OEX weekly options

Michael

Your trading is interesting. I don´t understand what you are doing though? I take it you are making multiple credit spread monthly trades, presumbaly in the same index? Or using different indexes? The adjustments I take it would lose you money. So I kind of guess you are moving with the monthly market flow, adusting and make trades at different times. Many trades apparently cover your losses.
Sure send me their recommendations. I would like to look at them. This past two weeks, I´m experimenting trying to find a trading style that suits me. ( straight buying options ) Last week I was trying short term trading on hourly, 15 min and 5 min and 1 min charts. Interesting reading about the WOLFE WAVE or THREE LITTLE INDIANS pattern. I have found it several times in the 5 minute and 15 minute charts. It works, more or less.
This week I think I´m going to return to weekly trading, but using monthly options. In this case for this week December options. In other words I am not actually going to trade weekly options but the monthlies. But will try to confine my trade to one week, or 5 days. I´ll use the OEX. The weekly bar chart in the OEX is a long BULL TREND above the averages.
 
December month is erratic trading month if I recall correctly. Most active fund traders are gone for the holidays in December and anyway the 30 day rule means the trading institutionally dries up for the month and resumes in first week of January.
 
Falconview, yes there are multiple positions, mainly RUT, OEX and SPY. As the month progresses, they alter the stike positions of new positions, close some and roll if necessary. So they dont just put on one at the beginning of the month and do nothing. Over the past couple of years they have been modifying their analysis after a losing month so we will see how they do after the next big market swing.
www.monthlycashthruoptions.com/ReturnOnInvestment.htm
This shows all the trades for the last few years. (PS I dont work for them)

Michael



Quote from falconview:

Michael

Your trading is interesting. I don´t understand what you are doing though? I take it you are making multiple credit spread monthly trades, presumbaly in the same index? Or using different indexes? The adjustments I take it would lose you money. So I kind of guess you are moving with the monthly market flow, adusting and make trades at different times. Many trades apparently cover your losses.
Sure send me their recommendations. I would like to look at them. This past two weeks, I´m experimenting trying to find a trading style that suits me. ( straight buying options ) Last week I was trying short term trading on hourly, 15 min and 5 min and 1 min charts. Interesting reading about the WOLFE WAVE or THREE LITTLE INDIANS pattern. I have found it several times in the 5 minute and 15 minute charts. It works, more or less.
This week I think I´m going to return to weekly trading, but using monthly options. In this case for this week December options. In other words I am not actually going to trade weekly options but the monthlies. But will try to confine my trade to one week, or 5 days. I´ll use the OEX. The weekly bar chart in the OEX is a long BULL TREND above the averages.
More...
 
Okay Michael

I spent the weekend studying your system for Brad Reinhard. Pretty much got it figured out. It is essentially the same as that of Phil with the forum SPX credit spread trader, though better explained.

Essentially the system relies on minimizing losses in those months the market goes against you.
The system also allows for three losing months per year. The system is subjective, meaning you cannot mechanize it. It relies a lot on mechanical and subjective experience learned over time.
In broader terms, the ability to complete Iron Condors is what the system uses to make profits. One side of an Iron Condor is a FREE TRADE at no cost. The ROLLOVERS are the system used to minimize as best as possible the losing months.
Assume that if you had 12 successful months with Iron Condors, your return would be 6% x 12 = 72% a year. Markets go through changes in bull runs and bear moves and in between. Allowing for 10% losses for those three months you would end up with a profit of 42% a year. In practice not all months will let you complete Iron Condors, so you end up some months only making on 3% credit spreads instead of 6%. The end result is sort of a net profit between 20% and 35% a year for the system. In a BULL trend in the long term, which we are looking at for 2011 and 2012, the system could return over a 100%.
The system heart is handling the losing months. This seems to be accomplished by ROLLOVERS. You can rollover to the same month, if you are early half of the month, or rolling over into the next month if you are in the last half of the month. There are variables in how much premium you collect.
In essence the system works on predicting the range of the monthly bar movement. Predicting the high and low of the monthly bar. Money management is key also. You divided your nest egg into 75% for the credit spread trading and 25% for a reserve, if you get hit and have to rollover. You can also use your 25% reserve for straight buying, or directional bets. If you are successful you would increase your net profit. The system also divides the credit spread portion into 3 trades. These are placed a strike apart, or whatever spacing you choose. Credit spreads are chosen by the DELTA of less than 9. This gives you a 90% probability. Usually effective about six months a year.
Actually selling 3 credit spreads a strike apart, allows you to complete in a gyrating monthly bar movement, up to six credit spreads if you complete the other FREE half in an Iron Condor. Obviously during a year, in a bull market trend, you would complete Iron Condors and reap 6% return per month. Premiums vary, so your return can increase or decrease and go up to 10% return for a month and down to 2% for a month. You would have losing months when you were forced into rollovers. Controlling the amount of the losses is the name of the game.
High VIX, or volatility would be a subjective judgement in those volatile months and I see they both persons do not play PUT credit spreads during those months as an added incentive not to lose. Essentially the VIX would dictate how you trade. A VIX above 25 would not be conducive to PUT credit spreads, eliminating Iron Condors for BEAR TRENDS. Cutting your take in half for those months.
Brad seems to have it roughly figured out and he is making money. he went through 2008 successful, so he is doing well. So using his auto trade is probably the way you want to go, since you do not want to waste time calculating and checking on things. As you have said, the return beats BANK interest rates. It depends on the amount of money you will have in your account. A large amount you would probably let him do it. A small amount you would have to do it yourself.
i will probably try this myself, sometime next year. At the moment I´m concentrating on system identification for shorter - medium trend trading in buying straight options. When I have that figured out and working, will go back into this credit spread system and give it a try.
How you reduce you given losses is the heart of this monthly and annual credit spread system.

Falconview
 
Michael

Just played with the chart for monthly bars for the past year..
Here is what I got.

Worst month in a high VIX bear month. The bar ws 80 points in the OEX, or 20 strikes, in a bear plunge. Not a month to be doing Bull Put spreads but certainly one you could follow down on pullbacks with Bear Call Credit spreads, laddering so to speak. Moving averages should keep you in the trend.

The AVERAGE monthly bar is 50 OEX points,or 10 Strikes.

The smallest monthly bar was 20 points, or 4 strike movement.

Something to work with and I suppose it would depend on the VIX and whether you were in a Bull low volatility, or Bear higher volatility mode. I'd hazard a guess you do Iron Condors with the VIX below 20 and stick to Bear Call Spreads above VIX 25.
 
Falconview, I dont think I saw any non spread positions in the MCTO trades.
Also, what about the idea of only doing the call spreads. I know we hear often about people getting wiped out doing this, and it is always on the sudden drops of the market. If we eliminate those sudden drops (or only put them on if the VIX is less than, I dont know somewhere between 20-25, wont you be much safer?
Thanks Michael
 
Here is my strategy outline so far

If VIX is lower than 20, use iron condors, if over that only use cal spreads, and if over 27.5 dont put on any positions.

Wait for an up day to sell call spreads, down day for puts.

Don't aim for more than 4% profit per position

If market goes against you, and the cost to close is 150% of the original credit, close and look at rolling out strike or month (havent decided how to figure that out yet)

Once the profit to close is 80% of the maximum, buy to close

Use only european style index options options that are not subject to the jump between thursdays close and fridays open

What do you think so far? I am looking for say 25%-30% per year return.
Michael

OR maybe just let MCTO autotrade for me! Too bad they cant do it for Canadians
 
I´m more inclined to think about the trading as trading the monthly bar. Trying to figure the extreme projected High and Low to identify support and resistance points for putting on the credit spreads for a month. In the OEX the average monthly bar is 50 points long. Or 10 strikes. I one time worked out that if you could figure to trade out 6 strikes on the monthly, either way from the middle, or open, you would have a plan. On the months when the bar is directional mostly one way, you would be 12 strikes to be safe in placing credit spreads.
The thing is HOW to forecast the direction overall for the month?

It looks like the guy is going to do over 20% for this year. Not as good as some years, but he is being consistantly profitable on a yearly basis.
I´m going to have to try it one of these days in paper money. I was trying to think how to do it and rolling over from a weekly to a monthly. You can´t really roll over on a weekly trade until Thursday or Friday, when they post the next weekly setup. Have no idea if such a thing is possible?
 
You must log in or register to reply here.
Back
Top