Purely Mechanical Option Trading Part 2

Discussion in 'Options' started by jeffalvinson, Oct 3, 2012.

  1. About four and a half years I started a thread call "Purely Mechanical
    Option Trading." Back then I discontinued posting because of health reasons, but I have recovered and have been ok for a while.
    This new thread will be a continuation of the same old system, but the old
    system has been slightly enhanched for more frequent trades.
    I will post my trades in the early morning and give updates if anything fills
    and wins or loses.
    In the last few days I had already started posting these new trades in the option forum on the thread called "My option trades" by Ryanpatrick,
    but I should probably give Ryan his space now that's back.
    Just to get some trades started, here is the first trades that I posted
    on Ryan's thread (My option trades) on Tuesday 10/2/2012
    (page 413) and today Wednesday 10/3/2012 (page 415):


    10-02-12 08:26 AM

    I placed orders for 2 different direction trades today:

    [Trade No. 1]
    SPY OCT144 Calls
    Buy Limit = 1.37 (No Fill)
    Sell Limit= 1.92
    Stop = 1.09

    [Trade No. 2]
    SPY OCT146 Puts
    Buy Limit = 2.05
    Sell Limit = 2.56 (+25%)
    Stop = 1.41

    I simply place an IB Bracket Order for each and let automation do the rest.



    10-03-12 07:30 AM

    My trading program is generating trades in both directions again, which tells me there is the potential for quick modest profits in either direction of the market.
    I placed the following trades today with automated IB bracket orders
    (Buy Limit / Sell Limit / Stop):

    [Trade No. 1]
    SPY OCT 144 Call
    Buy Limit = 1.74
    Sell Limit = 2.24 (+28%)
    Stop = 1.21

    [Trade No. 2 ]
    SPY OCT 146 Put (No Fill)
    Buy Limit = 1.65
    Sell Limit = 2.15
    Stop = 1.05


    Update for 10/2/2012 trades:
    [Trade No. 1] The call trade didn't fill.
    [Trade No. 2] The put trade filled and won on the first day (10/2/2012).

    Update for 10/3/2012 trades:
    [Trade No. 1] The call trade filled and won on the first day (10/3/2012).
    [Trade No. 2] The put trade didn't fill.

  2. Have you back-tested the system?
    For how long and over what dates?
    Did it make money on backtesting?

    Have you forward traded it?

    If so for real or on paper?

    Did forward trading make money?

    What is the basic underlying principle of the system? e.g. does it trade technicals like the 50 day average or what?
  3. Why only outright buy premium???
  4. subscribed. good luck Jeff.
  5. The system was back-tested prior to 2007 for a long period of time.
    Back-tested results made money.
    It has been forward tested in my cash account since July 2007 using SPY options. It has consistently made real money however the success rate of the system declined from July 2007 to May 2012 from W/L= 75% to WL= 70%.
    I then spent this summer slightly enhancing the reliability and frequency
    of trades by simply adjusting the system program parameters for Buy Limit Price, Sell Limit Price and Stop Price.
    However none of the original system program logic has been altered since
    its inception.
    The system is not chart based. It is based on mathematical
    trend and reversal logic formulas that have been programmed to accept the daily activity (open, high, low, close) of call and put options.
    The program then outputs a trade decision to buy the call, or buy the put,
    or buy both, or do not buy either. The trade decision also outputs the trade parameters (Buy Limit, Sell Limit, Stop).
    I can adjusted the trade parameters but not the formula decision logic.

  6. Thanks atticus,

  7. Trading only outright buy premium is all I have ever done.
    I find it forever-learning and frustrating at times, but its also extremely challenging and even fun on occassion.

  8. at109


    Jeff, good to see you back. Made a little coin with your system.
  9. Bracket order (Buy Limit, Sell Limit, Stop) placed for
    SPY OCT 147 Puts
    Buy Limit= 1.46
    Sell Limit = 2.04
    Stop = 1.14

  10. anytime i've bought outright premium.. i've thought as the entire premium as my stop... using a stop i imagine would get you picked off real quick no?
    #10     Oct 4, 2012