We're back at it. With today's action we will once again venture back into our "WOTM Index Spread Strategy. based on this: and now this (in C2 account): We'll follow this up with a translation to the 750,000k+ account generated in this thread.G
I was able to successfully ('til now) execute a WOTM spread trade with the QQQ's. I am now trying to construct one with DJX. Which instrument should I use (like the QQQ) where the spreads are just pennies? Any help would be appreciated, Pay (Gil)
OK, I got some answers from the C2 board - I guess this one has lost faith...interesting how the time has come and most won't know it.
OK, I got some answers from the C2 board - I guess this one has lost faith...interesting how the time has come and most won't know it. You can go back and formulate your own summary, but the market indeed tried to correct in Feb-Mar...and we got a ridiculous 1 month correction before bulls confirmed a new rally. Then numerous distribution days stacked up before June that by rights should've killed ANY rally - but this time institutional favorite stocks (AAPL,RIMM,GOOG) refused to budge even a bit - also market leading stocks held firm. Result: New highs on the Nasdaq - pulling the other indexes (temporarily) up to breakout of overhead resistance. Seems fine enough. I don't predict the market, I just follow in it's footprints. The (like the headfake attempt at correcting in June) Nasdaq had a surge of institutional buying making this investor have to stay the course with investments - knowing we are past due. This (hard work) compounded with all the "6-month wonders" (that play with a fraction of their net worth - decade after decade) that are humoring my 10-14% YTD return in this "raging bull market" (~15-20 YTD gains from benchmark indexes back down to ~5-10%, lol) and well...there we are. You see...accurately calling bottoms for this Covered Call (future) Hedge Fund (limited partnerships - "hedge" loosely=covered call) will make heady gains like you see from my funds at my site and many funds at Collective2 (like from last Aug - recent). The latter stage (Feb- recent) don't compound (for some) as strongly as the intitial month(s) period. THE KEY POINT is after ramping up 50-75% - that when a correction does hit...this MUST BE recognized and drawdown from highs needs to be contained 10-15% from highs - for high growth funds. That is the only way to (that I know) to successfully compound for 3-5+ years a high AVERAGE annual return of say 40% or greater. In hindsight...I would've liked to executed well with my WOTM Index Spread Strategy (BTW if positions were held they became entirely profitable, except deep drawdown was unacceptable - hence stop-loss methods incurred) from the beginning. For that matter, it'd been great if we had a "normal" 2-3 month correction in Mar, since the 45% gains from my Covered Call Funds at my site would've contained losses and then lauched from an outperformance (vs the benchmarks) vantage point up another 45% compounded from then until now. Be that as it may...the correction did eventyally hit (in case you didn't know it) and for this strategist it still works out fine, since it will have to now be deeper, longer and more severe (notice last week). Also, instead of the usual quick 10% lop off my funds from the first day the indexes tanked thru to entirely stopped out of covered call postions - mine was just an added 6%. I also wouldv'e liked to have stayed in cash - having recognized the correction at the beginning of starting my C2 Covered Call Fund on June 1 and let the market correct then get in with the business of producing gains - but that wasn't the case. Initial phase in got stopped with the first headfake (-3.5%), then IOC debacle (another 5%) then added mental mistakes (+9%) and the finally correction (6%) and I now have a starting point -20% LOL But that's cool, I'm now positioned to outperform the indexes in the next few months by not going long and my peers that may see their funds vanish - plus I enacted a QQQ spread trade that quickly made up for 5% and another 3% on the table - and perhaps other opportunities to show how I make money in my Covered Call Funds during correction. Worst case I'll be down the ususal 10% with the market grappling now for a bottom and an easy 50% or so rampup once it does. Most won't understand what is going on or what I am doing until I do exactly that, but that is how I'll bode...well. Gilbert aka Paysense. Oh the point of this post was to bring us up to date with adding the gains from the QQQQ spread in keeping with our strategy: Here is where we are at with the WOTM QQQ index spread trade. I've been waiting for the expected wild swing upward that we'll likely get from the DJIA to enter the next spread trade. (I won't bother posting an update of the the SPX/Nasdaq-QQQ/DJIA-DJX/RUT/MID/SML/SOXX - but they are in complete dissarray and will take quite some work to find a bottom and to once again reach new highs. Also remember 3/4 growth stocks go by way of the market = will be/remain in the tank...many never to return/recoup == or the VIX/VXN charts that will also add to the tell of impending corrections) Anyway...I know it's a lot of verbiage...but in 6 months we can look back and see what works AND stands the test of time. So when QQQQ trade was initiated (24th), C2 account was ~$87500/$100,000, - so spread trade was to (max possible) recoup $8750 or 10%. Thus far, it's up $4,750 (if unwound) so - with translation to ET study - account $742,270 (from $1M) QQQQ spread trade construct is on the order of 10% (possible max) profit or $74,227 of which $40,295 is thus far been gained (if unwound) Brings account total: $782,565. It would've been nice (but this is OK) if when the market said it was ready to correct (with institutions seriously caught holding the bag) if they hadn't artificially propped it up until they can safley exit and then force it down when they were good and ready. We'd be up $200,000 - $300,000 on the $1M. Instead we will have an easy time to make it back up to $1M and perhaps $100,000 - $150,000 in gains this ("top") time around. (at least that's the way I think (may have) happened). Also keep in mind, easy/sleep well is the mode to componding a relatively safe - large annual retrurn with this strategy. A LOT dfferent from day-trading wonders and jokers or those that like to think they have some progress with their money. Gilbert aka Paysense
Again to the one-hit wonders - my having NOT made any money these past few months leaves their gut saying so. Have I said "time will tell" before, when others say how come I don't get it and quit? Anyway what I wanted to say was if you noticed the C2 spread legs are treated as separate at C2 (like my short call options that go seriously - a good thing - ITM) and so show up in stats as extremely risky, which is FAR from the case (admittedly so by MK the owner at C2). paysense Also in keeping with this analysis/study (not for advertising my systems) one can easy enuf (since posting in not the policy of ET) find more message board material regarding subjects at C2. You'll have to figure out how to get there - or PM me. Regards, Gilbert
Also don't forget to check out - http://www.elitetrader.com/vb/showthread.php?s=&threadid=94764&perpage=6&pagenumber=53 Just an update - yes WOTM Index Spreads are profitable by accurately calling a market top. It took a few incorrect calls where we phased into the strategy - that drew down our initial $1M funding (admittedly theoretical). Read the C2 posts and see that we are trying to further profit by entering the next trade. The current trade is almost fully realized and we still have 3 weeks until the options expire. With this successful trade our account has jumped from $742,270 + $74,227 to $816,497 PS Things will eventually all work out. You see by containing losses with past "failed" top calls/trades - since our indicators are accurate, this thing (as is always the case) went up much higher than it should/we did call it "right" and will have to go down a lot harder and longer - which is GREAT! With our discipline, we will simply scoop up what was/is rightfully ours - eventually. You see...this thing (correction) may not resolve for a few months paysense
Not that I am in it, but we are GAINING traction with our WOTM Index Spread Strategy. This is an update: This trader has gotten a 'reprieve' with his "top" calls that kept going awry. Stop loss methods work, however and so do the indicators (all the way back to Feb/most recently in Jun-Jul period)! Like I said...the more frothy the market, the more work needed to wring it out. Hence, where we are at today. HEY - the important thing is we do call every "tops" (and bottoms) right - to within days!. Well at least I think this is of most value. I bank on the 80% probability (for the life of the market) that said "confirming" action leads to each new rally. I bank on this to be key not only for making money with "high-yielding" covered calls (the trend is your friend) - but with this WOTM Naked Index Spread strategy. I have combined the two strategies in my fund at C2 (per ET policy, I won't give a direct link - but this can be easily obtained PM, etc.) In all fairness, the FULL 10% from recent QQQ spread trade was NOT realized... ...as some was left on the table (I erred upon exit). Also note how C2 "accounts" for spreads (and covered calls) with the "EXTREME" ratings on relativley safe trades - oh well. Also note that ET posts regarding strategy allowed for this trader to refine (spreads not naked calls) process that has shown up in C2 account (making money in ANY market). 7250/8750 was ACTUALLY realized so with $61,502 gained, Corrected Total Account Value: $803,772. As I said, this "correction" is likely going to take a bit of time to resolve and more trades can be implemented. I was looking for a bounce in the DJX (poor bid/ask spreads) to enter next trade - and did get it (was able to use limit orders to execute trades in-between quoted bid/ask spread). As you can see we got a very "wild" bounce" - so much so I was bounced right out - yet got a good price on increased contracts at higher (WOTM) strikes: Also note we are also into a covered call trade and into another QQQ WOTM spread trade. Options expire next Friday. We will keep you updated. Also remember those late-day program trades that swung index prices wildly Tues-Thurs, well my attempt to enter a spread trade (C2 requires these be done separately) was only half opened and then closed, hence the $1,000 profit on DJYHH. So let's do the calculations on how these trade affect our hypothetical ET fund- On 06-Aug-2007 at 15:05 C2 account value ~$80,000, so DJX spread trade [150 x DJWHF/DJYHG: .60-.35=.25 credit spread] has total possible profit of .25x15000=$3,750 On 08-Aug at ~15:30 this position closed at 1.55-1=.55 credit spread or .55x15000=($8,250). Attempt to reopen DJX spread trade (roll up to 137/138 strikes), failed, but the opening and closing of one 'leg'=$1,000 Total drawdown 8,250-3,750-1,000=$3,500 $3,750 total possible profit on $80,000=3,750/80,000=0.046875 or 4.69% Instead incurred loss of $3,500=3,500/80,000=0.04375 or 4.375% Since 1-0.04375=0.95625 Total (ET) Account Value: 0.95625x803,772=$768,607 As you may have noticed I did get good pricing on the bounce for a new DJX WOTM Spread Trade on the massive bounce: With the subsequent plunge these (like the QQQ trade may too become) are pretty much fully realized. Also our entry into the next QQQ trade is far enough out-ot-the-money to be looking good with 5 days until expiration. We will revisit this once/if it becomes close to being fully realized. But for now, let's add in the $6,000 total possible profit from DJX spread trade [200xDJYHG/DJYHH or .80-.50=.30 credit spread=20000x.30=$6,000]: C2 account value on 09-Aug-2007 09:45 was about $80,000. So 6k/80k=0.075 or a total possible profit of 7.5% Current ET 'account' balance is $768,607 and a 7.5% increase: New Total Account Value: $826,252. Open QQQ trade has a 2.2625% possible profit that may bring this account back up to $847,941 from $1M. So we are gaining traction. If you remember we GOT CLOBBERED with (necessary) stops with our first 2 'phase in' attempts at calling the 'top'. These first few trades after succsessfully calling the "top" have quickly and relatively (excessive DJIA bounce did cost us) easy begin restoring most of our account. On 24-Jul-2007 we made our first successful QQQ spread trade and went to caution at my Covered Call training website. On 27-Jul-2007 went to Stop Losses mode at site. By the end of that week our Covered Call position exposure (see my "Managing Funds for A Living" thread) was reduced from being fully vest - with some margin - to <20% vested/shortly thereafter went fully into cash and have been ever since (except recent PRKR addition with Dow 'confirm'). Perhaps some gains on 1M will be had from this "top" after all! I am looking at RUT for the next WOTM Index Spread=$$$$ trade. paySense
It been a few days and I have an update: The last update found us at $826,252 - down from our $1M account inception. Our last WOTM (way-out-the-money) index spread trade was in the QQQ's at the Aug07 49c and 50c strikes for a .14 net credit with 150 contracts. If the full amount was realized, our ET account would be at $847,941. In actuality .11 was realized to bring: New Account Value: $843,294 So we've made a few more trades capitalizing on our accurate market analysis that we headed, went into and are/will continue to be in a correction. Gains were lost initially when market didn't cooperate (institutional favorite stocks held firm when rest of market was distributing) but frothy markets tend to fall harder - hence current and perhaps more gains to be made. Please note full $6,000 from previous C2 DJX trade was realized. So let's continue... We opened another QQQ WOTM spread trade. for Aug07 at the 48c and 49c strikes - or a .12 credit on 150 contracts. It was open and closed on the 14th and 15th for a $1,800 gain. Also opened on the 14th and closed on the 15th was a RIMM WOTM spread trade (bearish call spread). This time for Sep07 - HOLD IT...I just noticed something. I thought I had same month/different strikes. Now I see why I got such good prices on the one leg. It was for Aug07. So when RIMM and the market started to tank with about 2 hours left in the session, the one leg really dropped allowing for me to realize my full (intended) credit so quick. A liitle help in what this trade is called. I'd like to understand it better and its proper use. Anyways... I BTO the Sep07 230c at 5.2 Then I STO the Aug07 200c at 8.5 (now I see, I meant to STO the Aug07 220c) Needless to say the Aug 200 ITM call quickly went OTM to BTC at 2.6. I STC the Sep07 230c at 3.3. All told it made $4,000. So transposing from C2 to ET account: 14-Aug-2007 C2 account value $92,315 $4,000 + $1,800 = $5,800 or a 6.28% gain. New Account Value: $896,277 So we rather quickly recouped about 20% in gains from the low of ~$750,000 from $1M. From initiial (wrong,lol) "top" call trades that got stopped. Paysense
I could pull up and add charts of RIMM, AAPL, GOOG, MA, BIDU, AMZN, etc. ...along with the progression of SPX/NYA/Nasdaq/DJIA/RUT/MID/SML/SOXX coupled with the Vix and Vxn along with pictures of me sleeping well these past weeks...but I will spare you. Not to mention daily charts of the Nasdaq/DJIA as huge chunks get lopped off almost every other day. It seems we've only begun our work to form bottom to this correction (most figured we were done after SPX was off a whole 3%!). Anyway you'll need the cross ref - I could pull up and add charts of RIMM, AAPL, GOOG, MA, BIDU, AMZN, etc. ...along with the progression of SPX/NYA/Nasdaq/DJIA/RUT/MID/SML/SOXX coupled with the Vix and Vxn along with pictures of me sleeping well these past weeks...but I will spare you. Not to mention daily charts of the Nasdaq/DJIA as huge chunks get lopped off almost every other day. It seems we've only begun our work to form bottom to this correction (most figured we were done after SPX was off a whole 3%!). Anyway you need the cross ref - http://www.elitetrader.com/vb/showthread.php?s=&postid=1569591#post1569591