SPX Credit Spread Trader

50x200...must be on intraday data?

raw data is a great way to go, I just can't figure out a way to code it lol.

Quote from apex82:

Ya prevail, countrend entries off MA can produce fairly consistent results. I like to use the 50x200 ema because I feel its more robust and can be used on many timeframes and instruments. I never use indicators for longer term plays... most of the time they will get pinned at extremes for months at a time and people will be blown out. I personally use raw price action to form confluence zones that work as synergy when things line up together for my spreads and swings.
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at this time there is plenty of liquidity in the pit. moving 500-1000 contracts is doable. in the past only the pit was available which is why ansbacher used them.

Quote from nravo:

Ok. Then I am curious, why Ansbacher and some others I have heard about in passing, swear by SP options. Is there a benefit to trading SP with a broker versus ES eletronically? I'm surprised to hear that SP options have less volume than ES options. Shocked in fact. Do you mean the small number of SP options that may be traded eletronically? Or the pit options?
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Can't believe that thread is still going and he's started a new one selling Security Analysis for $2500 LMAO.

Quote from Aardvark:

19.95 is wayyyy to low...$199 more like it:p wasn't Mktsurf offering Cottle's used book for like way more!
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it sounds like you have a plan. I neglected to state in my post the -3500 is on a single contract basis of the sp pit options so the loss would be closer to 70,000 at vix 26 initially.

I'm normally short puts so I'm not really interested in having a credit on the 3x2. but vega risk not withstanding the lottery ticket could help on a down move.

Quote from optioncoach:

You are correct that a surge in vega will have an initial negative effect on the ratio position. If your modeling shows an immediate loss of $3,500 then it is certainly is small and manageable given the large risk. Especially given I have a $12,500 credit remember? So if I can close out the position for a $3,000 loss I still pocket $9,500. Unless you were factoring in the credit then it is still a small and managable loss.

If I still feel that the index will not move below 1150, I will still hold the position since credit spreads also have wild paper loss swings with moves in the index. What has to hold up is my overall view on where the market is going. If the spike in IV accompanied a move to 1200 and I feel we bottomed after the news, I will hold since I am now in the lottery ticket zone and will stay if I feel the market will hold between 1150 and 1200.

If the ES moves to 1200 and starts moving lower, then I couldl add some short futures in small increments, go long the 1150 Puts to convert to a butterfly using the credit to finance the cost as much as possible, look at the cost of buying back the 1175 Puts, add long puts at other strikes, or simply get out of the position.

Thanks for the look into the 3*2. I will take a look at it. I like the 2*1 due to the nice net credit so if the market never moves lower I still make a nice profit. I will take a look at the comparisons and see how it looks :).
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obviously one would have to take many things into consideration but I think the curve exhibits the overall mean reversion tendencies for the past 16 years, which was merely the point. this will not work with some other markets, eurofx etc.

Quote from jeffm:

Just a quick comment on your equity curve. Its hard to tell with just trade numbers instead of dates, but your system seems to have made all its money during the boom boom late 90's. Early 90s and early 2000's don't show the same level of performance.

Now, you are talking about using these entry signals for possible option trades. The workings of these trades will obviously be hugely different from a straight futures system. In that sense, showing futures performance doesn't really tell you that much. A 70% w/l could be much better or worse when the same method is used with options. Your $avg trade will vary even more greatly with options.

Just watch out that your entry and exit is still valid in today's market.
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Coach

Could you identify the amount of Span Margin it would take to put on your trade below and the amount of Hair Cut Margin it would take; to get a comparison between the two types of account trading? I realize that the Hair Cut Margin would change day to day...but initially what would it take to put it on?


Quote from optioncoach:

Going back to my put ratio spread roots and gonna include some of the prop trades I do with them here on the ES options. (Remember ES units are * $50).

JULY 100*200 Put Ratio Spread:

BTO 100 JULY ES 1200 Puts @ 8.50 ($42,500)

STO 200 JULY ES 1175 Puts @ 5.50 ($55,00)

Net credit = 2.50 ($12,500)

Breakeven at expiration = 1147.50 on the ES for July.

:).
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Quote from Prevail:

obviously one would have to take many things into consideration but I think the curve exhibits the overall mean reversion tendencies for the past 16 years, which was merely the point. this will not work with some other markets, eurofx etc.
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prevail,

just noticed your period covered the last 16 years. Pretty significant in my opinion. When you get a chance, if not too much trouble, could you post the parameters of that counter trend system again and also the summary page outlining the drawdowns. Don't see the date range on the chart but I am guessing that some of those large drawdowns to the equity curve coincided with periods of market instability.

i may have to look at tradestation again, pretty nice backtesting capabilities.
 
UPDATE

JULY 100*200 Put Ratio Spread:

BTO 100 JULY ES 1200 Puts @ 8.50 ($42,500)

STO 200 JULY ES 1175 Puts @ 5.50 ($55,00)

Net credit = 2.50 ($12,500)

Breakeven at expiration = 1147.50 on the ES for July.

CLOSED for net debit of 1.60 for profit of .90 or $4,500.

Feel like the market will move lower and wanted to take profits here which is nice for 24 hours. Leaving VIX Calls to possibly profit off move lower.


VIX HEDGE

BTO 30 JULY VIX 20.00 Calls @ $0.75 or $2,250
 
Quote from Prevail:

I think the curve exhibits the overall mean reversion tendencies
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An equity curve exhibits many things in many combinations :)

You could also argue that the mean reversion shown in that curve is a system that performed great during the boom, and has since reverted to the mean.

I don't mean to be picky, but an equity curve is really the final product of a whole trading system. You are looking for input on a possible entry signal that you are testing. The problem is that equity curve = $$, and people can get distracted by a green line going up at 45 degrees. What you really want is a discussion of your countertrend entry signal. So I would recommend sticking to that and keeping the equity curve off the table for now :) Even saying "70% win/loss" is problematic, since w/l is controlled more by the exit than the entry; and you're not discussing exits.

I'm certainly not saying you can't use TS to test your idea. But jumping straight to the equity curve can be very misleading. Trust me...I've led myself down the wrong path many a time :D
 
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