Monday, August 10, 2009

08/10 Daily Summary

It was nice not giving back all the weekend profits for a change! I appreciated that we didn't move too much one direction or another and my two remaining positions are still standing.

Me and my partner (aka Wife) have pretty much decided to focus on the strategy that worked best for us thus far: the Iron Butterfly. I will be trading this strategy only for the next few months in an effort to improve my management and learning from it. I also am going to trade a smaller IBM calendar, as the calendar is another trading strategy I didn't get hit too badly in the past. So, for SEP my plan is to trade 2 iron Butterflies (DIA and MNX) and 1 IBM Calendar.

Speaking of Iron Butterflies, I started backtesting the MNX Iron Butterfly a while back, and now have to do the same for the DIA Iron Butterfly. I find that by backtesting I can short-circuit some of the learning feedback. It takes one full month for a trade to evolve, and we can review an entire month in one or two hours of backtesting.

Position's Details:
08/10 IBM Calendar
08/10 MNX Iron Butterfly

MNX Iron Butterfly Backtesting:
FEB09: 07/21 MNX Iron Butterfly Backtesting
MAR09: 07/20 MNX Iron Butterfly Backtesting
APR09: 07/17 MNX Iron Butterfly Backtesting
MAY and JUN09: 07/15 Backtest Challenge
JUL09: 07/16 MNX Iron Butterfly Backtesting


Anonymous said...

Do you mind explaining a little more about how you "backtest"? Would be much appreciated

Gustavo's Trades said...

Ok, my time has been limited lately, as I just started a new job and am undergoing training.

The backtesting was performed using Thinkor Swim' thinkback feature. All I did was start with an iron butterfly with 35 days till expiration. Then managed the position using a few adjustments.

I had to document the daily theta and delta from the TOS thinkback, and adjust whenever the delta was over a 1:1 ratio with the theta.

Also, I plotted the volatility cone for each month using TOS's implied volatility for the day of the trade.

I hope this helps explain how I did the testing.

Last but not least, backtesting P&L is usually off the real values. The value in backtesting is not proving the profitability of a certain strategy, but more to get you used to how it performs over time, and how your adjustments help... The Profitability is only a marker, not an exact number.

Hope this helps,