03/15 Daily Summary

Got in the OEX weekly, as well as two NDX Iron butterflies (one weekly, one monthly). I also took the opportunity to exit my NDX Butterfly from 03/01 (-5.32% loss), it was time to refresh the capital and get on with another weekly position. All and all, this intra-day reversal was kind of a surprise for me, but didn’t affect me much, as the only position I had entered intra-day was the OEX weekly, the others were added at the closing time.

03/15 NDX Iron Butterfly

Started a new monthly position, the NDX Iron Butterfly strategy. I am following Dan Harvey’s updated rules. As I started this trade I did not add the long call to smooth deltas right away, the reason is that the deltas are fairly small. If we trade higher (1935) Tomorrow, making new highs, then I’ll cut the deltas in half. Other than that, will continue to manage as business as usual.

03/15 NDX Fast Iron Butterfly (from 03/15)

Started a new weekly position Today. Got in the 1900 strike for the APR contracts (32 DTE), as you can see on the chart, the hedge-recover level comes right around 1940. Contingent order is in place.

03/15 NDX Fast Butterfly (from 03/08)

The position is back at B/E Today, if we have a few days of consolidating range-bound trading it will be ready to cash out. My goal is to aim for the 8% minimum, or take it off regardless on Friday.

03/15 NDX Fast Butterfly (from 03/01)

Ok, last Friday I said the trade would be ok if the market went down on Monday. Sure enough, it did and I got out of the position. My loss on the trade was -5.32% ROI, which is much better than the -12% we were trading at on Friday. So it paid off to have the extra day of patience and not being able to exit actually worked on my favor . I could have stayed in the trade to go up this final 5%, but part of the strategy requires me to get out and “refresh” the butterfly with a new weekly position, so I closed this one to free up my capital to enter the new position for this week.

03/15 OEX Weekly Iron Condor

When OEX was down around the 523 area I entered the weekly condor, as it traded higher at the close it got slightly bellow the 80% probability threshold. I still do not regret entering the trade back when I did, it is now part of my strategy, to enter around 9 AM unless we’re watching the market to rally/fall fast against one of the legs. The reversal was not very clear back then.

03/13 Fast Iron Butterfly - Backtest results

Ok, the results are in! First, a few disclaimers: This is based on backtest results, they are not representative of exact trading conditions, it simply serves as a baseline for me to decide if a certain idea is worth exploring.

I first had this idea after trading the OEX weekly. I wanted to duplicate the concept of a weekly trading strategy that was not necessarily dependent upon having an underlying with weekly expiration contracts. So I thought about this question for a few days and the answer came one night in a blast of inspiration. Such inspiration was so strong I’ve decided to test it.

My first test was simple: enter a bearish position, if it goes against you, get out, use a short stop (-8%) for exit, and take profits as soon as you make over 8% in ROI. Exit by end of week regardless. So, I tested this for a bit over 1 year, then I listened to a few Sheridan Mentoring sessions where they were talking about a similar concept (yet monthly), the “chain of butterflies”, the key difference was that instead of exiting the trade, the strategy actually opens a new bullish butterfly if the market moves up. I thought hum, there might be something in there for me.. my weekly strategy could be improved...

So I tested again, this time by hedging the position with a single long if down by around 8%, and opening a bullish butterfly at the top. A lot of improvement on the data-set I had tested.

For the past 2 weeks I had the experience with live trading, as it turns out, my recovery butterfly (the bullish one) ended up hurting both times when I needed them. So I started wondering if simply hedging wouldn’t be better. But I do not allow myself to change a strategy before first testing it.. Lesson learned: do not jump from strategy to strategy based on one bad trade, test the new concept, is it indeed better? Or was it an isolated scenario?

Turns out, the best approach is still to hedge and add a second position to recover. I also learned trading live that using butterflies is a pain (they’re hard to get out) so I re-tested with Iron Butterflies instead, the difference isn’t major from testing results, but it is major (in my mind) in Live trading.

So, as you can see on the table, I’ve placed my results side-by-side, and you’ll notice that even though the hedge+recover strategy gives you a smaller average win, and worse win-loss ratio, it bumps your win-ratio a LOT. That more than makes up for it! One final disclaimer, this is based in only 1 year of data (last year), so take with a grain of salt as well. I will not backtest further until I have a better software program in my hands for backtesting..

Cheers!