Performance Review NDX Fast Butterfly

Link to Live trades:
FEB NDX Fast Butterfly Day-by-day review (4 trades)

So, let me start with a log of all trades (Live and backtested) for this strategy, I’ve tested the NDX Fast Butterfly for a little over one year before I started trading live, here is my log:



This is fine, but let’s also look at a simulated equity curve chart based on this data:




You’ll notice in the above picture that despite the ups and downs, categorized by a relatively smaller win-ratio (60%), the strategy makes money over time because its good win-loss ratio. Therefore, moving forward it is imperative to control the win-ratio and do not let it run out of hand.

I’ve decided to go back to the most basic factors when determining if you have a positive edge: Win-loss ratio and percent wins. With these two numbers, and the average win, you can use a very nice tool that Henry Carstens put together to test your edge, go to http://www.verticalsolutions.com/tools/pl_forecaster_pctwins.html and check it out for yourself, just plug in the variables and run a few scenarios to make sure your position is still a winner.




I hope you enjoy this new approach at looking at your trades from a different angle.

Cheers!
Gustavo

02/26 Daily Summary

Not much to report Today, OEX didn’t quite move and gracefully expired within my weekly condor. I am grateful for this week. We all (income traders) needed this break. Notice how the market seems to be navigating in calm waters. I sure hope we keep it up for the next few months!

02/26 OEX Weekly Iron Condor

OEX expired nicely in the center of the graph, gratefully accept the +8.7% ROI this week. Thank you!

02/25 Daily Summary

That of what I desire for me, I desire for everyone! Gratefully exited all my Butterflies this month, now waiting for OEX to expire Tomorrow so I can also book my profits on that weekly trade. Nice and sweet week, I sincerely wish the same for all fellow option traders!

02/25 NDX Fast Butterfly

We were soaring around 11% ROI mid morning Today, then the market pulled back quite a bit. I am still very grateful that I got slightly above my 8% goal by end of day Today. Remember, I have been in this trade for exactly 3 days.

02/25 MNX Iron Butterfly

Landed the MNX iron butterfly Today, got it with a bit over my 10% profit goal, nice and sweet ride! Thank you!

02/25 OEX Weekly Iron Condor

Ok, OEX, let’s bring another weekly deal home, I am very grateful for having learned this trade from the fellow Sheridan Mentoring California1 trading group. Thank you!

02/24 Daily Summary

Didn’t touch any position Today, that makes it a perfect option trading day! Gratefully waiting for time decay to do its job so I can do mine (aka. Get out of the positions). So far so good.

02/24 NDX Fast Butterfly

I’m looking for just a small pull back or simply the time decay to cash in at my profit level this week. At the final hour I floated an order out to close me with 8%, the current P/L was around 7% and I figured it could work, why not try it? I am sure I had traded over 8% during the intra-day action Yesterday, however I want to stick to the backtested process: close by end of day instead of intra-day.

02/24 MNX Iron Butterfly

MNX kept collecting premium Today, didn’t do anything on it as well, just waiting for time to go by and money to come in.

02/24 OEX Weekly Iron Condor

I am glad that OEX moved back and forth Today and didn’t leave the same surrounding area of Yesterday. Nothing to do with the position, simply a matter of waiting for it to expire.

02/23 Daily Summary

Leaving the NDX position alone paid off Today! I got out of the trade for a nice 13.75% profit in 5 trading sessions! I’m on my way to cash out the NDX Fast butterfly as well, and should we hang around these levels I’ll be out of the MNX iron butterfly too. It is all a matter of how the market behaves Tomorrow. One way or another, I’m ready to manage whatever comes my way

02/23 NDX Fast Butterfly

Approaching the 8% (or more) target profit, If we get to this level Tomorrow I’ll take the position out of the table. I plan on analyzing it and taking my profits by end of day if it reaches 8% or more.

02/23 MNX Iron Butterfly

Yesterday’s decision of cutting delta came back to haunt me Today, I still don’t think it was a bad idea overall, as we still managed to post profits even though we had to sell out the call for a loss, then again, it goes back to trading rules I wanted to make sure the delta didn’t get out of control and it was getting there on the trade. If we consolidate for Tomorrow or so, I’ll get to my profit target and get out.

02/23 NDX Iron Butterfly

With Today’s price action we got exactly in the sweet spot for the trade, I promptly removed the position from the table as it reached over my 10% goal in such a short period of time. Final count: +13.75% ROI

02/23 OEX Weekly Iron Condor

OEX made a fast descend Today, the iron condor position is still with a good probability of success. Now it is a matter of following closely to see if we find some sort of pull-back and/or consolidation, which I think might happen in the next day or so given the fact we’re trading around the moving averages and around the 500 price level on the daily chart.

02/22 Daily Summary

Nothing extra-ordinary Today, just business as usual, I entered my weekly strategies and did a small delta maintenance on the MNX iron butterfly position. So far have not touched the NDX position.
I have been compiling ideas about my lessons learned e-book/web-site, more to come on that as I get further along in the process.

02/22 NDX Fast Butterfly

Got another NDX fast butterfly started Today, I start them bearish, so if we pull further down this week it will be in the money, otherwise I’ll hedge and come back next week.

02/22 MNX Iron Butterfly

I cut a few deltas out of the position by purchasing a long call, this softens the up-side risk and doesn’t necessarily cuts my down-side potential. If we suddenly sell off hard, I will sell the long contract and stay a bit longer. If we just drop a bit further the position will be reaching its p/l target.

02/22 NDX Iron Butterfly

Position is working out nicely, today’s small pull back got me up in the P/L level, if we pull back a bit further it will be good to exit. I have orders to hedge if we push higher Tomorrow.

02/22 OEX Weekly Iron Condor

Started a new Weekly cycle Today, as a new rule of thumb I started the position mid-morning, and because of my limited time availability I had to leave one single condor order out there, eventually most of my order got filled. I did not force the remaining contracts at the end of day, left them out this week.

Performance Review RUT Iron Condor

Day-by-day Review of Live trades:
FEB RUT Iron Condor Day-by-day review Content:
JAN RUT Iron Condor Day-by-day review
RUT Iron Condor - Day by day review
JUL RUT 30-Day Iron Condor (day-by-day review)
JUN RUT 30-Day Iron Condor (day-by-day review)
JUN09 RUT 50-Day Condor (Day-by-Day Review)
MAY RUT 50-Day Condor (Day by day Review)

So, let me start with a log of all trades (Live and backtested) for this strategy, I’ve tested the RUT Iron Condor for 2 years before I dug into it, the log bellow illustrates the results. One thing I’ve noticed is how much difference there is between 2 years and 1 year, because I decided to focus all my positions on at least 1 year horizon, I used the 2 years of data just for information, all my analysis is done based on the last 1 year of performance.



This is fine, but let’s also look at a simulated equity curve chart based on this data:



You’ll notice in the above picture that in the short term time-frame the position is going through a slump, however, even more telling is the fact that the trade’s vital signs are not so good, the win-ratio is relatively low for an income strategy, and this could mean trouble. With these two numbers, I used Henry Carstens’s forecaster to test the edge, go to http://www.verticalsolutions.com/tools/pl_forecaster_pctwins.html and check it out for yourself, just plug in the variables and run a few scenarios to make sure your position is still a winner.



After running the simulation many times I’ve noticed the edge is positive, but the equity curves were not the most exciting ones, a lot of draw-downs or side-ways cycles. With this information in mind I decided to leave this strategy in the back burner, and re-allocate my capital to other strategies that have a better profile and are likely to keep me in the green for longer periods of time. I also have a limited bandwidth of how many strategies I can trade, and in this case, the more I can focus on fewer strategies the better off I get.

Performance Review OEX Weekly Iron Condor

Links to day-by-day review of live trades:
FEB OEX Weekly Iron Condors Day-by-day review (4 trades)
JAN OEX Weekly Iron Condors Day-by-day review (3 trades)

So, let me start with a log of all trades (Live and backtested) for this strategy, I’ve tested the OEX Weekly Iron Condor for 1 year before I dug into it, even if I wanted to test it further, as it seems the OEX weekly had very few strikes available back in 2008, so backtesting further was not an option:



This is fine, but let’s also look at a simulated equity curve chart based on this data:




You’ll notice this is by far one of the best equity curves I’ve posted on the blog. Why is that? The vital signs are awesome! Despite the relative small win/loss ratio, the percent of winning trades is huge. So, the trade results seems to be complying with the probabilities, win 80% of the time and it is golden.

With the win-loss ratio, percent wins and average win, you can run several simulation scenarios by using a very nice tool that Henry Carstens put together. To test your edge, go to http://www.verticalsolutions.com/tools/pl_forecaster_pctwins.html and check it out for yourself, just plug in the variables and run a few scenarios to make sure your position is still a winner.



So, needless to say, I’m sticking around the OEX weekly for a while. Another key factor is the weekly feature. Notice that on any monthly trade you’d spend about 8 and a half years to reach 100 trades, but on the weekly strategies you go through 100 trades in just about 2 years! So you can crank up your money making machine much faster!

02/19 Daily Summary

I missed a couple of days this week, not something I’m proud of, but simply happened this time. I’m now back on the sweet spot, with all my trade monitors updated and ready to resume my daily journaling process.
I have been thinking about writing a few e-books, this week got me thinking about writing a lessons learned manual.. Something I spent quite a few trading dollars to learn, paying the school of hard knocks.. Would you be interested in purchasing such an e-book? Let me know your feedback.

02/19 NDX Fast Butterfly

Closed the NDX Fast Butterfly this week for a small profit. The NDX refused to post a negative day for the entire week. It kept on rising, but I must say, this rise is like a watching someone move painfully up the stairs, not very healthy up-side move I must say....

02/19 MNX Iron Butterfly

As much as I wanted to touch the trade, I decided not to mess with it during this week, left it all for the market to decide (with contingent orders). The deltas are higher than I usually let them be, but in the same time, volatility compressed through the week and I see that if it gets to my up-side adjustment I’ll be able to hedge without any major impact in the P/L.

02/19 NDX Iron Butterfly

Got through the first week without having to adjust the position, it seems to me that getting off to a good start is usually half of the battle on any of those income strategies, so this is a good one!

02/19 OEX Weekly Iron Condor

The PUT side expired Today, so this week was a losing week for the trade, I captured a few lessons learned after discussing with fellow traders here in California who trade this strategy:
1) Enter the position mid-day instead of early morning;
2) Be suspicious if you’re getting over .40c for 80% probability of profit (I was getting .70c for the position I got in this week)
3) Enter the trade as a full condor, no reason to force with single contract orders. In other words, do not force execution unless you have an extremely good reason why.

02/17 Daily Summary

I missed a day in blogging Yesterday, this long weekend has been rough around our house, all household members (including the dog) got sick over the weekend, and we were still recovering Yesterday, we’re doing much better now, so I’m able to catch up and not let the blog and trade journal slip.
Yesterday I’ve started most of my positions for the MAR cycle. Have been playing catch up with some of my tracking spreadsheet and got hit on the OEX weekly this time quite early in the trade, read more to see the details.

02/17 MNX Fast Butterfly

This is an experiment I’m running, loading a slightly bearish butterfly on a weekly basis with the goal of capturing a pull back and getting out fast. My stop is to the up-side and if we pull back between Tomorrow and Friday the position will bring in the profit goals (8 or more ROI).

02/17 MNX Iron Butterfly

Started the MAR contracts for the MNX Iron Butterfly, the trade got started Yesterday and I still have to find some time to compile the dashboard.

02/17 NDX Iron Butterfly

I am leaving the remaining FEB contracts to expire and have started the MAR position. I’ve entered the trade Yesterday and there has been little change. I have not yet created my tracking and dashboard view, am a bit behind myself this week.

02/17 OEX Weekly Iron Condor

This was not a good week for me on the OEX Weekly Iron Condor. I got stopped out of my call spread this morning as the OEX traded around 506. In hindsight I believe my entry was a big part of this issue, as you see, I enter this position early in the morning, and when I got in, the OEX was trading below 500, then it proceed to rally through the day and got my trade in trouble right off the gate. I will reach out to fellow OEX weekly traders to find out if they had the same problem and if they enter at the end of the day to avoid such an issue. In my backtesting for this model all assumptions were based on a end of day entry, but in reality I’ve noticed little difference between the early morning prices and end of day, except for Yesterday. So I need to further research and evaluate the model I using for testing and live trading execution to make they as close to a match as possible.

02/12 Daily Summary

Ok, I must have Internet back! Please Comcast, stop being lame.. I’ve been trading out of the local Starbucks, and Today I had the “pleasure” of spending about 40 minutes listening to two guys yapping about useless stuff ... aaaargh Need some quiet please 
Back to trading, shutting down the Iron Butterflies, the OEX managed to make its Money this week, so getting ready to re-load next Tuesday. This is it for me, you all enjoy the weekend, I’ll catch up my new buddies Starbucks buddies...,,

02/12 MNX Iron Butterfly

Houston to MNX, Houston to MNX, you still there, over? Sir. We lost our crew.. 
Yeah, took a beating on this one, but part of the business, at the very least managed to keep under the max loss level. Next month begins.

02/12 NDX Iron Butterfly

Houston, prepare to touch down! We’re landing the craft without major damage, all pilots are still alive.