Trading strategies if SPY goes into 2004-2005 mode?

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short&naked

The 2004-2005 period was a low vol environment with range bound price action. What
Trend following strategies were difficult to execute and options selling was hard due to low premiums.

What kinds of strategies would work in this environment? What about Selling longer dated options for higher premium? Or shorter dated options closer to the money?
 
right. 2004 to 2006 was the time of great famine where the day range was very small for many many months.
There is hardly any way to profit from such situation.
There are times where market is simply untradable.


2020 is the time of greatest harvest where day range is extra large.


BUT 2004- 2006 was not the end of the world.
those who traded Natural Gas during that time should be extremely happy.
Because its day range was extremely high.
Now day range is relatively very low
 
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ETF momentum worked really well back then, largely because commodities and EM stocks were ripping higher.

In that environment, if you would have tracked a basket of ETFs (SPXL, TQQQ, TLT, FXI, EWJ, UCO, GUSH, BOIL, GLD, GDXJ, SLV, EEM, RSX, CORN, EWZ) and bought the top-3 with the highest relative strength over the last 90 days, and rebalanced every 30 days, you would have made solid returns.
 
short&naked said:
The 2004-2005 period was a low vol environment with range bound price action. What
Trend following strategies were difficult to execute and options selling was hard due to low premiums.

What kinds of strategies would work in this environment? What about Selling longer dated options for higher premium? Or shorter dated options closer to the money?
More...

Same strategies but expect lower returns.
 
This is just a theory but I would think that any market theme would not stay protracted
for too long without many intermittent disruptions anymore because of the proliferation of algo's.

You'll have 1000's of low vol algos all doing the same thing and with that it can't last.
So you'll have periodic spikes mixed in to keep these algo's in check, they can't all
clean up after all.
 
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