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General Discussion · Stocks that TREND and do not CONSOLIDATE at 0
Kevin_in_GA
msg #120570
6/9/2014 8:57:15 PM

SF data and filters won't show you intraday consolidation.

Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120569
6/9/2014 8:55:13 PM

Well, pretty much. This past week has been a statistical anomaly, and when you bet on statistical probabilities you don't like anomalies!

Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120563
6/9/2014 7:16:13 PM

Well, the deltas aren't pretty, but to pull the plug now on the IWM trade would be to accept about a $15000 loss. I'd rather ride it out and risk losing the full $2000 versus no chance at all of it expiring profitably. Again, a great example of IC pluses and minuses in my first posted trade here. Always happens ...

The SPY IC is getting a little closer than I like as well, while the GLD put spread will easily close profitably.

Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120524
6/7/2014 7:01:37 PM

Friday after the close update:

The market moved up again, placing the IWM call spread under serious pressure. The current deltas are as follows:

SPY Put Spread Delta = -0.02 (great)
SPY Call Spread Delta = 0.23 (increased risk)

IWM Put Spread Delta = -0.02 (great)
IWM Call Spread Delta = 0.52 (red zone - current price is above the inner call option)

GLD Put Spread Delta = 0.03 (great)

I'll keep this tracking going - odds are now basically 50/50 that the IWM IC will close at a loss. Too close to call but to exit this spread now would be to take a large loss (almost $1200). In statistical analyses, this happens periodically and about 2/3rds of the time it comes back inside the inner option strike price. Still not the 90+% odds that were in play when the trade was placed ...

I actually like that my first post on this is in trouble - I think it is far more informative to show a system's weaknesses than its strengths (still, I want it to close profitably and will wait and see how it plays out).

General Discussion · CCI Divergence Filter Help
Kevin_in_GA
msg #120523
modified
6/7/2014 6:44:46 PM

http://forums.stockfetcher.com/forums/General-Discussion/A-challenge-to-TomB-and-the-Stockfetcher-Crew/95123/10


Fetcher[
sfNegDiv(CCI(14), MA(3), 10,3) is above 0
close is above 5
and CCI(14) below -100
]



Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120502
6/5/2014 10:09:33 PM

If you are thinking this can be done with a small account, then no - you don't know when the big loss will come. If it comes first it will wipe your $2000 account out.

I would not put into these type of trades any more than 1/4th of my trading account. Note that I am using an initial equity of $25,000 in this thread, which would be at the ratio I feel comfortable.

You are also confusing "money at risk" with equity. You see a typical return of 6% on "money at risk" but to be safe you need to divide that by 4 to get what your total account sees as a return. Given these are weekly option plays, that still is about 1-2% per week after commissions.

Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120500
6/5/2014 9:08:07 PM

Update from today's trading:

Today's action is exactly what you DON'T want when trading iron condors - a sudden and significant move in either direction that places the trades under pressure. This is really only happening in the IWM call spread, which has moved from a delta of 0.11 to 0.32. The current price is now only about 0.4 SD from our condor, which definitely increases the risk. However, we have a week to see where things go, and I'm not one to cut and run when the heat is turned up a little.

All other spread deltas are even lower than before, and are not showing any risk signals.

Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120499
modified
6/5/2014 8:57:25 PM

Sort of - I wrote this which I thought explained it:

So if IWM stays within the range of 108 - 116 by the close of trading next Friday, this IC will net $440 against a total at risk of only $1780 (since only one side could be a loss, the total at risk is only one side or $2000 minus the $220 profit made from the other side).

The sum of the three trades risk is as I quoted (no profit offset on GLD since there is only one side to the condor).

The max loss is always larger than the max gain in this trade, but you need to think longer term - in any 10 trades we will have 9 wins at $340 and one loss at $1860. That means you make $1200 over 10 trades, or $120 per trade. That is your expectancy and it is equal to 6% of the amount at risk. Not too bad.

And more often than not the actual loss is less than the max loss (which is only hit if the price goes beyond the outer option in the spread). If you are trading multiple ICs you can mitigate any large loss with several smaller wins (although you are also increasing your probability of taking a loss since you are trading more ICs).

Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120468
modified
6/4/2014 11:18:46 PM

I thought I would share several of the Pangolin IC trades for this week. Most folks here are stock traders like me, but lately I have been looking at options strategies that might generate steady income with a low risk profile. I focused in fairly quickly on a strategy known as an "Iron Condor". An Iron Condor is a fixed risk, directionally neutral option strategy that makes money as long as the underlying index or stock does not move more than a specified amount prior to option expiration. As a seller of these contracts, time decay (theta) is on your side, and appropriate positioning of the puts and calls can provide a 90+% likelihood of the trade closing profitably.

Within Pangolin IC I only trade Iron Condors on the ETFs for the major indices (SPY and IWM), and I usually try to include one on GLD if the premium is high enough. With these ETFs large price dislocations are uncommon, unlike higher volatility stocks where earnings can cause a 5-10% move overnight. The condors are established with a delta for each wing of 0.10 or less (delta is the statistical likelihood of a losing outcome, so 0.10 means a 10% chance of losing and a 90% chance of winning).

I also use only weekly options - these options have a much greater time decay and traditional monthly options, which as a seller works to our benefit. And frankly it is easier to sell risk where the market WILL NOT go than it is to take risk trying to predict where it WILL go. Iron Condors are one of the most reliable option strategies for generating steady income growth regardless of market direction. This is not rocket science - it is a simple and straightforward application of statistics to market activity.

So for the next few weeks I thought I'd let folks see the trades and learn about this option strategy. As always, thoughtful discussion is both expected and encouraged.

IWM weekly condor for options expiring 13 June (in 9 days)

STO 20 IWM1413F116 IWM Jun13'14 116 call at market
Filled: 0.14 at 6/4/14 14:14 ET
BTO 20 IWM1413F118 IWM Jun13'14 118 call at market
Filled: 0.03 at 6/4/14 14:13 ET
Current Call Spread Delta = 0.11 (89% probability of staying below 116)

BTO 20 IWM1413R106 IWM Jun13'14 106 put at limit 0.11
Filled: 0.10 at 6/4/14 14:11 ET
STO 20 IWM1413R108 IWM Jun13'14 108 put at market
Filled: 0.21 at 6/4/14 14:12 ET
Current Put Spread Delta = 0.12 (88% probability of staying above 108)


As long as the price of IWM does not close above 116 by the end of the day next Friday, the call spread will return $220 before commissions against a risk of $2000 (11%). Similarly as long as the price of IWM does not close below 108 by the end of the day next Friday, the put spread will return $220 before commissions against a risk of $2000 (11%).

So if IWM stays within the range of 108 - 116 by the close of trading next Friday, this IC will net $440 against a total at risk of only $1780 (since only one side could be a loss, the total at risk is only one side or $2000 minus the $220 profit made from the other side). Potential return before commisisons of 24.8%, with an 88% likelihood of having the condor spreads expire profitably.

SPY weekly condor for options expiring 13 June (in 9 days)

STO 20 SPY1413F197 SPY Jun13'14 197 call at market
Filled: 0.11 at 6/4/14 14:32 ET
BTO 20 SPY1413F199 SPY Jun13'14 199 call at market
Filled: 0.03 at 6/4/14 14:32 ET
Current Call Spread Delta = 0.09 (91% probability of staying below 197)

BTO 20 SPY1413R186 SPY Jun13'14 186 put at market
Filled: 0.11 at 6/4/14 14:40 ET
STO 20 SPY1413R188 SPY Jun13'14 188 put at market
Filled: 0.20 at 6/4/14 14:41 ET
Current Put Spread Delta = 0.10 (90% probability of staying above 188)

As long as the price of SPY does not close above 197 by the end of the day next Friday, the call spread will return $160 before commissions against a risk of $2000 (8%). Similarly as long as the price of IWM does not close below 188 by the end of the day next Friday, the put spread will return $180 before commissions against a risk of $2000 (9%).

So just like in the previous trade, as long as SPY stays within the range of 188 - 197 by the close of trading next Friday, this IC will net $340 against a total at risk of $1860. Potential return before commisisons of 18.3%, with a 90% likelihood of having the condor spreads expire profitably.

GLD weekly condor for options expiring 13 June (in 9 days)

BTO 20 GLD1413R114 GLD Jun13'14 114 put at limit 0.09
Filled: 0.06 at 6/4/14 14:34 ET
STO 20 GLD1413R116 GLD Jun13'14 116 put at market
Filled: 0.13 at 6/4/14 14:34 ET

I wanted to get the other side of this condor (buy the 126 call and sell the 124 call) but could not get it at a spread price of at least 0.05. Below that amount the trade return just isn't worth it. As long as the price of GLD does not close below 116 by the end of the day next Friday, the put spread will return $140 before commissions against a risk of $2000 (7%).

I'll update the stats on these trades as they progress to expiration next week - I'm assuming a starting equity of $25,000 for an imaginary account trading this. That means only $5640 or about 22% of the equity is in trades. Assuming all goes as planned the return will be $920 before commissions, or about 2-3% on starting equity after commissions - in about a week.

At 20 contracts each, the commissions on these trades will cost about $38 for each spread ($19 per trade) so the realized profit after taking these out will be more like $730. I'll record all costs here as these play out over the course of the next 9 days. Some brokers will charge no commission to close an option that is worth less than 0.05, some charge no commission for options to expire, others charge for both. This being a paper trade, I'll be using Interactive Brokers' fee structure to model these costs.

General Discussion · Difference in MA's
Kevin_in_GA
msg #120434
6/4/2014 1:26:35 PM

you need to determine if you are sorting on column 5 ascending or descending.

You are asking how to tweak this, but you are sorting on a momentum-based custom indicator - unless you change that indicator, you'll always end up taking the same trade as the original filter.

What is your exit? Is it when the current stock is no longer the top spot? I think you need to consider optimization of your exit as much as your entry.

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