I think I may have given you the incorrect impression. I'm not putting forth a complete trading system in any capacity. there might be a slight correlation with up markets but it does hit new highs in down markets as well. This IS a discussion of the entry and exit signals and since it is always in, the exit/entries are the same. Basic system design is to take a skeleton idea, see if it has any merit and build from there. This curve represents the skeleton. If one can fade the ma's (always in) and be right 70% of the time the premium seller of a market should be able to find this useful. A mean reverting market is often an added edge for a nondirectional trader. Thanks for your input.
Prevail nailed this one on ES vs ER2, and today's action is an easy demonstration. ER2 @ 698, +15.5 on the day ES @ 1267, +14.5 on the day Looking at a short strike put 15% OTM: ER2 ~ 590, only 30 points below the October low of 620. ER2 JUL 590P 0.60 bid ES ~ 1070, a full 100 points below the Oct low of 1170. ES JUL 1075P 0.55 bid You take in 2x the credit selling 1 ER2 vs 1 ES. But it comes with the attendant volatility risk that Prevail points out. Does ER stand for "Emergency Room"?
Here is the entire report with actual parameters expressed in terms of sp cash. This is not a tradable system but designed to simply display a rough characterstic.
A skeleton in the closet perhaps (j/k). The curve shows 400 trades, but all the juice comes from 200 to 300. Does it still hit 70% on trades 1-200, and 300-400? Maybe it does, thus making it very informative for premium sellers. Its just hard to tell that from the equity curve. I missed that the system was always in. Perhaps try coding an exit XX(20?) days after the entry, with a stop of YY%(10%). See how many times the stop gets triggered. That might give you a good approximation of how a premium selling strategy would work with entries signaled by the ma cross. The PnL of the backtest would be meaningless, but all you care about in this test is the number of stopouts. Try it also with only long trades, since those represent put shorts, right?
UPDATE JULY 100*200 Put Ratio Spread: BTO 100 JULY ES 1200 Puts @ 8.50 ($42,500) STO 200 JULY ES 1175 Puts @ 5.50 ($55,00) Net credit = 2.50 ($12,500) Breakeven at expiration = 1147.50 on the ES for July. CLOSED for net debit of 1.60 for profit of .90 or $4,500. Feel like the market will move lower and wanted to take profits here which is nice for 24 hours. Leaving VIX Calls to possibly profit off move lower. VIX HEDGE BTO 30 JULY VIX 20.00 Calls @ $0.75 or $2,250
great ideas on making it more useful for options traders and I've tried a myriad of similar exits. I really feel increasing the efficiency of the entry is key for improvement. if only I could find the time...(grins)
ES (and SPX as well) hit resistance right at the highs at the moving average and the previous highs resistance line. Seems like we have another consolidating pattern which could be leaning towards a downside breakout. that is why I closed the put ratio spread for a quick 1-day profit, so that I could let it fall and find another entry point. Key indication is what we do over the next few days and of course the Fed announcement which could confirm what I have said or kick it in the bukake. Either way, my sentiment right now is for a pullback off the resistance.
Hey, do you want to be a trader, or a programmer? Tradestation is a bit of a siren's song. It can easily suck away time that might have been better spent elsewhere. One thing you might try for testing out ideas is to skip making a trade system from the idea. Just use indicators to map out the idea and visually see how it looks. On your ma cross for instance...what you really want to know is this, "If I sell a credit spread (or naked) at the MA cross, how often will I get stopped out?" Right? You don't care about targets or exits. All you want to know is how often the market moved strongly against you and forced you out. To test this, it may be easier to write a new indicator, rather than a system. When the MA cross happens, tell TS to draw a trendline 20 (make it variable) bars into the future, at a level 10% (make it variable) above and below the closing price. Then you can just scan through the chart and visually see the trades. If you like what you see and want to dig deeper, then make it a system and add all the extra junk. Or maybe you like what you see and don't feel you need to systematize it. The point is, try the easy way first
Are you trying to make my life harder or easier? Two lines of code ain't bad. I've built hundreds of systems, most have shorter life expectancies as you know. The hard part WAS setting up a theoretical trade every day for 22 years varied by vols so everything is apples to apples and measure exact violations in any chosen window of time. Now that was tough, and worth it. But alas I'm all for simpler when possible.