Comments on Profile Post by wave

  1. jeffalvinson
    jeffalvinson
    I actually use the closing price of a SPY call and Put option which is approximately 2.00 to 2.50 (+ or - .50). It doesn't matter if those options are OTM, ATM, or ITM, "but" I do look for high volume (aprox. 10k or >) options. When there is less than 10 days left before expiration, I switch the options to 2nd month expiring third Friday of each month (no weeklies).
    Jun 5, 2019
  2. wave
    wave
    Thanks. 3 replies back because of 420 character limit.

    It seems you are trading a mean-reversion strategy.If pullbacks in a defined trend or reversion of the bigger wave, how would you play this scenario:
    Jun 6, 2019
  3. wave
    wave
    SPY price is $250, buy on a decline with minimum target back to 1st buy entry of $240.

    What sort of position sizing and risk control are you implementing and do you double position sizes on each level and/or hedge?

    Do you buy the $240 OTM at each buy level below or buy ATM at each buy level?
    Jun 6, 2019
  4. wave
    wave
    1st buy entry is $240
    2nd buy entry is $230
    3rd buy entry is $220
    4th buy entry is $210
    5th buy entry is $200
    Jun 6, 2019
  5. jeffalvinson
    jeffalvinson
    I maintain a Risk to Reward of 1:1. So if an option closes at 2.50, my entry is Closing Price -25%( 2.50 -25%=1.90)
    Buy Limit=1.90 / Sell Limit=2.40 / Stop=1.40
    (+.50 Profit or -.50 Loss)
    Jun 6, 2019
  6. jeffalvinson
    jeffalvinson
    I do use a mean-reversion strategy within a defined trend. 2 trade elements are working for you.
    Fill rates are not great (7 per month average), but this strategy creates a higher W/L ratio (70% or >). When 3 consecutive trade days do not fill, I add +.10 to the entry formula.
    Jun 6, 2019
  7. jeffalvinson
    jeffalvinson
    If a trend is predominantly strong and nothing is filling, I use options with a lower closing price (1.50 to 2.00), because the entry formula for cheaper priced options is as follows: Close > 2.05= -25% / Close > 1.70 to 2.05 = -20% / Close 1.70 and under = -17%.
    Jun 6, 2019
  8. jeffalvinson
    jeffalvinson
    Sell Limit Profit is dependent on Entry Price: Entry 1.60 and > = +.50 / Entry > 1.40 but < 1.60 = +.45 / Entry 1.40 and under +.40.
    Jun 6, 2019
  9. jeffalvinson
    jeffalvinson
    2nd buys do not occur often, only about 9% of the time. 2nd buys require that I watch the TWS all day looking for them; versus a single buy only requires setting up a semi automated Bracket Order and walking away. So entering 2nd buys are dependent upon, "do I have the time today to watch the TWS all day?"
    Jun 6, 2019
  10. jeffalvinson
    jeffalvinson
    The formula for 2nd Buys is:
    Buy 1 is > 1.70, Buy 2 is -20% less than Buy 1.
    Buy 1 is 1.70 or less, Buy 2 is -17% less than Buy 1.
    Sell Limit: +.20 above Buy 1.
    Stop: -.20 below Buy 2.
    Jun 6, 2019
  11. wave
    wave
    Thank you for the clarification.
    Jun 6, 2019
  12. jeffalvinson
    jeffalvinson
    I missed 2 questions: Position Sizing / and or Hedge.
    I use approximately 10% of my account for each trade, but only -2.5% of my account is at risk because of the Stop. I do not Hedge.
    Per 100 trades: Sell or Stop in how many trade days?
    1st Day = 44 / 2nd Day = 45 / 3rd Day = 11
    Jun 6, 2019