Very interesting project! Best of luck to you and thanks for sharing your process/thoughts. From the description of your strategies, it looks like you are overlaying a directional options strategy with a long calendar strategy (sometimes outright short vol when strategy 2 is 0). Do you have any data on your 1st order risk/pnl attribution (how much of your pnl is coming from each delta/vega/theta)? Do you limit outright aggregate delta direction of strategy 1? Obviously your worst case is a risk off vol spike with strategy 1 being short only puts and strategy 2 being 0. Are you modeling the conditional price/vol correlations of the securities on a strategy and/or portfolio level?
I am not opening both long and short vol positions in the same stock. At least not generally. It does rarely occur. However, the instruments I am trading are fairly well correlated, so if you look at the strategy as an aggregate - it does share some similar properties to a long calendar strategy. I am not explicitly limiting the positions - however outside of this strategy I always carry significant exposure to far out the money puts on the main indexes. This hedge protects these strategies as well as other strategies run out of this account.
The first month is now officially in the books! While I did not match my goal of $50k this month, I still had a GREAT month. I also fixed a few execution related bugs early in the process and I just completed training of V1.1 of strategy #2. This version will run in place of strategy #2 starting Monday. I will also add 1 or 2 additional symbols to the system, as I slowly build towards the $50k goal. This week's results: Closed PL: +$18,704 Open PL: -$4,735 MTM PL: +$13,969 Weekly Results (MTM): Week 1: +$7,815 Week 2: -$4,997 Week 3: +$10,624 Week 4: +$13,969 Monthly Results (MTM): Jan: +$24,559 Closed PL Since Inception: +$29,294 MTM PL Since Inception: +$24,559 (+9.82%) on 1115 trades Current Holdings: $SPY short 12 Puts 0 Calls - Open PL: $-930 $QQQ short 2 Puts 1 Calls - Open PL: $87 $IWM short 5 Puts 0 Calls - Open PL: $-998 $DIA short 8 Puts 0 Calls - Open PL: $-965 $XLV short 20 Puts 1 Calls - Open PL: $-242 $XLI short 32 Puts 2 Calls - Open PL: $-896 $XLK short 5 Puts 1 Calls - Open PL: $-205 $XLY short 11 Puts 2 Calls - Open PL: $-586 This strategy is holding quite a few short puts going into next week. I personally am not nearly as bullish as my strategy is. Good chance my "hedges" get tested a bit next week.
I have been analyzing my results for Strategy 1 and Strategy 2 for the month. With over 1000 trades in the month, I have plenty of data to look at. For Strategy 1 - shorting options, there was a positive effect (although small) to using short options vs just buying shares. For Strategy 2, where I am long options for a max of 24 hours. There is a pretty substantial hit to the strategies performance and win %. By using options I am giving up 6 points on win percentage. For example, strategy 2 with options won 67% of the time. Without options (buying/shorting shares instead) it would have won 73% of the time. That is a pretty big delta. I need to seriously consider moving Strategy 2 over to shares. It looks like it was more pronounced on bullish trades. Therefore, a happy medium may be to use share purchase for bullish signals and put purchase for bearish signals.
Looking at this are you a little worried if we have a fiver percent sell off in the indices this week? What are your deltas on these strikes? It does look like a very bullish position.
Most of the deltas are around 30-35 at the moment. If we have a 5% drop this week, these bullish positions will end up getting closed for a significant loss. However, that will open up opportunities for new positions to be open which will capitalize on whatever movement comes next. I would prefer to not have a big loss, but in the grand scheme, it wont matter. In addition, a 5% drop will let me unwind some of my hedges for nice profits. So, while this 1 strategy in my account will have a bad few days, the overall account will be great if that plays out.
Ha! Same thing happened to my thread. Started daily, then weekly.... now I only post performance when I feel like it and maybe once a year. Performance threads for automated trading aren't that interesting, but it is nice if you can get a discussion going about what you do and why... that's where the value is. GAT
Having a fantastic week. Obviously being very long coming into the week was a good call. I didn't agree with it at the time, but that is why i'm not a discretionary trader. Algo's are slightly bearish/neutral at the moment. Closed PL this week: +$20,510 MTM PL this week: +$26,032 Closed PL Since Inception: +$49,804 MTM PL Since Inception: +$55,326 (+22.13%) on 1425 trades
Very slow week. Strategy didn't make too many trades. The few it did got chopped around a bit. Strategy is currently net bullish going into next week. Closed PL Since Inception: +$49,257 MTM PL Since Inception: +$51,173 MTM Delta since last week: -$4,153