SPY & SPX or Large Bluechip Weekly Option Strategy...trading intraday could it work, questions?

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Hybr1d88

I have a new algorithmic strategy I've developed and I'm trying to figure out if it's feasible AND if there's scalability, and if so how much?

The duration of each trade is on average around an hour, some as little as 30 minutes and some as large as 3 hours, all about delta and gamma, the other greeks won't effect me that much and it's not like I'm scalping, more like intra day trading with short term holds. The average movement will be about 40c-50c(On something like SPY, on SPX it would be more likely around $3-5).

So say about half a full delta in a favorable direction. It seems to me like it works fine, I have been paper trading successfully using OptionsHouse and the option contract prices do move in a favorable direction at the time I imagine they would, and seems to keep up fairly well with the price of the underlying. Let me reemphasize that I'm not scalping and I'm trading fairly large price increase/decrease that are sometimes in the range of 90c-$1(depending on the underlying here I'm talking about SPY).

My only concern at this point is potential slippage/getting screwed on spreads, and a potential lack of volume/liquidity with the slightly OTM(almost ATM) weekly contracts I will be trading. Also I need to be in within a couple of minutes, and than out within a couple of minutes to be fairly profitable, so I need good liquidity. I will be holding each position around 30 minutes to several hours depending on price fluctuations.

Will there be enough volume in these weekly contracts for me to make a $50,000-$100,000 trade(worth of contracts), and be in and out within a few minute time span? Is that even remotely realistic and if not what is the maximum about of $ you could move in slightly OTM/ATM contracts on SPY and perhaps some large bluechips like BoA, NVDA, AAPL?

*Please note I don't mind a bit of slippage and I don't mind taking a cent or two off the mid to close out of a trade or enter into a trade quickly.*

 
For SPY and SPX: Yes.

I saw your earlier thread on turning $500 into $100,000 though, so assuming nothing significant has changed in your funding situation, odds are you won't need to worry about that size position for quite some time. You shouldn't have any liquidity issues.
 
FCXoptions said:
For SPY and SPX: Yes.

I saw your earlier thread on turning $500 into $100,000 though, so assuming nothing significant has changed in your funding situation, odds are you won't need to worry about that size position for quite some time. You shouldn't have any liquidity issues.
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Thanks, what about for larger equities like NVDA, BAC, AAPL though? Or other ETFs like QQQ?
 
wintergasp said:
I think you should work on your strategy a bit more, thats not how option seller make money without blowing up.
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No, I've already backtested and it has a near 90% success rate with my stop losses the average trade is making about +35c PPS.

I've been papertrading it for several weeks now and have tripled the intial account value. There is no risk of blowing the account up with the short hold time.

Edit: That was also offtopic and you never answered my actual question.
 
More than enough liquidity in SPY or SPX weeklies.

Other things to consider.

1 SPX option has a much higher notional value than 1 Spy option, so you will have to do more SPY contracts to equal 1 SPX contract.

There are higher exchange fees for SPX contracts, so this may matter depending on who your broker is. Some give an all in commission rate, while others will pass on exchange fees.
 
Hybr1d88 said:
No, I've already backtested and it has a near 90% success rate with my stop losses the average trade is making about +35c PPS.

I've been papertrading it for several weeks now and have tripled the intial account value. There is no risk of blowing the account up with the short hold time.

Edit: That was also offtopic and you never answered my actual question.
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Oh ok sorry then if you backtested it should work out well.

I know a 300m hedge fund that does only spx futures weekly options writting and they dont have too much liquidity issue but thats kind of the limit so you should be good.
 
wintergasp said:
Oh ok sorry then if you backtested it should work out well.

I know a 300m hedge fund that does only spx futures weekly options writting and they dont have too much liquidity issue but thats kind of the limit so you should be good.
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No worries I wouldn't jump in without backtesting and paper trading it first, and thanks, that makes me feel much better concerning liquidity.
 
Just to chime in, but I believe that if you are more of a "price fader" then your situation with fills, slippage, bid/ask concerns are smaller than if you are a "price chaser" (especially on these shortened time horizons).
 
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