Yesterday, the trade described here would be closed at the profit target.
At 12:30 on Monday, Sept 29, the trade was up $2,040.
Waiting until EOD (15:30), I would have closed the trade with profit of $2,260 (11.4%).
Only two paper trades but both have been winners. This is far too small a sample size to conclude anything just yet.Categories: Backtesting | Comments (0) | Permalink
Yesterday Avg IV spiked about 1.8%. Being a Thursday, this meets the criteria defined here for a weekly IBF trade.
On 9/25/14, I sold 10*1140/1110/1110/1070 IBFs. MR is $19,730. Credit received was $20.71.
Profit target is $1,973 with max loss $2,959.
For T+1, max loss points are roughly 1090 and 1132.
I will monitor this way every day to see if max loss points are hit.
One concern I have is that this is the first trade in nearly two months. Perhaps I should backtest this every week to see if waiting for a higher volatility condition really makes a significant difference.Categories: Backtesting | Comments (0) | Permalink
Last Friday (9/19/14), this trade hit the profit target.
On Day 2 of this trade (Day 1 was EOD when it was placed), looking every 30 minutes the trade was down as much as $990 and down as little as $140.
On Day 3, the trade was down as much as $200 and up as much as $600.
On Day 4, the trade was up as little as $1,280 and as much as $2,230. I could have closed the trade at the profit target intraday but at EOD (15:30), it was up $1,780. That’s not at target so I kept it on for another day.
On Day 5, the trade was up as little as $1,250 and at 15:30, I closed it for a gain of $5,130 (27%). My preference is to close trades intraday if max loss is hit but not to close trades until EOD if profit targets are hit. I feel that biases backtesting against the trade by providing more opportunity to hit loss points. At the same time though, by realizing a 27% profit rather than 10% profit (target), this is biased for the trade–maybe the two effects cancel each other out.
Only with enough occurrences will I have a better idea about this.Categories: Backtesting | Comments (0) | Permalink
Yesterday, Avg IV increased from 16.3% to 17.1% on a second consecutive 10-point down day. This is not the magnitude for a 1-day volatility spike I originally described as a criterion for taking the trade.
The main issue I’m having is a low number of occurrences. If I take this trade then it’s only the second trade in 1.5 months. At that rate, it will take 75 months–over six years–for me to get 50 trades (a small but probably acceptable sample size). Another problem with the infrequent trades is that it can’t be counted on as a consistent income generator.
I could do a couple things to increase the number of occurrences. First, I can allow for Monday trades rather than Tuesday through Thursday only; that is something I am doing here. I originally excluded Monday trades because Avg IV usually expands on Monday since the tradeless weekend has passed; this can distort Avg IV change data. Second, I could look for more than a 1-day IV spike. If IV increases 0.8% one day and 1.2% the next then that’s a 2.0% spike in two days, which is a lot. Neither would meet the “roughly 2.0% or more on one day” criterion, though.
Another thing I might have to consider is taking all trades just to see how the trade generally performs. If the trade is only profitable when IV spikes then it’s an opportunistic, occasional trade. My preference would be one I could place regularly, though. There may or may not be such a thing as that “consistent” trade that is a reliable profit generator. I’m skeptical.
Yesterday, I would sell 10 * 1180/1150/1150/1110 IBF for a credit of $21.44/contract. MR is $19,000 so the profit target is $1,900 and max loss is $2,750. At T+1, these would be hit at 1129 and 1170. I will continue monitoring accordingly.Categories: Backtesting | Comments (0) | Permalink
This first trade worked out profitably.
On 8/1, the trade was down 1330 at 10:30 AM (RUT 1107.4).
The trade was up 270 by EOD Friday.
At the open yesterday, trade was up 2350 (RUT 1119.1).
At 15:30 yesterday, trade was up 4520 (RUT 1124).
I’ve had thoughts to close trade at max loss intraday but to take profits at EOD only. I’ll track both possibilities. Were I to have taken profits intraday, I would have done so at the open (~11%).Categories: Backtesting | Comments (0) | Permalink
I apologize for the generic title of this blog post! This corresponds to a RUT weekly iron butterfly trade.
The trading plan is as follows:
–Place trade on Tues-Thurs when Avg IV spikes roughly 2% or more
–Sell 30-point call credit spread ATM
–Sell 40-point put credit spread ATM
–Close trade if profit reaches 10%
–Close trade if loss reaches 15%
I will include transaction fees of $11/contract.
On 7/31/14, I sold 10*1150/1120/1120/1080 IBFs. MR is $18,730. Credit received was $21.71.
For T+1, max loss points (-$2800) are roughly 1098 and 1143.
I will monitor this way every day to see if max loss points are hit.Categories: Backtesting | Comments (3) | Permalink
Today I will begin reading The 29% Solution: 52 Weekly Networking Success Stories by Ivan Misner. This may not be the best book on networking and it certainly isn’t the only one. I did a brief scan and came up with it. The author is founder of BNI, which either gives him credibility or makes him suspect that the book may offer little aside from referrals to his premium organization. Time will tell as I progressively make my way through.
I will continue to post periodically with discussion of networking and/or weekly tasks from the book. Yes, the book does assign weekly homework. Some appear to be writing tasks and those may work well as blog posts.
As always, if you have any feedback or comments then please feel free to share. Also feel free to join me on this networking adventure: especially if it is something new to you as well!Categories: Networking | Comments (0) | Permalink
As mentioned in my last post, I’m new to marketing probably somewhat because I find it hard to understand where it can fit in with my business.
In my previous career, one thing I always lamented especially when talking to colleagues was the lack of business education taught in pharmacy school. I worked retail pharmacy and one promotion above “staff pharmacist” was “pharmacy manager.” I knew other pharmacists who had opened their own pharmacies or were looking to do so. Whether managing a pharmacy or owning one, some sort of business savvy would have been useful.
Networking is certainly part of this savvy and without any business education I also had little insight into networking. My intuitive understanding of “business networking” was handing out business cards to a prospective customer in hopes of generating sales.
Fast forwarding to my current career, the lack of business training has left me befuddled about a potential role for networking in the life of a full-time trader. I’m not looking for customers. I buy and sell product on stock and option exchanges. I have no employees. I do run a business and I am an entrepreneur but I just don’t seem to fit the mold. What could I possibly gain from networking?
In an attempt to update my understanding, this website defines “business networking” as:
> …a skill and a low cost method of marketing that is used
> to build new business contacts through connecting with other
> like minded individuals.
The mention of marketing is of no help to me. Again, whether it be trader education, an investing newsletter, or tools for traders/investors, I am not selling anything.
The rest is more interesting, though: “like minded individuals.” With other traders I could develop or improve my business. With other traders I could share ideas and trading experiences. With other traders I could develop new strategies. With other traders, I could establish a foundation for accountability that I don’t have when working by myself.
Now we’re getting somewhere.Categories: Networking | Comments (0) | Permalink
I’m taking a break from my previous post to discuss networking.
Last year I did an 18-part blog mini-series on trader Meetups. In many of those posts, I bashed the idea of the Meetup for trader networking purposes and even considered it a disguised ploy to get my business since the Meetup organizer ran a premium online subscription service.
I’ve recently joined a dedicated, local networking group. In that group we’re reading and discussing a book focused specifically on business networking. Since it is net-WORK-ing, the book recommends many homework tasks to ensure time spent is time returned.
For many reasons, I’ve already come to realize that networking can be an important tool for me and much of that stems from the fact that trading is such a solitary pursuit. I miss my co-workers and patients from the pharmacy. Most of my trading day is spent at home in front of my computer. I know I’m not alone on that, either. Pretty much every trader I have ever crossed paths with has said something like “I’m so happy to finally be able to speak with someone who knows what I do. None of my friends or family have any clue what trading is all about.”
Since I know there are others like me out there somewhere, why not spend some time trying to find them? In the process, networking can give me the opportunity to help others, to teach, to share knowledge, and maybe even to have some laughs and good times.
With this post I am creating a new blog category. I will periodically discuss networking efforts and perhaps use this blog as a means to get some of that networking homework done.Categories: Networking | Comments (1) | Permalink
Today I continue the stream-of-consciousness sidebar that I began in the last post.
In Part 1 I pretty much decided that live-trading experience is not, in general, a necessary criterion for a competent investment adviser (IA).
Coming to mind in support of this realization was my work as a pharmacist. I did not make the medications. Machines in remote locations make the tablets, the suspensions, the creams and ointments, etc. All I know is what medications are best for different conditions. If you bring me a diagnosis (from the MD) then I can recommend the proper medication. This seems quite analogous to an IA [representative--that's a legal term] completing a personal interview/assessment in order to recommend funds or financial products suitable for client investment. Those products are traded in remote locations (e.g. New York, Chicago) often by machines (computers): just like the manufacturing of medications.
This rationale, in addition to the “agnostic” reason given in Part 1, supports my belief that in general an IA need not have live-trading experience to be competent.
What I think matters more is an investment style that can best suit client needs. A short option premium strategy can generate a higher average return, a lower variability in returns, a lower maximum drawdown, etc., but few IAs have this sort of offering. If you believe this approach is best then the confusion becomes clearer. The confusion arises because live-trading experience is necessary to execute this sort of strategy and this causes two separate arguments–what investment strategy is best and whether life-trading experience is advantageous–to run together into one discussion.Categories: Uncategorized | Comments (0) | Permalink