For those of you who wish to read this, here’s what’s been going on with me. I had already announced that I planned to retire in April, the volatility mess in Feb hurt, and it sucked big time, but it did not change the calculus on retirement plans. I have never mentioned this, on purpose, but worked for Rockwell Collins ($COL now part of $UTX) for 32 years. I had worked my way into a very unique position where I was the only person in the company doing what I did. I was involved in projects with very senior leaders where I wasn’t even allowed to tell my boss what I was doing. So, my retirement caused them some grief trying to figure out what to do since I could not be directly replaced by anyone in the organization. I spent Feb, Mar and April training a number of different people to take over the things I was working. That took all of my time and effort, so had to just walk away from the market altogether.
Even before the Feb mess occurred, I had been wanting to move away from what I was doing and head for futures day trading. I liked the idea of being able to be flat at the end of every day and not have to worry about after hour shenanigans, or what was happening in China, etc…. Had spent quite a bit of time picking @Fibwizard‘s brain and working on a strategy that would work for me. Once I retired, I dove pretty deep into it and figured out a good approach, but eventually had to look elsewhere. I had figured out a strategy that I could implement, and if I had still been working and at my computer all day, would have gone that way. But, with retirement, I didn’t want to spend all day staring at my screen waiting for the right setups. Lots of other things I wanted to do with my time.
Around that time @smasty160 told me about a guy named Tony Rago @ TheoTrade who was trading /NQ futures with other traders, calling out what they were doing real time in a live chat room. I spent some time studying his approach and watching. I then started paper trading it on TOS. The worst possible thing that could have happened, happened, for the next 3 weeks it worked beautifully and I killed it. So I decided to go live. First day, first trade ended up a very small loss, no biggie. Next trade, got long, and seconds later a Washington headline crushed the market and I had to hit eject as it just kept heading south, no rebound at all to give me a better exit. After what happened in Feb, the last thing I wanted was to be starting something new and losing money at it. So had to be back to paper trading. 3 weeks later when I had some confidence back and was consistently making money, first day back trading real money and you guessed it, bang, another headline hit while I was long and got crushed again.
Not much you can do about the headline risk, but the better I get at trading, the fewer trades I have to take to make my goal for the day and thus the less amount of time actually being exposed to the market.
His overall approach makes sense and Tony put a lot of time and effort into developing it, but I wasn’t really happy with it as is:
1) Sometimes it worked right away
2) Sometimes it worked but you had to deal with some heat first (never feels good as you don’t know if it will continue to go against you or not), which is OK with Tony, he accepts it as part of his thesis. Since it is his, and he put the time into developing it, he has that level of confidence in it. Me, not so much.
3) Sometimes it just plain didn’t work
I before I spent any more capital, I wanted try to figure out how to put the odds on my side
I needed a better set of rules to use.
I spent months fine tuning the approach, trading for a few weeks, analyzing failures. Lather, rinse, repeat. I’ve had times I went 3 weeks trading without a single loosing trade only to have it start to fail so spent more time tweaking. I have definitely put my time into it. I now have time frames, EMA’s and patterns identified that put the edge dramatically in my favor when entering a trade. Still working on my execution, having the patience to wait for the high probability setups and identifying them real time as they are developing, they are always obvious later looking at the chart :). I trade for about the first hour of trading, 1.5 hrs max.
On the flip side, retirement definitely doesn’t suck. I’ve been loving it.
I am not the directional guy but while eating lunch /NQ just pushed to new 20 day lows on a 5 minute chart and bounced fairly quickly. Not saying this is a bottom but on market profile there is a lot less volume here so any reversal is likely to snap back to 6865 fairly quickly.
What is @fibwizard showing?
Next big levels above that are 6977 and 7104. Big volume at the 6977 level.
With the volatility trying a few futures scalps. Full disclosure, I have done this before, just my job does not allow me to do it on work days. Off today, daughter home sick so figured I can make some money back. Entered at the green arrow but set stop to tight and triggered out 3 bars later while I was making breakfast for a $205 loss. But re-entered close to the lows as the signal is still valid. Will hold until I get an exit signal on the 15 minute chart.
Officially went flat on the year with todays drop on paper. Gave back all the profits since Feb. Obviously income investing cannot keep up with extended moves.
I am comfortable with my directional trading now but do not have the time to watch the markets all day.
Have to come up with a hybrid trading model. Core based on income investing but really need to take some directional plays to boost returns and keep up with the extended directional moves. As I generate cash with rolls will figure out how to do that better.
Hope everyone else is preserving some gains.
My SPX Chart for this current sell off…as is usually the case, on oct 4th, teh indicators I use called for a reversal at the top..see the white Line, as it intersected teh ADO and DPO moves to the downside..after a double top retested the 2940, the dam broke down…and as usual, I took advantage of the sell off based on my chart indications….
Reversal signal on /ES on the new indicator, can’t post it, on a different computer. What is @fibwizard showing.
New tool. Not advertising here but works well in chop. Not going full directional like @fibwizard but I think this will help with my #pietrades by pointing out the actual pivots in real time. I just can’t make it work for me because of schedule, wish I could I know there is money to be made there. So I need something that does it for me. Alphashark calls it the tide trader or something like that. Uses a combination of volume, momentum, oscillator (can’t figure out which one but I think RSI looking at the math) and ATR so it is a Frankenstein indicator. However, it already helped me to hedge my SPX hedge as I saw the reversal. Takes some adjusting to each name. You have to figure out which ATR works best for what you are trading or you get too many or not enough signals. On /es and most stocks a setting of 2 is god but NFLX/AMZN take 10s. Default is 0.5 and just too many signals.
Special is $259 but I don’t know how long. An upper indicator, the big arrows and a lower. Increasing green wave go long. Purple dot possible reversal point. Increasing red wave short. Can change it for any time frame. Easy enough even I cannot miss the signal. Only traded with it 2 times so far but is helping recover MU and WDC positions by letting me sell options closer to the money.
Will update as I use it.
What is your take on the market today? I’d love to know what you see on the NDX and SPX charts.
Here came the sharks, shaking the market, got there millions and now drinking the champagne.
STO aug 3 2525/2625 Credit Spread (BUPS) 7.20 CR when ES was coming off its lows..
BTC Jul 25th short 2625, @ 10.60, prev sold at 14.20..Took a 25% gain as ES Touched the R2 Pivot at its HOD
Resold the Same Short Put for 10.40, to collect another 20-30% profit as SPX moves higher after the gap open and bounce at the 100ma…
Looks like your indicators for SPX predicted this down move.
I wish they would be wrong, but it is what it is… 🙂
What do you see in the charts for SPX in the near future?
#SPXcampaign Doesn’t seem we will be pushing much higher this week…
Sold $SPX June 18th 2800/2825 call spreads for 2.05. These expire Monday.
BA: I’ve got two of these on, a #CoveredBackRatio and an #UnbalancedDiagonal . The CBR had a virtual call assignment today, closing the full position for a net $2964 profit on an 8×4 setup. The UB I put on right before the close yesterday and is up smartly today.
TWTR: Opened a new Unbalanced Diagonal: Aug 37 call x10 @ 5.25, sold Jun 15 40.5 call x8 @.92. I’m really loving these unbalanced diagonals, how you can really bring the long strike up closer to ATM, thus lower risk, and at the same time bring the short call down closer to ATM (collect more $$), but the ratio makes the trade work so well.
SPY added a few more #Saf-T contracts. I’m still waiting for Saf-T shares to get called so I can reset them. I decided I make more profit waiting for full profit and paying the assignment fees, vs front running the assignment myself and giving up a few cents in order to save the fees.
I expect a really slow day from here on. It’s a “theta day” where I just sit back and catch the pennies.
The 2665 voodoo line (elliot wave line) seems to have stop the fall today to the tick. Not taking any directional trades today but worth watching.
What do you think @fibwizard?
$SPX BTC 3/23 2800/2775 BECS at 9.50 STO at 2.80
$SPX STC 3/14 2810/2830 BUCS at 3.50 BTO at 2.20 Thank you @jeffcp66
$SPX STC 3/16 2840/2860 BUCS at 1.80 BTO at 1.70 Thank you @jeffcp66
$BIDU BTC 3/16 270/260 BECS at 4.00 (GTC Stop) STO at 1.92
$WYNN STC 3/16 165 calls at 25.20 BTO for 9.80 on 1/30 All gone now.
$MZOR STO 4/20 70 puts at 2.80
$MU STO 3/16 57.5 puts at .80 Thank you @honkhonk81 Good luck to all
$SCHN STO 4/20 36 puts at 1.45
$SPX STO 4/20 2650/2750 BUPS at 19.00 Thank you @fibwizard
@fibwizard you on line?
Are you using tick or range charts currently? I am finding the range charts are responding too slowly now with the increased volatility.
Any suggestions for tick settings for say /es, /ym. /nq, /cl, /gc if you are trading those?
for those like me that are trying to add a little directional bias and trading to their option selling, Raghee from simpler has posted her charts to TOS and tradestation. I can only get the TOS version to work. Pretty simple charts to follow
Here’s an example. Not as clean as @fibwizard but easy to follow. Red short, green long, blue transition. The dots along the 21 ema show buying or selling strength and the boxes are auto plotting darvas for support and resistance. I use them a little on 15, 60, and 4 hour chart.
Have been tweaking my charts a little to better pick up the reversal points.
The SMI trigger was giving too many signals and too many false signals. Went back to percent r with a setting of 55 based on a netpicks reversal system. Picks up the extremes a little better.
Not quite as good as @fibwizard and still not trading fully directionally but this may help me sell options more accurately at the pivot points.
Any feed back or additional thoughts appreciated.
@fibwizard Sent you an email with a question about the Sierra platform
#SPXcampaign The question is, when do we get the bounce? I closed my most endangered put spread yesterday. Only one other was hitting its stop point before the open, so I will roll it down. I may also sell an ITM call spread as a one or two day trade, and perhaps some OTM if I can find good ones.
For the bounce, I want to sell ITM or ATM put spreads. If I miss timing I can grit my teeth through lower prices and wait for the bounce, and roll if necessary. I will likely wait to BUY call spreads until bounce seems clear, and then more with a new Upside Warning.
Bounce could be today or tomorrow, unless we are in for something bigger. With the biggest earnings announcements this week and next, I think it would be tough to go full-on correction now.
Unhedged #Fuzzy (this is really long!!)
My good friend @MamaCash calls these “Unhinged Fuzzies” and that always makes me smile. Over the past couple of weeks, the power of these revealed itself to me. So that’s why I called Mr @fuzzballl an onion last night 🙂 These fuzzies are revealing very important layers of opportunity to apply in different circumstances.
Yesterday morning I woke up remembering one of John Carter’s classes from a few years ago where he talked about “HPTM” High Probability Moments in Time. Couple that with Jeff’s upside VIX warning and Eureka! HPTM is here. My immediate thought was “put down all the toys.” No more 2-lot 3-lot 5-lots on various tickers. Time for BIG laser focus on SPY/SPX RIGHT NOW. However long this window lasts this is when fortunes are made.
Before I talk more about yesterday though, let me give a couple-paragraph primer on unhedged fuzzies, because I know some people are following this carefully. And when the check-out girl at the grocery store this weekend asks you “why not just buy calls instead of a fuzzy,” here’s your answer:
100 shares of stock = 100 Delta (P/L moves 1:1 with stock, it is stock)
1 At-the-Money call = 100 shares of stock = 50 Delta (only moves 1/2 with stock)
(1 ATM Call) + (- 1 ATM Put) = 100 Delta—this is a synthetic long stock position with 100 delta
A synthetic stock position is a very cheap way to approximate ownership of stock, but there’s not a huge advantage in it. In a 401K you still are required to hold the full buying power risk of the naked puts, in margin accounts there is some buying power reduction on the naked puts. But note that you have a large naked put position with synthetic stock.
SPY 1000 Shares: $273,000
SPY 10-lot synthetic naked put risk: $273,000 (indulge me in being less than precise)
Buying Power required: $273,000
Enter the 3rd leg of the Unhedged Fuzzy: The Protective Put
This is done in the same expiration cycle as the synthetic, in fact on the same order (hold your control key to add the leg). Currently I’m using $4.00 spread-risk on SPY. Here’s what my orders look like:
BTO 273 Call
STO 273 Put
BTO 269 Put
What just happened? All of this is on a 10-lot:
Risk: $4,000 (+ trade cost) vs $273,000
Income: UNLIMITED 700 delta ($700 for every $1.00 move in SPY (vs $500 for ATM calls))
Buying Power: FREE for portfolio margin, $4,000 for IRA vs $273,000
Let me give you a real example of how I recently used this trade that I’ve not yet reported. I really like the Gorilla Trades service. I’ve been a subscriber for probably 10 years. If I’d been a faithful follower I’d probably have $25 Million by now, but I’ve not been a faithful follower. Last weekend they came out with their top 3 picks for 2018, all 3 biotechs, all 3 are take out candidates for 2018: EXAS, EXEL, GWPH. All 3 look awesome to me! Do I want to buy 1000 shares of each and just sit on them for 6 months waiting for a buyout that may or may not come? Some of these have very high vol, meaning the market thinks they are either zoom or doom stocks. Do I want to risk 1000 shares on doom? Enter the unhedged fuzzy. Here were my Tue trades:
EXAS July 55/55/45 for 3.56 x 10 (this position is up $2,740)
EXEL May 31/31/27 for 2.55 x10 (this position is up $150.00)
GWPH May 135/135/125 for 9.65 x 5 (this position is down $1175.00 but only because of weekend b/a spread, it’s been up and down )
Point is….I have nice positions tucked away on 3 biotechs using very small risk and buying power….any one of these 3 could bring in a $40K windfall (or more), but if it doesn’t, what is my risk? I’m not sitting on thousands of shares of speculative stock. EXAS I’m most comfortable with, their product is amazing, so I took bigger risk there with a $10 wide protective put (they present at the big health conf this next week). EXEL I’m less familiar with, less risk. GWPH, less risk with less size.
Alright, back to yesterday morning. Woke up, big opportunity still in the markets. But its Friday, we’ve breached key expected move targets (not just for 1 week but 2 weeks). Still I removed hedges from 40 SPY fuzzies that I had, I added 30 Feb SPY Fuzzies for about 2.30. That gave me 70 SPY Fuzzies. 70x $272 x 100 = $1,904,000. Buying power used, next to nothing. Risk: $28,000 + trade cost. I still have a hard time believing the power of this myself. I rode this to the sign of resistance around 2 hours before the close, it was pretty quiet for most of the day. Grabbed about .50 of SPY move = $3500. Then I closed the extra 30 fuzzies and put fresh hedges on the other 40. When resistance broke and we had strength into the close I added another 10 unhedged fuzzies on for Monday morning. So I’m currently sitting on 40 hedged, 10 unhedged. My intent was to keep these trades open longer, but I tend to be a nervous nelly on Fridays. However, this is a tool I plan to use over and over; shorter duration expiries on limited trend trades, longer duration (hedged) on income trades.
This is really long, I know, thank you if you’ve made it this far. These trades, with their limited risk and effective use of buying power, are showing great versatility for trending/contraction/income/momo/long/short/hedge/speculation opportunities. Hope this was helpful for those of you still getting the #fuzzy concepts.
#SPXcampaign The VIX ended th day on its lows, signaling the likelihood of a new Upside Warning next week. So I closed the two Jan 5th call spreads I sold this week, one with sufficient profit and one with a loss, but easy to roll next week.
Closed $SPX Jan 5th 2740/2765 call spreads for .40. Sold for 1.50 on Monday.
Closed $SPX Jan 5th 2705/2730 call spreads for 2.10. Sold for 1.50 yesterday.
#OptionsExpiration, closed 1/3 of this position for 11.50 on Wednesday, and now the rest expires at the max profit.
#Exercised: Dec 8th 2520/2540 LONG call spreads for 20.00. Bought for 3.50 on Nov 27th.
This is the last few days of /NQ with the new tool. Getting close to @fibwizard but unfortunately have not had time to trade it and if I do have time will sell options at the pivot points on qqq instead of trading the futures.
my attempt at some directional trading. Mostly use this for the xiv/vxx trigger. Not as clean as @fibwizard but some adaptability to different tickers
@jeffcp66, think I have the tool for the upside/downside warning and the trigger we have been discussing for going long/short VXX/XIV or the leveraged versions. Not doing any sales here but alphashark has a new tool that uses a hybrid indicator and the triggers are almost instantaneous for VIX because it was designed for futures. It is in beta test mode and because I have some other tools from them I am getting it at a discount. I reviewed some recent triggers with the developer tonight on VIX and it looks like it will give us a real time warning (or within 1 bar). I will buy it (only $299), install it this weekend and get it up and running. It may even give a signal faster than @fibwizard charts because it is adaptive. Based on BB, MACD, ATR and some other voodoo math but adapts as the volatility and ATR changes so it constantly updates itself and even sets targets based on ATR.
Not saying I am going directional here, but it should help with selling options in the right direction. Once I load it will show you guys and will set alerts for /VX and after we see how accurate it is that might be our new upside/downside trigger (if you want).
As a former ski racer, love the snow and let it keep snowing all the way through March!
I think strangles are the most profitable and consistent trades but am reluctant to trade strangles on individual names mostly to the upside. Don’t mind selling puts but naked calls to the upside can get ugly if there is a buyout rumor or someone comes up with a cure for cancer (which would be awesome). When Heinz was picked up by Berkshire learned that lesson.
So after a few earnings trades that did not work out (GILD, EXPE but fortunately made it out at even on that one), I will probably be trading more jade lizards on individual names, especially around binary events like earnings. The extra credit from a strangle or jade lizard would make it more likely to break even or at least recover quicker and the extra credit improves returns over the long run. On indexes will continue strangles as there is less likely to be an unexpected gap to the upside. Also you can structure jade lizards so there is no risk to the upside.
I also think I need to add another 15% cushion to my margin trades. No margin calls but with the trades I have on don’t have much room to wiggle. IRA trades are always cash secured and never seem to cause adjustment issues. I like using some margin for the extra returns but have been using 50%. I think I saw a tastytrade episode that suggested only using 35% to keep from getting in trouble with margin. I think I will scale back a little to that level and see if I have less margin issues.
What level margin do those that trade with it use? I used to have a portfolio margin account and that seemed to be easier but that account was nearly wiped out Aug. 2015. I am finally getting close to portfolio margin again at TOS but not sure I want to convert. Those of you using portfolio margin at TOS how far do you dip into it? 50% or less?
I love the decay on weeklies but seem to adjust my longer trades a lot less. Seems like the best compromise between theta decay and having to adjust trades is 21-45 days. Consistent with the studies tastytrade did. Ladders seem to work really well for this. Others have any thoughts on timing of option sales, DTE for best theta decay/risk ratio?
I agree that having weeklies makes managing trades easier! But some monthlies have really good decay /CL and /GC as examples.
Finally will manage winners a little sooner. Again tastytrade has found 50% ideal for strangles but in some cases such as straddles 25% seems to be better. Maybe managing a little earlier say at 30-40% may allow churning the portfolio faster. Say 50% requires 4 weeks but managing at 35% may allow rolling to new trades in 2-3 weeks. I will experiment managing index, ETF, and futures trades doing this and see if the faster turn over improves profits and consistency.
Thanks everyone for the help and ideas, as mentioned the other day just closed out my most consistent 6 months of trading ever.
Have a great weekend!
Busy all morning at the office and looks like today is mostly chop so did not miss much.
So I know the key to consistent returns is selling options but would like to be better at the directional trades to get an extra kick, home run every now and then and also to improve the timing of my option selling. The problem is most trend following systems tend to get in too late and out too late, especially on short time frames. I have pretty much looked at all of them over the years. Big trends, simpler, turtle trading, connors rsi system, whiz, alphashark, kirkland, persons, and several others. The alphashark tools have been helpful and have paid for themselves many times over but are mostly based on day trading although can be tweaked for longer time frames. Because of my schedule I am more of a weekly and swing trader.
I like @fibwizard charts but don’t have time to watch tick charts. So I have been watching several systems over the last few months and think I have discovered a hybrid that may work well for weekly trades. Basically use my alphashark market profile and dynamic swing trader indicators and combine them with kirklands p3 squeeze and a CCI 30 as the trigger confirmation. Looking at 6 months of data, seems to get the meat of most of the moves because you get into the trade earlier and out earlier than any of the other systems. Also fewer whipsaws than most of the other systems. I also like some of Raghee’s tools from simpler futures but have not figured out how to integrate them and she posts them for free (rare that simpler would give anything away). The GRAB candles are helpful and she somehow tweaked the darvas box to look like a pivot point but is based on real support and resistance, not just projected.
Anyway, no system is perfect but am restarting the /ES strangles with a directional bias when there is one. On a 5 and 15 min. have a fresh sell signal on the /ES so am selling one oct EOM 2570 call but watch the 1 and 4 hour for the weekly signals. Will then leg into the put once/if we get a drop. Between the strangle may buy or short 1 /es contract if there is a sustained move in either direction. I had some huge success with this before but got burned big on 8/24/15, not because it didn’t work, had too much size to properly hedge and optionsxpress locked my account.
My thought is to collect steady theta decay, but get the home run and hedge at the same time on the bigger moves. As you short or go long the future it hedges the options and creates a synthetic covered call or short with a put. Basically sell a delta 8 option each week (45DTE or close), then hedge when needed. I suppose if the delta of the short option hits 16-30, then add the directional component.
Will post as I trade it in real time and will share my charts. If anyone else has any thoughts or ideas on how to improve it, please let me know.
Current margin requirements are about 4k for selling a single strangle but then need to have 6k for the futures contract, so about 9-10k for each contract so as to not get into too much trouble.
Probably wont start until Thurs, when I can transfer some funds, current margin a little low.
Apologize for the long post, but I know you can help me find the flaws in the system and make it better.
Pretty Sure These Will Expire Worthless
Have a great weekend everyone.
$SPX STO 5/12 2135/2195 BUPS @ 2.00
Interesting that the Russel 2000 has been positive most of the day and the mid caps are only down $0.03 ($VO). One of the folks on CNBC today mentioned that the VIX equivalent in Europe is in the 20’s and that traders have gone short that volatility and are buying volatility in the US as a hedge. Might explain what drove us into front month contango while the rest of the curve really has not been affected, looks normal and orderly.
$SPX 2225/2250 BUPS 100% profit
$SPX 2260/2285 BUPS 100% profit
$SPX 2445/2420 BECS 100% profit
$SPX 2375/2350 BECS 174% loss
$SPX STO 4/28 2175/2275 BUPS @ 3.80 Thank you @fibwizard
$SPX STO 5/5 2225/2250 BUPS @ 3.00 Thank you @jeffcp66
$SPX STO 4/28 2230/2255 BUPS @ 1.30 Thank you @jeffcp66
#SVXY STO 1/19/2018 75 put @6.03 Thank you @jsd501
$AMZN STO 865/875 BUPS @ 2.90
$SPX BTC 4/3 2290.2315 BUPS @ .10 STO 3/22 for 3.05
$BABA STC 5/19 105 call 8% profit
Thanks to everyone. Keep our chins up and our brains working.
Have a great weekend
While the VXXY boys were rolling in the dough…I played around in the Futures Playground..
Made 180 YM points thruout the day..attached is my chart of the ups and downs…
My april 2200/2300 BUPS is in decent shape, My long may 2400 delta 70 put is in excellent shape..
@fibwizard are you still using the ST_Launchpad. I’m getting ready to go buy it if you still think this is a valuable indicator to use.
Got a chance this morning so decided to enter a paper trade. Market is strong, should have made this one for real.
Entered @ 8:30 central, 20032