There is one chart signal in the S&P that I take care of: the 200 dma. I usually get out of my short ES put trades, when we move below it, and re-enter very carefully, until we move back above it.
On the one hand, that helped me to keep losses minimal in the second half of August, as I liquidated on 19th. On the other hand, I liquidated several times with a small loss and re-entered soon after, eg. in the first half of July 2015
Best regards, Myrrdin
The following 2 users say Thank You to myrrdin for this post:
1. About entry point: I just notice that using 2 days ES future % change as entry date can noticeably improve my trade (more ROI, less DH).
2. About others: I`m tend to think that there must be some factors ( put or call side). Behind every trade is human opinion (even if a trade is execute by soft command - soft parameter are adjusting by people too).
I agree with you.
Like most of you I have been doing lots of backtesting since the Aug 24 crash to see what I could have done to change to outcome.
Looking at the chart, the week before there really wasn't anything jumping out that would have signalled a crash, just the normal oscillation and the news events no different. Just like this January, nobody could have predicted that severe of a drop.
In the end I found you have to have have the hedges in place before the crash. Putting them in after it is never as effective. Getting out of unhedged positions will also be painful.
What I haven't determined is the best way to hedge. @ron99 posted a good method of buying 2 puts, it works well in a Aug 24 type crash, but it does not work if it is a slow 10-20% grind downward that takes 30+ days to go down and VIX stays relatively low like it has for the Jan crash.
The problem of hedges is you can't do them for free, they will always cost you something. Determining how much you want to pay and how much protection you will get out of it is the tricky part
Last edited by chubbly2; February 13th, 2016 at 01:09 PM.
The following 4 users say Thank You to chubbly2 for this post:
I typically follow the Tastytrade approach, and try to exit strangles at about 50% of max profit, and straddles at about 25% of max profit. However, it also depends on how much the positions are making at a given point in time. I exited all of these some time ago, the strangle for 5.53, the 26/46 strangle for .71, and the 29.5/43 strangle for 1.54. I trade CL options a lot, and have made 13 more trades in it since I exited these positions. I'm currently short April 35 calls, expecting a decline in April CL to March 10, and down to 25.12.
The following 2 users say Thank You to Warren534 for this post:
So basically the three serial months (Currently Feb Mar Apr) will get replaced with three 'week3' options. So when Feb expires instead of adding May they will add May EW3. Plus they change from American to European.
I predict that the next change will be to go from listing the first 4 weeks of weekly options, to the first 12 weeks... then you'll have three each of EW1, EW2, EW3 & EW4
The following 6 users say Thank You to SMCJB for this post: