Welcome to SteadyYields

[SBatch 2,316]

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

We target April 1st as a starting date, and will offer 2 months of free access to all current paying members. On June 1st it will become a paid service for everyone. If you are a current member of any of our services, do NOT sign up before June 1st, as you have free access util then.

Here are the service parameters:
 

• Tailored for short term traders
• Minimum portfolio size - $10,000
• Underlying -TLT, TMF
• Average holding period - 2-3 weeks
• Number of trades per month - 3-4
• Profit target - 200%+ annually

 

The impact of commissions is minimal (unlike VIX), but we still recommend trading with 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.

[Tamas 28]

@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 2,316]

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 2,316]

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.

[bestjax 5]

I am not SO subscriber.

What is the performance history of these SO trade ? Trying to understand the data behind the 200% profit target. 

This link gives me an error, https://steadyoptions.com/forums/forum/topic/9468-crude-oil30-year-treasury-yield-correlation/   How many contracts per month would be traded ?  Trying to get a sense of the fees and trading platforms.  I assume Firstrade will also be good for this one. 

 

 

[SBatch 2,316]

11 minutes ago, bestjax said:

I am not SO subscriber.

What is the performance history of these SO trade ? Trying to understand the data behind the 200% profit target. 

This link gives me an error, https://steadyoptions.com/forums/forum/topic/9468-crude-oil30-year-treasury-yield-correlation/   How many contracts per month would be traded ?  Trying to get a sense of the fees and trading platforms.  I assume Firstrade will also be good for this one. 

 

 

The last trade was over 50%. Target for this trade is 50%-100%. Commissions are not an issue.

[Spread 20]

Hello @SBatch do the 3-4 trades each contain numerous adjustments ? Or framed in a different way; how many order execution moments do you epect to happen in a month ?

 

[SBatch 2,316]

3 hours ago, Spread said:

Hello @SBatch do the 3-4 trades each contain numerous adjustments ? Or framed in a different way; how many order execution moments do you epect to happen in a month ?

 

I would estimate 4-6 executions per month.

[PeterBear 6]

 

Hi, I'm excited to hear about this new strategy.  What is the learning curve and how hard is it for a novice trader to execute the trades for this strategy?  Compared to the other SO strategies.

I've spent many many hours studying the SO education center, the strategies, and reading the forum. Gave up as it looks like a year(s) long journey to learn how to trade options - get good order fills and make a profit.

 

 

[Kim 7,502]

2 hours ago, PeterBear said:

 

Hi, I'm excited to hear about this new strategy.  What is the learning curve and how hard is it for a novice trader to execute the trades for this strategy?  Compared to the other SO strategies.

I've spent many many hours studying the SO education center, the strategies, and reading the forum. Gave up as it looks like a year(s) long journey to learn how to trade options - get good order fills and make a profit.

 

 

To become an engineer you have to study 4 years, and probably another 4 years (at least) to become a good one. Why people expect it to be different in trading?

Yes, it's a long journey, like everything in life. 

[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 2,316]

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 2,316]

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 22]

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 2,316]

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 2,316]

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 157]

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 2,316]

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 20]

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

[SBatch 2,316]

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 25]

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.

[Kim 7,502]

11 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?

This doesn't make sense. I just tried to buy and sell 2 spreads, and was charged 1.40 and 1.48, which is 0.35-0.37 per contract.

[Kim 7,502]

Those are estimates, you need to look at the actual fills.

Those were mine:

[NJ_KenRob 157]

24 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?

I think all these posts mean that trading this strategy at IB should be fine and you should average around .40 a contract.

[Masoud 0]

Just now, Kim said:

It can be lower if you add liquidity. My average is around 0.40/contract.

Thanks, Kim for answering part of my question, So with that much in commission, do you believe the strategy still will be profitable? Is that normal to trade this strategy with that much commission, or I have to go to a Zero commission broker to have profit in this strategy? since I have not seen the result and P/L for these trades I am not sure how much we will make or lose in each trade. That is why I am asking this question.

[NJ_KenRob 157]

5 minutes ago, Masoud said:

Thanks, Kim for answering part of my question, So with that much in commission, do you believe the strategy still will be profitable? Is that normal to trade this strategy with that much commission, or I have to go to a Zero commission broker to have profit in this strategy? since I have not seen the result and P/L for these trades I am not sure how much we will make or lose in each trade. That is why I am asking this question.

Total P/L: $2,360 or 47.0% on $5,020 capital, or 23.6% on $10k account.

[InvestTrader 21]

4 minutes ago, Masoud said:

Thanks, Kim for answering part of my question, So with that much in commission, do you believe the strategy still will be profitable? Is that normal to trade this strategy with that much commission, or I have to go to a Zero commission broker to have profit in this strategy? since I have not seen the result and P/L for these trades I am not sure how much we will make or lose in each trade. That is why I am asking this question.

I'm not Kim, obviously. However, I have done the last trade and I am also with IB and I can assure you that it has been very profitable.

[Kim 7,502]

3 minutes ago, Masoud said:

Thanks, Kim for answering part of my question, So with that much in commission, do you believe the strategy still will be profitable? Is that normal to trade this strategy with that much commission, or I have to go to a Zero commission broker to have profit in this strategy? since I have not seen the result and P/L for these trades I am not sure how much we will make or lose in each trade. That is why I am asking this question.

First trade produced $2,360 gain on $10k portfolio, trading 240 contracts. I don't know if this number of contracts is typical (we had 2 adjustments), but even with 0.40/contract, the gain will be reduced by $100. 

[zxcv64 712]

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 5]

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 2,316]

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 2,316]

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%. 

 

[Drizzle_268 1]

9 hours ago, SBatch said:

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%. 

 

Thank you so much for your quick response. I am new to options, can you explain to me the graph above? I don’t really understand it. How can I interpret it?

[Bullfighter 126]

This chart has nothing to do with options. It measures the signal. It is histogram of the measurement error, when comparing the forecast with what really happened during the last 20 years. As you can see the forecast is pretty accurate. There are many ways to play this signal. Using options stacks additional edge.

[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?

[drkats 0]

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

[Drizzle_268 1]

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

[SBatch 2,316]

13 hours ago, Alpha Harvester said:

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?

I use credit spreads unless I am anticipating a very sharp elongated move.  I want to be Theta positive while I wait for the move to play out, and rolling allows to also capitalize on Delta. For example, the model portfolio is up about 50% MTD using only credit spreads.

[SBatch 2,316]

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 2,316]

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 2,316]

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.