My Simple Profitable Strat: "ET Contrarian"

I plan to test the hypothesis that the majority is usually wrong. I need the support of ET to run the test. Right now the plan is to run a market sentiment poll every weekend . Based on the poll I will buy or sell a general market ETF Monday morning and hold it for one week or longer. Naturally, I will bet against the majority. Rinse and repeat the following week.

I will commit my hard earned money to the experiment. I will swing trade IWM (iShares Russell 2000 Index (ETF)) as a general market proxy.

I may change the format if I hear the suggestions that I like.


this week's poll is here: http://www.elitetrader.com/vb/showthread.php?s=&threadid=190864

 

Majority of where? You are sampling ET instead of the whole world. Are you also willing to fade the majority of GS traders?

 

Try fading the below on the main page of yahoo finance. Shows the top 3 bullish and bearish stocks people think on the yahoo forums.

"Community Sentiment

Top stocks creating buzz on Yahoo! Finance message boards"

 

I am willing to take the other side of ET. I like the challenge.

 

good idea, for now i will just bet on the general market direction and see how that one goes.

 

Cool experiment,

Looking forward to reading this journal.

 

Are You Bullish or Bearish For The Coming Week
Bullish 19 38.78%
Neutral 11 22.45%
Bearish 17 34.69%
Contrarians Suck 2 4.08%
Total: 49 votes 100%


I see a bit of a problem going forward. I need to have an unbiased way to interpret the significance of a given poll outcome.

Today the poll is unusually symmetrical. The minority is calling for a flat market. Therefore, I will sell a March or Feb strangle on Tue (the market was closed on Mon) betting on a flat market.

 

Betting on a range-bound market: sold 1 Feb strangle (63Call/59Put) around 10am ET with IWM ~61.37

SLD 1 IWM true Strangle: 0.21 USD SMART 07:04:26 1.63

 

Neat experiment, shortie. However, why would you throw in "Contrarians suck" as a poll option? Secondly, what do you consider to be the "majority"? +50% bullish or bearish? Most votes of bullish or bearish? I suspect that if your definition of the majority of voters is +50% of the polls or something to that effect, you will likely be "range bound" the majority of the time (which might not be a bad thing, but I don't think that is the intention of your experiment).

Technically, if most voters are "neutral" and you play the range, aren't you trading WITH ET as opposed to against ET?

 

i realized that won't be getting much out that strangle so i sold an additional one.
SLD 1 0.23 USD SMART 09:09:45 1.63