Purely Mechanical Option Trading Part 2

This morning I lowered the sell limit of this filled order from yesterday to 2.58 (+25%) and the trade sold quickly.

10-18-12 07:22 AM
Bracket Orders placed today (Trade No. 1 just filled):
[ Trade No. 1 ]
SPY NOV146 PUT
Buy Limit: 2.06
Sell Limit: 2.68 to 2.58 (+25%)
Stop: 1.24

New Bracket order placed this morning:
SPY NOV147 PUT
Buy Limit: 2.35
Sell Limit: 2.94
Stop: 1.41


Jeff
 
Placed new Bracket Order for Friday 10/19/2012:
SPY NOV 147 PUT
Buy Limit: 2.35
Sell Limit: 2.95
Stop: 1.41

___________________________________________________

Updated October trades:

10-02-12 08:26 AM
SPY OCT 146 Puts
Buy Limit = 2.05
Sell Limit = 2.56 (+25%)
Stop = 1.41
Closed trade on 10/2/2012: +25%
--------------------------------------------------------------------------------
10-03-12 07:30 AM
SPY OCT 144 Call
Buy Limit = 1.74
Sell Limit = 2.24 (+28%)
Stop = 1.21
Closed Trade on 10/3/2012: +28%
----------------------------------------------------------------------------------
10-05-12 06:46 AM
SPY OCT 148 Put
Buy Limit = 1.80
Sell Limit = 1.80 (0%)
Stop = 1.08
Closed trade on 10/5/2012: 0%
----------------------------------------------------------------------------------
10/9/2012:
SPY NOV 146 CALL
BUY LIMIT = 2.05
SELL LIMIT = 2.70
STOP = 1.40 (-32%)
Closed trade on 10/10/2012: -32%
---------------------------------------------------------------------------------
10-10-12
SPY NOV 145 CALL
BUY LIMIT: 1.78
SELL LIMIT: 2.90 (+62%)
STOP: 1.07
Closed trade on 10/17/2012: +62%
----------------------------------------------------------------------------------
10-11-12
Placed a Bracket order:
SPY NOV 144 CALL
BUY LIMIT: 1.98
SELL LIMIT: 3.60 (+81%)
STOP: 1.35
Closed trade on 10/17/2012: +81%
---------------------------------------------------------------------------------
10-18-12 07:22 AM
SPY NOV146 PUT
Buy Limit: 2.06
Sell Limit: changed from 2.68 to 2.58 (+25%)
Stop: 1.24
Closed trade on 10/19/2012: +25%



Jeff

Note to self: The old trading program is working well with the slightly modified trade parameters (buy limit price/sell limit price/stop price). It seems to have captured the personality of this particular market in this point in time.
 
Placed the following bracket orders today:

[ Trade No. 1 ]:
SPY 143 Nov Calls (filled)
Buy Limit: 2.05
Sell Limit: 2.70
Stop: 1.40


[ Trade No. 2 ]:
SPY 143 Nov Puts
Buy Limit: 1.75
Sell Limit: 2.30
Stop: 1.05


Jeff
 
Quote from rfriend73:

Jeff.
What made you decide to trade SPY vs other ETFs and stocks ? Have you tried your model on other instruments ?
More...

During one time or another in the past 10-12 years, I have tried the math trading formula's (before they were integrated into my current trading program completed in 2004-2005) on
OEX Index options, QQQ etf options, DJX options and SPY options.

A: Bid to Ask Spread:
To me, option trading is all about buying options with a
.01 or .02 cent bid to ask price. Any bigger then that and your just giving away your profits. Program Buy Limit, Sell Limit, & Stop formula's are very close most of the time and I can't afford sloppy
spreads.

B: High Daily Volume:
10,000 contracts or > on the strike your trading.
This help keep the bid to ask tight,
and makes the options easier to enter and exit. It also provides good low to high range activity.

C: Strikes every 1 point of index or etf value:
This way I can keep initial Delta consistent on all trades.
I don't want to start a one trade with a delta of .55 and another
with a delta of .30.

D: The formula's are good for an "average" move in the etf of
about 1 point = 25% gain on an ITM or slightly ITM SPY option.
(averages are derived from years of data in all market conditions; "but" delta, volatility & time premium create exceptions in both directions).

What I found I didn't like about the others (other than SPY) is:
OEX:
Bid to Ask Spread too Large.
Volume nearly non-existent.
ATM & ITM too expensive.
On paper the trades work. With real cash trades they don't.
QQQ:
It works with the Q's except I would most of the time, have to be willing to accept lower profit levels (and the bid to ask spread always seemed higher than the SPY).
DJX:
Bid to Ask Spread too large and volume too low.
SPY:
The best attributes of A,B, C & D above.


Jeff
 
Quote from jeffalvinson:

During one time or another in the past 10-12 years, I have tried the math trading formula's (before they were integrated into my current trading program completed in 2004-2005) on
OEX Index options, QQQ etf options, DJX options and SPY options.

A: Bid to Ask Spread:
To me, option trading is all about buying options with a
.01 or .02 cent bid to ask price. Any bigger then that and your just giving away your profits. Program Buy Limit, Sell Limit, & Stop formula's are very close most of the time and I can't afford sloppy
spreads.

B: High Daily Volume:
10,000 contracts or > on the strike your trading.
This help keep the bid to ask tight,
and makes the options easier to enter and exit. It also provides good low to high range activity.

C: Strikes every 1 point of index or etf value:
This way I can keep initial Delta consistent on all trades.
I don't want to start a one trade with a delta of .55 and another
with a delta of .30.

D: The formula's are good for an "average" move in the etf of
about 1 point = 25% gain on an ITM or slightly ITM SPY option.
(averages are derived from years of data in all market conditions; "but" delta, volatility & time premium create exceptions in both directions).

What I found I didn't like about the others (other than SPY) is:
OEX:
Bid to Ask Spread too Large.
Volume nearly non-existent.
ATM & ITM too expensive.
On paper the trades work. With real cash trades they don't.
QQQ:
It works with the Q's except I would most of the time, have to be willing to accept lower profit levels (and the bid to ask spread always seemed higher than the SPY).
DJX:
Bid to Ask Spread too large and volume too low.
SPY:
The best attributes of A,B, C & D above.


Jeff
More...
Those are good reasons for the SPY, but surely some stocks would offer similar attributes...I could be wrong on this, and maybe some traders do well trading only 1 instrument..I am still learning and growing as a trader here...
 
Quote from rfriend73:

Those are good reasons for the SPY, but surely some stocks would offer similar attributes...I could be wrong on this, and maybe some traders do well trading only 1 instrument..I am still learning and growing as a trader here...
More...

Your right, some stocks do have similar attributes as the SPY,
but there is a problem with an individual stocks that an index
or etf doesn't have:
Individual companies are constantly coming up with surprise news (good and bad) that usually occurs when the markets are closed. So if your holding the options and the news is contrary to your option direction, the options open sharply lower then what you paid and usually don't recover again before expiration.
In the 1990's all I traded was individual stock options.
I bought straight calls and puts on companies based on technical and fundamental analysis.
Even when I had good runs of several winning stock trades in a row, there would still come the sudden news event on one of the companies that I was holding,
and it always happens when the option market is closed.
Then when the stock would open, it was sharply against my trade options leaving me at total wipe-outs (or near).
The total loss would negate the last several winning trades!
This happened often enough over a period of years that it caused
me to start looking at indexes, because a "single companies sudden news event" rarely effects an "index that contains 499 other companies."


Jeff
 
Very true...I have had some big winners and terrible losers with stock options (mostly from not following my rules) but also from big gap downs overnight...this led me to trade options on QQQ and SPY for the same reasons you have earlier this year, but Apple is such a behemoth in each ETF that its performance drags down the whole index...
Apple is now 4.8% of SPY and 18-19% of QQQ...
 
Quote from rfriend73:

Very true...I have had some big winners and terrible losers with stock options (mostly from not following my rules) but also from big gap downs overnight...this led me to trade options on QQQ and SPY for the same reasons you have earlier this year, but Apple is such a behemoth in each ETF that its performance drags down the whole index...
Apple is now 4.8% of SPY and 18-19% of QQQ...
More...

How has it been going trading the SPY and Q's ?
Better or worse then individual stock options?
Do you have any kind of trading system developed for the etf's?


Jeff
 
You must log in or register to reply here.
Back
Top