Great. Just curious can we expect to see future postings to be of similar nature as this one? I was hoping for a discussion on strategy approach, risk, implementation, technology. Not sure how post like this benefit you or others. If this is just for yourself then why disseminate publicly? If looking to establish a track record then a lot more would be needed, such as posts in near real time with the exact fills (timestamp, fill price, quantity, symbol, direction). Just saying we see countless threads opened by people who state they made or lost xyz day in day out. It's kind of useless and does not add much value imo. @neke thread was awesome when I read through it all because he discussed much beyond just pnl figures. Just sharing my thoughts on this.
Fully Automated Trading Journal - $50k per month goal
- Thread starter frostengine
- Start date
There has been plenty shared thus far and will be plenty more shared as time goes on. In the opening paragraph of this journal I wrote : "This journal will document the ups and downs of bringing a new fully automated system live."
The first few days after going live is about checking each component of the system to make sure its functioning as expected. From signal generation, through the execution engine. So far, things have gone as expected - so there has been less to share. Some of the value I believe this journal will provide to others is a behind the scenes look at what it really takes to bring an automated system live. The things that go right, the things that go wrong, and the boring stuff in between. The thought process on how I will approach upcoming tweaks and changes that may be necessary etc.
I'm not concerned with establishing a track record, but by nature of my automated twitter postings - one is being established anyway. Every execution is posted in real time within a second of the trade being filled. With price, contract, etc. There is a lot that can be learned by watching these executions in real time.
Here is an example of what is being posted in realtime:
Ah you post on Twitter, right that slipped my mind. Apologies. Though, I only see updates pnl wise, not the opening trades placed
Your description of how you are hedging with OTM puts is very useful information. This journal is definitely adding value!!
The opening/closing trades are also listed. I update PNL every 10 minutes.. its how I keep track of the system throughout the day via twitter notifications. This does make it harder to see the executions.. but if you dig through you will see opening/closing trade updates as well.
Interesting approaches by everyone. Thanks for sharing. I write most of my stuff to google sheets and access via the phone that way. I never have been in a situation where on a trading day I couldn't ssh/vnc/log into the machine and manually shut things down - but when it has to happen it definitely is more chaotic than sending a tweet back and pausing the system that way.
Ok, got a lot to discuss based on the action I am seeing. However, first - today's results.
Strategy 1:
Open PL: -$539
Closed PL: +$3,993
Net: +$3,454
Strategy 2:
Open PL: -$2,276
Closed PL: -$1,079
Net: -$3,355
Closed PL Since Inception: +$3,250
MTM PL Since Inception: +$435
Results are not too important at this stage, proper execution is critical - the results will come as long as execution is correct.
Observation #1:
Strategy 1 is performing largely as expected. The strategy has shorted both calls and puts - meaning both bullish and bearish signals have been generated on live data. The signal's generated while live are matching the signals a backtest of the past 3 days show should have happened. This is what you want to see. A deviation between live and backtest results of the same period would have been a huge red flag. It is clear this strategy is also significantly outperforming strategy #2. I am feeling very confident this strategy is going to be a winner. Had Strategy 1 been the only strategy live this week, I would have a closed PL of +$4,113
Observation #2:
Strategy 2 is under performing expectations. Not a single put has been purchased - meaning no bearish signals have fired. This struck me as very unusual based on historical data - so I ran a backtest over the same period. Sure enough, several bearish signals should have been generated so far this week. This is a RED flag. Something is structurally wrong with strategy #2. I need to investigate and understand what it is quickly - or disable this strategy for now.
Observation #3:
While Strategy #2 is having signal generation issues - a closer look at the actual executions is giving me some concern about my choice to use long options vs straight shares or even short options like strategy #1 uses.
A study I once conducted demonstrated that if I buy options roughly 21 DTE and between 35 to 40 delta (the parameters this strategy is using), I will have roughly a 10 point hit to profitable trades. Meaning a strategy that would win 55% of the time when purchasing straight shares would only win 45% of the time with an option with these characteristics held for 1 day. However, for certain strategies, the asymmetric risk profile of using options makes using this type of option the best choice. Before going live, I had my doubts on if Strategy #2 would meet the criteria where long options was the best choice. After seeing a few days of live data, those doubts are getting louder.
I need to first fix the signal generation issue, and second, I need to evaluate if I want to keep strategy #2 as a long option strategy or switch over to straight shares or short options. The signals generated by this strategy would certainly work well with either shares or short options. So, it's worth considering.
Strategy 1:
Open PL: -$539
Closed PL: +$3,993
Net: +$3,454
Strategy 2:
Open PL: -$2,276
Closed PL: -$1,079
Net: -$3,355
Closed PL Since Inception: +$3,250
MTM PL Since Inception: +$435
Results are not too important at this stage, proper execution is critical - the results will come as long as execution is correct.
Observation #1:
Strategy 1 is performing largely as expected. The strategy has shorted both calls and puts - meaning both bullish and bearish signals have been generated on live data. The signal's generated while live are matching the signals a backtest of the past 3 days show should have happened. This is what you want to see. A deviation between live and backtest results of the same period would have been a huge red flag. It is clear this strategy is also significantly outperforming strategy #2. I am feeling very confident this strategy is going to be a winner. Had Strategy 1 been the only strategy live this week, I would have a closed PL of +$4,113
Observation #2:
Strategy 2 is under performing expectations. Not a single put has been purchased - meaning no bearish signals have fired. This struck me as very unusual based on historical data - so I ran a backtest over the same period. Sure enough, several bearish signals should have been generated so far this week. This is a RED flag. Something is structurally wrong with strategy #2. I need to investigate and understand what it is quickly - or disable this strategy for now.
Observation #3:
While Strategy #2 is having signal generation issues - a closer look at the actual executions is giving me some concern about my choice to use long options vs straight shares or even short options like strategy #1 uses.
A study I once conducted demonstrated that if I buy options roughly 21 DTE and between 35 to 40 delta (the parameters this strategy is using), I will have roughly a 10 point hit to profitable trades. Meaning a strategy that would win 55% of the time when purchasing straight shares would only win 45% of the time with an option with these characteristics held for 1 day. However, for certain strategies, the asymmetric risk profile of using options makes using this type of option the best choice. Before going live, I had my doubts on if Strategy #2 would meet the criteria where long options was the best choice. After seeing a few days of live data, those doubts are getting louder.
I need to first fix the signal generation issue, and second, I need to evaluate if I want to keep strategy #2 as a long option strategy or switch over to straight shares or short options. The signals generated by this strategy would certainly work well with either shares or short options. So, it's worth considering.
Todays Results:
Strategy 1:
Open PL: -$911
Closed PL: +$1,856
Net: +$945
Strategy 2:
Open PL: +$71
Closed PL: +$2,482
Net: +$2,553
Closed PL Since Inception: +$7,588
MTM PL Since Inception: +$6,748
Both strategies rebounded nicely today. I am currently running behind pace for $50k this month. However, I consider being up ~$7k a nice start to a new live strategy in the first week.
In addition, I set out to trade roughly 1 dozen ETFs with strategy 1 and a few dozen stocks/ETFs with strategy 2. This week I have only had 8 for strategy 1 and 8 for strategy 2 turned on. I am looking at turning on another 4 or 5 next week as I scale the strategy up.
Strategy 1:
Open PL: -$911
Closed PL: +$1,856
Net: +$945
Strategy 2:
Open PL: +$71
Closed PL: +$2,482
Net: +$2,553
Closed PL Since Inception: +$7,588
MTM PL Since Inception: +$6,748
Both strategies rebounded nicely today. I am currently running behind pace for $50k this month. However, I consider being up ~$7k a nice start to a new live strategy in the first week.
In addition, I set out to trade roughly 1 dozen ETFs with strategy 1 and a few dozen stocks/ETFs with strategy 2. This week I have only had 8 for strategy 1 and 8 for strategy 2 turned on. I am looking at turning on another 4 or 5 next week as I scale the strategy up.
Todays Results:
Strategy 1:
Open PL: +$199
Closed PL: -$418
Net: -$219
Strategy 2:
Open PL: $0
Closed PL: +$446
Net: +$446
Closed PL Since Inception: +$7,616
MTM PL Since Inception: +$7,815
Week 1 Results (MTM): +$7,815
First week is now in the books. Not a bad start. I prevented strategy #2 from opening any new positions today and allowed the open ones to roll off as per the rules. Will be fixing issues related to it this weekend and have it ready to go for Monday. Turns out I have a live data feed issue for one of the strategy parameters which was preventing bearish signals.
In addition, I will be adding several new stocks to the strategy starting Monday to slowly scale up the results.
Strategy 1:
Open PL: +$199
Closed PL: -$418
Net: -$219
Strategy 2:
Open PL: $0
Closed PL: +$446
Net: +$446
Closed PL Since Inception: +$7,616
MTM PL Since Inception: +$7,815
Week 1 Results (MTM): +$7,815
First week is now in the books. Not a bad start. I prevented strategy #2 from opening any new positions today and allowed the open ones to roll off as per the rules. Will be fixing issues related to it this weekend and have it ready to go for Monday. Turns out I have a live data feed issue for one of the strategy parameters which was preventing bearish signals.
In addition, I will be adding several new stocks to the strategy starting Monday to slowly scale up the results.