starmine777
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hi all,
i have a few option strategies concepts in mind that i haven't really backtested/drilled into details but just wondering if anyone out there is already employing these strategies and willing to share the experience (or if u see any flaws pls point out too). my apology if someone else already discussed these in other threads (as i'm a newbie to the forum) and if u can point me to those threads that'd be great as well.
strategy 1 - pattern recognition (tech analysis) + option
e.g. whenever i see a weekly reversal candlestick say in SPY (assume signal is bearish) then i will do a bear call spread. reason for not doing a outright short or long put instead is that in this strategy i want to have some buffer as the reversal may be false signal. i understand instead of high risk/reward ratio in the outright/long put case i will get a bad risk/reward ratio with higher win% , but personally i prefer a high prob strategy (of coz i have to work out a positive expectation from backtesting).
i actually think lots of traders are doing this on the outright/long put basis but is there anyone using credit spread/short call, etc as entry instead or is this a losing game?
strategy 2 - trend following + covered call/put
e.g. the trend strategy being long or short on 50Day breakout either side. let's say it's a long, usually what ppl does is go long and also place a hard/trailing stop and watch the trend develops, but here my thinking is why don't ppl also sell covered call on their long position? if it keeps trending then they can roll up and out their calls but if it goes down and reaches their stops then they should be able to profit a bit from the short call? of course you will have cases that vol spiked up so both the outright and option end up losing, which means u need a lot more monitoring and risk mgmt control (also the case that price rose so fast u can't roll up and out enough so u capped your profit), but this should be something to consider for the extra yield?
strategy 3 - fundamental analysis + ratio call/put
e.g. i have a few undervalued stocks and long them outright, but instead of selling 1 covered call i sell 2 or 3 covered calls. thinking here is that if just do 1 covered call the risk profile is = a naked put, which is more of one-way directional bet, but with 2 or 3 covered calls, again like strategy 2 u can roll up and out if the calls get ITM, barring cases where the outrights gone flying and u can't catch up with the rolls (which u still make money but capped by the call strike), this should be a decent strategy to smooth out the equity curve? margin may be an issue here but assume i do 1 time leverage on the outright and write 2 times covered calls it shld still be within margin requirement...?
strategy 4 - alternate rolling of naked put/call
last one is a funny thought .. e.g. u short a naked call and it gets ITM, so normally u would roll up and out to manage, but usually the stock keep trending and u end up still being ITM. so instead my thought is that u don't roll up and out but u roll out and turn that naked call into a naked PUT.
an example would be AAPL current spot 336.1 , you sell 19feb 340call naked (prem $6.1) so later spot moves to 341 which the prem of 340c you shorted probably rose to $8.5 (i made up the number approximately). normally ppl would roll to 11mar 345c with net credit or flat, but my strategy is to roll to 11mar 335c instead, under the idea that ok if AAPL continues to move up and down i will need to roll out and alternate between call and put, but this kind of martingale strategy should at least fare better than the 'keep rolling up and out because stocks/index/futures can't go up forever' strategy? margin maybe another concern here.
obviously i haven't thought through all details of each strategy but i'd like to kick start some discussions nonetheless. i believe u guys' comments will develop help shape up my thoughts to move on for some in-depth backtesting.
thanks,
will
i have a few option strategies concepts in mind that i haven't really backtested/drilled into details but just wondering if anyone out there is already employing these strategies and willing to share the experience (or if u see any flaws pls point out too). my apology if someone else already discussed these in other threads (as i'm a newbie to the forum) and if u can point me to those threads that'd be great as well.
strategy 1 - pattern recognition (tech analysis) + option
e.g. whenever i see a weekly reversal candlestick say in SPY (assume signal is bearish) then i will do a bear call spread. reason for not doing a outright short or long put instead is that in this strategy i want to have some buffer as the reversal may be false signal. i understand instead of high risk/reward ratio in the outright/long put case i will get a bad risk/reward ratio with higher win% , but personally i prefer a high prob strategy (of coz i have to work out a positive expectation from backtesting).
i actually think lots of traders are doing this on the outright/long put basis but is there anyone using credit spread/short call, etc as entry instead or is this a losing game?
strategy 2 - trend following + covered call/put
e.g. the trend strategy being long or short on 50Day breakout either side. let's say it's a long, usually what ppl does is go long and also place a hard/trailing stop and watch the trend develops, but here my thinking is why don't ppl also sell covered call on their long position? if it keeps trending then they can roll up and out their calls but if it goes down and reaches their stops then they should be able to profit a bit from the short call? of course you will have cases that vol spiked up so both the outright and option end up losing, which means u need a lot more monitoring and risk mgmt control (also the case that price rose so fast u can't roll up and out enough so u capped your profit), but this should be something to consider for the extra yield?
strategy 3 - fundamental analysis + ratio call/put
e.g. i have a few undervalued stocks and long them outright, but instead of selling 1 covered call i sell 2 or 3 covered calls. thinking here is that if just do 1 covered call the risk profile is = a naked put, which is more of one-way directional bet, but with 2 or 3 covered calls, again like strategy 2 u can roll up and out if the calls get ITM, barring cases where the outrights gone flying and u can't catch up with the rolls (which u still make money but capped by the call strike), this should be a decent strategy to smooth out the equity curve? margin may be an issue here but assume i do 1 time leverage on the outright and write 2 times covered calls it shld still be within margin requirement...?
strategy 4 - alternate rolling of naked put/call
last one is a funny thought .. e.g. u short a naked call and it gets ITM, so normally u would roll up and out to manage, but usually the stock keep trending and u end up still being ITM. so instead my thought is that u don't roll up and out but u roll out and turn that naked call into a naked PUT.
an example would be AAPL current spot 336.1 , you sell 19feb 340call naked (prem $6.1) so later spot moves to 341 which the prem of 340c you shorted probably rose to $8.5 (i made up the number approximately). normally ppl would roll to 11mar 345c with net credit or flat, but my strategy is to roll to 11mar 335c instead, under the idea that ok if AAPL continues to move up and down i will need to roll out and alternate between call and put, but this kind of martingale strategy should at least fare better than the 'keep rolling up and out because stocks/index/futures can't go up forever' strategy? margin maybe another concern here.
obviously i haven't thought through all details of each strategy but i'd like to kick start some discussions nonetheless. i believe u guys' comments will develop help shape up my thoughts to move on for some in-depth backtesting.
thanks,
will
