just checking so I can scale properly.

2.  I'm thinking of an alternate hedge of an .80 delta call in Jan 2026, possible also selling a May OTM call at about .25 or .30 delta to nullify the time decay.  Your thoughts?  Again, love the strategy.

It will always be based upon $10,000. I will be using a variety of hedges, depending upon the setup.

[RichardW 0]

Is this backtested ? It seems pretty straight foreward and thus not difficult to backtest. 

[SBatch 3,134]

5 hours ago, RichardW said:

Is this backtested ? It seems pretty straight foreward and thus not difficult to backtest. 

Yes, here is one done by a member:

At the end, here are the results, backtests of the strategy over the last 20 years :

Mean RMSE = 3.36%. 

 

[Alpha Harvester 0]

Credit spreads obviously work nicely for the delta neutral (iron condor) trades on TMF/TLT. How do you decide whether to use a debit or credit spread for the directional (bullish/bearish TMF/TLT) trades?

[Drizzle_268 1]

With such a year return, what is the max drawdown in this strategy? 

[SBatch 3,134]

1 hour ago, Drizzle_268 said:

With such a year return, what is the max drawdown in this strategy? 

I keep the max estimated drawdown to around 20%.

[jvo 9]

1 minute ago, SBatch said:

I keep the max estimated drawdown to around 20%.

Thanks for this Sbatch.

Wondering how this strategy would look alongside SteadyVol within the same account. 

I believe SteadyVol was attempting to keep the max drawdowns to around 30%. 

If wanting to run both in the same account, can this be done with $20k (assuming the $10k model trades for each strategy) without running into any margin issues?

[SBatch 3,134]

Just now, jvo said:

Thanks for this Sbatch.

Wondering how this strategy would look alongside SteadyVol within the same account. 

I believe SteadyVol was attempting to keep the max drawdowns to around 30%. 

If wanting to run both in the same account, can this be done with $20k (assuming the $10k model trades for each strategy) without running into any margin issues?

Max estimated drawdown for SV is also around 20%. Yes both could be traded in a $20k account.

[SBatch 3,134]

3 hours ago, drkats said:

@SBatch and team, thank you for rolling out this strategy.  Looks straightforward.  Question: how do you determine whether to use TMF or TLT?

I will use TMF as long as there continue to be no liquidity concerns.

[falkor 169]

My understanding is that the payoff graphs are identical for credit and debit spreads, with the only difference being the payoff timing (whether credit received up front or over the life of the trade), assuming IV doesn't change. Credit spreads are short vol (-ve vega), so work well if you don't expect IV to increase too much. In contrast debit spreads are long vol and work better if you expect IV to go up (eg sudden move). @Kim @SBatch am I on the right track?

[Kim 7,592]

19 minutes ago, falkor said:

My understanding is that the payoff graphs are identical for credit and debit spreads, with the only difference being the payoff timing (whether credit received up front or over the life of the trade), assuming IV doesn't change. Credit spreads are short vol (-ve vega), so work well if you don't expect IV to increase too much. In contrast debit spreads are long vol and work better if you expect IV to go up (eg sudden move). @Kim @SBatch am I on the right track?

It depends on the strikes. If using they same strikes, they would have the same (or very similar) Greeks. Different strikes would have different effect on the Greeks. @Yowster wrote an article recently how IV impacts different trades - https://steadyoptions.com/articles/the-impact-of-implied-volatility-iv-on-popular-options-trades-r805/

[ItsNoahTime 10]

On 4/21/2024 at 6:40 AM, Bullfighter said:

I find SY way less involved, as you don't need to focus in a plethora of securities. Also, you execute less trades overall. The profit percent per trade is higher, so timeliness of execution is less of a factor. Sometimes you can get better pricing, but it's a coin flip. Still, you shouldn't dilly dally and place the order sooner rather than later, as the thesis can play out without you.

I feel the same way about this strategy.  SteadyOptions is great, but the SteadyYields trades have been more profitable and the fills happen faster.  The only advantage of SteadyOptions is the proven longevity.  I have probably mid-level knowledge on options trading and SteadyYield's spreads are easier to understand and somewhat replicate if there's liquidity issues. 

I am also pretty excited about the fund/s.  Seeing how awesome SteadyYields has done has alleviated some of my anxieties about the fund's performance (it's my first fund).  The convenience and discipline of the fund manager, while also boasting market beating returns, is literally exactly what I've been looking for.  There's syndicate funds, but usually I don't see them making as much as the potential CAGR of these.  Either way, I'm pretty stoked about finding this website as it's always been "steady."  

[V_NAM 7]

If we were to apply the 'Efficient market' theory to this strategy; as more and more people trade this strategy, the advantage afforded by this correlation of CL with TLT should slowly reduce. But it is interesting to note that this trend existed for past 20 years! Wonder what makes it tick. I read some of the links posted in the thread, but I am not finding them very convincing. Of course, I wish the lagging correlation continues to exist!!

[SBatch 3,134]

11 minutes ago, VNambula said:

If we were to apply the 'Efficient market' theory to this strategy; as more and more people trade this strategy, the advantage afforded by this correlation of CL with TLT should slowly reduce. But it is interesting to note that this trend existed for past 20 years! Wonder what makes it tick. I read some of the links posted in the thread, but I am not finding them very convincing. Of course, I wish the lagging correlation continues to exist!!

We will not be affecting the largest market in the world (Treasury), I assure you. Petrodollar system is a very convincing reason.

[mrputsncalls 18]

We also have to be sceptical about the efficient market hypothesis. "Hypothesis" btw, not a theory. 

The way I reject the hypothesis for myself is I look at the list of the most successful hedge fund managers, hedge funds in general, successful traders from books on the biographies of those. The list is long. None of these people's success would have been possible if the hypothesis was true. 

[TrustyJules 3,040]

7 hours ago, SBatch said:

We will not be affecting the largest market in the world (Treasury), I assure you. Petrodollar system is a very convincing reason.

LOL in the proverbial words: "When I die I want to come back as the bond market because then you can intimidate anybody."

[SBatch 3,134]

The model portfolio was up 40.1% on total account for the month of April.

[SBatch 3,134]

Closed trades since inception.

[Dvash 2]

On 5/19/2024 at 3:07 PM, SBatch said:

Closed trades since inception.

Is this the frequency of trades? More than 4 trades a month.

[SBatch 3,134]

1 hour ago, Dvash said:

Is this the frequency of trades? More than 4 trades a month.

It depends on market activity.

[SBatch 3,134]

For those looking to reduce volatility with SteadyYields, one may want to consider investing 50% of option capital in SteadyYields and 50% of option capital in SteadyVol. Last month the 50%/50% allocation would have returned around 26% on total account, with no volatility or adjustments on the SV side. Both strategies can be scaled down to $5,000, so this could be done with as little as $10,000 held at Firstrade or Tradier. Both strategies can also be scaled completely up, liquidity is not an issue on VIX or TMF.

 

Closed Trades:

https://docs.google.com/spreadsheets/d/1aDpc_nDv4Lb-biTrYwd_f2LkPkouLKp8PtuRxxzWBRM/edit#gid=0

[andrey748 1]

7 minutes ago, SBatch said:

Тем, кто хочет снизить волатильность с помощью SteadyYields, можно рассмотреть возможность инвестирования 50 % опционного капитала в SteadyYields и 50 % опционного капитала в SteadyVol. В прошлом месяце распределение 50%/50% принесло бы около 26% от общего счета, без волатильности или корректировок со стороны SV. Обе стратегии можно масштабировать до 5000 долларов, то есть это можно сделать, имея всего 10 000 долларов в Firstrade или Tradier. 

Hey, Steve! There is a problem with small accounts. Yesterday I fell under the day trading rule, and as a result I dropped out of the game, since now I cannot open new positions for five days. As for the drawdown, it is quite consistent with the level of aggressiveness of this strategy. I'm not a hater and I accept the situation as it is. Could you please make it a rule not to trade the same contract twice during the day?
Without confidence in this, it is difficult to continue to follow the strategy with a small account size
Of course, if it does not contradict the concept of trade and if it affects any significant number of participants

[SBatch 3,134]

4 minutes ago, andrey748 said:

Hey, Steve! There is a problem with small accounts. Yesterday I fell under the day trading rule, and as a result I dropped out of the game, since now I cannot open new positions for five days. As for the drawdown, it is quite consistent with the level of aggressiveness of this strategy. I'm not a hater and I accept the situation as it is. Could you please make it a rule not to trade the same contract twice during the day?
Without confidence in this, it is difficult to continue to follow the strategy with a small account size
Of course, if it does not contradict the concept of trade and if it affects any significant number of participants

Please see this post, the amount of trades would not trigger the pattern day trader, which I do completely avoid.

https://steadyoptions.com/forums/forum/topic/9767-discussion-tmf-debit-call-spread-june-7-2024/?do=findComment&comment=195846

[andrey748 1]

37 minutes ago, SBatch said:

Пожалуйста, прочтите этот пост: количество сделок не будет запускать паттерн-дей-трейдер, которого я полностью избегаю.

https://steadyoptions.com/forums/forum/topic/9767-discussion-tmf-debit-call-spread-june-7-2024/?do=findComment&comment=195846

Thank you, I didn’t know that you follow the PDT rules rule. Reviewing the trades, I don’t see the reason why the IB applied this rule, there were three day trades on Tuesday, but there was no fourth, trigger trade. I should probably write to them. Sorry if I'm cluttering the topic

Edited May 30 by andrey748

[andrey748 1]

54 minutes ago, SBatch said:

For those looking to reduce volatility with SteadyYields, one may want to consider investing 50% of option capital in SteadyYields and 50% of option capital in SteadyVol. Last month the 50%/50% allocation would have returned around 26% on total account, with no volatility or adjustments on the SV side. Both strategies can be scaled down to $5,000, so this could be done with as little as $10,000 held at Firstrade or Tradier. Both strategies can also be scaled completely up, liquidity is not an issue on VIX or TMF.

 

Closed Trades:

https://docs.google.com/spreadsheets/d/1aDpc_nDv4Lb-biTrYwd_f2LkPkouLKp8PtuRxxzWBRM/edit#gid=0

Question on the topic: Is it true that IB commissions do not allow the use of SteadyVol?

[SBatch 3,134]

1 minute ago, andrey748 said:

Question on the topic: Is it true that IB commissions do not allow the use of SteadyVol?

I can’t speak to that, I know some are using IB but not sure of their results.