Long-scalping equity options against time decay and market drift

[fullautotrading]

Latest update:

Our summary as of today:

Current PNL: $ 458K
comms: $ 24.53K
days elapsed: 393.13 (max PNL so far 458.2K)
Funds currently in use: 87.57%
Initial funds: 2MM, max DD < 5%
Current abs pos: 593 (PUTs)
Daily avg: $116.99,
Total fills so far: 1456

[Realtime data, paper trading account, 2MM capital, all LMT orders: SELL at bid, BUY at ask. These trading sessions run parallel to my investors' sessions on real $$$ accounts.]


For missing episodes since the last post, see also my journal on LinkedIn or better (since LI seems to be "losing" and messing up with posts), see posts here [in the "Journals" section] (this is just a prototype trading site that will be moved later to its domain when finished coding.
Feel free to spam and advertise at will, as it helps me to debug while coding).

(You will find also other Journals from other investors.)

The latest strategy improvements include adding scalping to long protective layers too (not used previously). [ Which on average brings down the max DD to less than 2.5%. ]


Current Payoff profile [dynamic] of the session illustrated here

Example of scalping/hedging activity, with rollovers (all options, realtime):

 

[destriero]

Outperf!

 

[fullautotrading]

We continue with our strategy, which, in essence, consists of keeping a dynamic balance in the long/short position while making a profit from the scalping/hedging action. Most of the time, this balance will favor the short side in order to feed a steady source of profit from decay and exceed the cost of the long (put) options. This asymmetry, created using puts, is preferred in our case in recognition of the long-term drift of the S&P and the presence of the circuit breakers.

PnL update:

2MM initial capital, Current PnL 623K, elapsed 486 days, min PnL -93K, comms 33.3K.

Similar results from all the investors (with PnL growing more than linearly wrt the available funds). Note that now normally we use always around 50% of available funds (to be able to cope with extreme events and be able to ride volatility bursts).

Lately, I have added a few improvements which consist essentially of a (long) scalping/hedging game performed on ATM long puts. This has the effect to reduce the potential DD.

 

[traider]

We continue with our strategy, which, in essence, consists of keeping a dynamic balance in the long/short position while making a profit from the scalping/hedging action. Most of the time, this balance will favor the short side in order to feed a steady source of profit from decay and exceed the cost of the long (put) options. This asymmetry, created using puts, is preferred in our case in recognition of the long-term drift of the S&P and the presence of the circuit breakers.

PnL update:

View attachment 316220

2MM initial capital, Current PnL 623K, elapsed 486 days, min PnL -93K, comms 33.3K.

Similar results from all the investors (with PnL growing more than linearly wrt the available funds). Note that now normally we use always around 50% of available funds (to be able to cope with extreme events and be able to ride volatility bursts).

Lately, I have added a few improvements which consist essentially of a (long) scalping/hedging game performed on ATM long puts. This has the effect to reduce the potential DD.

Please go live

 

[fullautotrading]

Please go live

The platform is already live with more than 30MM at the moment, and growing up (not my $$$).

[ This is a "public illustration" with real-time tickdata (not delayed) on an IB portfolio margin account and fictitious $$$, as I do not wish to be chased by tax officers. I repeat this is fictitious $$$, although all orders are executed as limit orders precisely at bid (sell) and ask (buy).
I am actually homeless
]

Sufficiently capitalized investors, with a portfolio margin account at IB, can run it (for free) on their own machines in full transparency, tick by tick, order by order, as long as they wish (with no obligations whatsoever).

 

[fullautotrading]

Current (dynamic) payoff:

You see here as the platform maintains a dynamic zone of positive payoff, ranging at the moment from 2628 (the price of the underlying S&P futures ), up to any higher price.


The "left peak" of the payoff "mountain" at the moment reaches 2MM, which we would hit as a payoff in case of an extreme crash. On the right (global option theta) we have currently 350K (our "ordinary" profit).

On the extreme left, there is the abyss ... which will never reach as the bot "slides" the payoff as necessary.

Keep also in mind that the market has circuit breakers in place.

This is all dynamic, as it varies continuously with each new order, and with the folio composition.

 

[traider]

The platform is already live with more than 30MM at the moment, and growing up (not my $$$).

[ This is a "public illustration" with real-time tickdata (not delayed) on an IB portfolio margin account and fictitious $$$, as I do not wish to be chased by tax officers. I repeat this is fictitious $$$, although all orders are executed as limit orders precisely at bid (sell) and ask (buy).
I am actually homeless
]

Sufficiently capitalized investors, with a portfolio margin account at IB, can run it (for free) on their own machines in full transparency, tick by tick, order by order, as long as they wish (with no obligations whatsoever).

how do I run it? More details please

 

[fullautotrading]

how do I run it? More details please

Thank you for your interest traider. It's all explained on my project page (should also be on my profile, and I have probably posted the link several times. ).

[Please, note that it's only for "sufficiently capitalized" investors: this approach is not suitable for small funds, due to margin requirements, and its profitability increases more than linearly with funds. It can be scaled upward without limits.]

 

[fullautotrading]

btw, for those wondering if I am dead, as my profile disappeared from LinkedIn, I made a post in the Chit Chat forum:

https://www.elitetrader.com/et/thre...-kicked-out-of-linkedin-after-decades.374968/

So I did not kick the bucket yet. Apparently, I can still kick some ass

 

[fullautotrading]

9:02 in Rome, here is an update on the public demonstration:

currently 643K profit in 511.73 days (init cap 2MM). Small DD (<5%). And lately, much smaller with the introduction of scalping action on long legs too. Portfolio margin account (mandatory for this approach).

Info from Broker (IB):


Last values received: Tue 27 Jun 2023 09:04:33:718 Tue 27 Jun 2023 03:04:33:718 ET
Now: Tue 27 Jun 2023 09:04:34:255 Tue 27 Jun 2023 03:04:34:255 ET

AccruedCash 8716.80 USD
AccruedDividend 0.00 USD
BuyingPower 9250157.42 USD
FullAvailableFunds 1387523.61 USD
FullExcessLiquidity 1634305.19 USD
FullInitMarginReq 1347665.25 USD
FullMaintMarginReq 1100883.67 USD
NetLiquidation 2735188.87 USD


(The broker is indicating a profit of 735K.)

This is a dynamic long short play of S&P options that are constantly kept in balance to mitigate DD and maximize scalping action.

Here is the current payoff scenario:

Example of scalping action on one layer (with multiple rollovers) [currently 88 layers, 37 auto]:

Transfer: ES FOP 20220617 2650 P GLOBEX 50 → ES FOP 20221118 2880 P GLOBEX 50
Transfer: ES FOP 20221118 2880 P GLOBEX 50 → ES FOP 20230120 2400 P GLOBEX 50
Transfer: ES FOP 20230120 2400 P CME 50 → ES FOP 20230131 2900 P CME 50
Transfer: ES FOP 20230131 2900 P CME 50 → ES FOP 20230519 2900 P CME 50
Transfer: ES FOP 20230519 2900 P CME 50 → ES FOP 20231020 2550 P CME 50


In case you have not been following the chit-chat forum, I am now using the project returns to create a spinoff of new social media.

ET Thread here:

https://www.elitetrader.com/et/thre...al-or-a-chain-of-them-your-suggestions.375032