SPX Option Trading System

We have had a 63% pop in the VIX over the past 3 trading days. This has only happened a handful of times since 1990.

For those interested in how the market has moved after such a large 3-day move in the VIX, here are some SPX moves over the next few days:

1-Day after: SPX up 5 of the 6 times.
https://www.dropbox.com/s/e6rib7j9fxjcppn/Screenshot 2014-10-13 22.48.31.png?dl=0

2-Days after: SPX up 6 of the 6 times:
https://www.dropbox.com/s/hw5xh4vwdef9lgs/Screenshot 2014-10-13 22.49.39.png?dl=0

4-Days after (would be the equivalent of now until Friday for those with weekly SPX positions: SPX up 5 of the 6 times:
https://www.dropbox.com/s/tmq08mr50dzl5to/Screenshot 2014-10-13 22.51.00.png?dl=0
 
This is awesome! I have been working on something very similar. I am using the VXST as I focus on trades 9 days and less which the VXST represents. VIX is for 30 days out.
 
This is awesome! I have been working on something very similar. I am using the VXST as I focus on trades 9 days and less which the VXST represents. VIX is for 30 days out.

Thanks. I still use this all the time.

I have been doing more long term SPX vertical spreads. For example I put on last Friday the Dec 2650 -2675 BeCS for $2.20 credit when SPX hit a new intra-day high. I could close it today for $1.45 and make $0.75 on $22.80 risked = 3.29% return in a week.

Here is how my calculator looks for that spread. 89% success rate at Options Expiration. This is how SPX has traded historically over 128 days (equivalent of now until Dec op ex) after it has set a new high.

https://www.dropbox.com/s/f4fevmqpfsdksui/Screenshot 2017-06-16 14.39.02.png?dl=0
 
Here are the spreads IC's I did which expired today.

Last Thursday I opened:
SPXW 2370/2375 2495/2500 IC @ $0.30

Yesterday I opened:
SPXW 2385/2390 2455/2460 IC @ $0.30

Also yesterday I opened for expiration next Friday:
SPXW 2365/2370 2480/2485 IC @ $0.30

My program is written in Java using JavaFX for the user interface. I have API access to TD Ameritrade. That makes it much easier to put on these trades.

My strategy computes a 90% probable range starting with VXST. I then adjust the standard deviation from the most recent 40 weeks until I get only 4 stop-outs.

The range I compute is actually the stop-out which is 10 points away from the short strikes. That way 9 out of 10 trades on average actually work out. Most people use the options delta to approximate a 90% probability but that is for SPX to not get to the short strike. I think that approach is not very useful because that is way too late to get out of a trade.

I wish we could post images here. I would send you screen shots of my app. I guess I need to use drop box.

Do you no longer have a website?
 
Can you share your yearly return percentages? What percentage of your account do you commit to each trade? I am doing 35% per week. There is a few days of overlap.
 
Can you share your yearly return percentages? What percentage of your account do you commit to each trade? I am doing 35% per week. There is a few days of overlap.

I don't really keep track of yearly returns anymore. I retired 6 years ago at age 46 and now just trade for income with capital preservation my biggest priority. So I keep more in cash and/or do more longer term catastrophic adverse trades such as Bear Call Spreads on SPX. I also will sell weekly Puts on stocks that are at over-sold levels so worse case is I am assigned the stock at a pretty good entry point.

It looks like you have developed a nice analysis tool. My tool uses the historical % moves on SPX over whatever time frame the trade covers and I use data back to 2004. It then converts those % moves to todays $$. I like using actual historical move data versus something like ToS probabilities.

I can limit it to only times when VIX was below a certain level if desired. I can also just look at data for monthly op ex versus every week. And I added the ability to see how SPX trades after it hit a new high.

When I run a scenario on my calculator I can then look at the far right to see what dates the larger moves happened. I can decide if I discount any of those for some reason.

For a couple years I did a "double your money" strategy with weekly spreads. It worked out well but you had to be very disciplined to take take a loss and move on. Some had a problem with this strategy as they held too long and a loss that could have been recovered in 2-3 weeks then became a big loss that wiped out months of gains.

Here is an example of the first 6 months of 2015 results. 41% gain for 6 months even with starting out with a 5% loss on the first trade of the year. This was done with $15,000 starting capital and reinvesting the capital each week.

https://www.dropbox.com/s/rbaqma702y0tw5k/Screenshot 2017-06-17 08.15.36.png?dl=0

I also did this in 2014 and I hit 135% return by October of that year. Here is a screenshot of those trades through June and about an 83% return. I was doing weekly and also overnight Thur-Fri trades. The Overnights is where I had the losses so I dropped those in 2015.

https://www.dropbox.com/s/9du867y8aofp4of/Screenshot 2017-06-17 08.20.39.png?dl=0

As for % of capital in a trade, I always recommend keeping that to less than 10-15% if there is a catastrophic exposure present in the trade. For example, weekly Bull Put Spreads could be wiped out if there was some big terrorist attack overnight in the US.

I am trying to enjoy life a bit more now. We have our first grandson (9 months old) and during the school year we watch him during the week. So I've been focusing less on the short term / weekly trading and more on longer term spreads (6 months or longer). I will still do day-trades using some good indicators on a 2-minute chart. I typically am in / out of those trades within a few minutes.

I do have a website where I post my tools and some other information. I focus a lot on AAPL as I know that company well and it has great option volume for trading. Note: most of the website requires a password and I ask for an annual donation to help cover my time in collecting and posting the data. But you can click on a couple of the sample pages such as the SPX calculator that uses data back to Jan 2015. Just give the calculator a few seconds to load the interactive spreadsheet.

http://activetrader999.wixsite.com/online-tools

I also have a chat room where we discuss some trading that is free for anyone to enjoy.

http://us20.chatzy.com/19161210620658

I have my own personal version of the SPX calculator that feeds live premiums from ToS so I can see the actual returns for spreads I am considering.
 
Thanks for the detail. I see in your spreadsheet you use an adjustment value for VIX. When I do back-testing on the most recent 40 weeks for all short-term holding period combinations the logic computes an adjustment to conform to a 90% success rate (stopped out, vs short strike breach). I then list the trades by lowest to highest adjustment. The key value of 2THURSDAY90 means a 90% trade opened at 10AM EST Thursday and held for 2 days expiring Friday. The lower the adjustment the higher the premium. So I trade the top 2 "hot hands" each week. I have found that using the SPX and VXST at 10AM gives much better results than using the opening or the previous day's close. The first 30 minutes of the day sees very little premium loss but allows the market to settle down and get through the initial balance.

==== HOT HANDS ====
0.96 2THURSDAY90 to FRIDAY
1.02 7THURSDAY90 to FRIDAY
1.05 8THURSDAY90 to MONDAY
1.06 2FRIDAY90 to MONDAY
1.06 9WEDNESDAY90 to MONDAY
1.09 3THURSDAY90 to MONDAY
1.1 6WEDNESDAY90 to WEDNESDAY
1.1 7FRIDAY90 to MONDAY
1.1 8WEDNESDAY90 to FRIDAY
1.12 4WEDNESDAY90 to MONDAY
1.12 5THURSDAY90 to WEDNESDAY
1.15 2MONDAY90 to TUESDAY
1.15 3WEDNESDAY90 to FRIDAY
1.16 10MONDAY90 to FRIDAY
1.16 5MONDAY90 to FRIDAY
1.16 6FRIDAY90 to FRIDAY
1.18 20MONDAY90 to MONDAY
1.19 10TUESDAY90 to MONDAY
1.19 21MONDAY90 to TUESDAY
1.19 6MONDAY90 to MONDAY
1.19 9MONDAY90 to THURSDAY
1.2 10THURSDAY90 to WEDNESDAY
1.2 25MONDAY90 to SATURDAY
1.21 22MONDAY90 to WEDNESDAY
1.23 7MONDAY90 to TUESDAY
1.24 24MONDAY90 to FRIDAY
1.24 4MONDAY90 to THURSDAY
1.25 3MONDAY90 to WEDNESDAY
1.25 4FRIDAY90 to WEDNESDAY
1.25 8MONDAY90 to WEDNESDAY
1.25 9TUESDAY90 to FRIDAY
1.26 23MONDAY90 to THURSDAY
1.33 9FRIDAY90 to WEDNESDAY
1.34 4TUESDAY90 to FRIDAY
1.37 5TUESDAY90 to MONDAY
1.39 7TUESDAY90 to WEDNESDAY
1.55 2TUESDAY90 to WEDNESDAY
 
Your gains seem to be in line with what my back testing shows is possible. It's great to hear confirmation.
 
Yes, I put in a VIX adjustment value so I can limit the historical data for the past 13 years to times with similar volatility. Or I can use a high value and capture all the historical moves regardless of the VIX.

At the top right of my spreadsheet I can also extract data after certain other criteria are met:
- large moves in VIX over a certain # of days
- large daily moves in SPX up or down. For example, if SPX had a 1.5% drop or pop that day I can see how it has traded on the day after (or any # of days after) for any similar move back to 2004.

I prefer knowing the actual historical % moves versus some computer algorithm that calculates probabilities.

Does your data look at the intra-period prices of SPX? I track the open, high, low, and close so I know what the intra-period absolute low / high moves are over any period I am holding. This is important to know as this is what will shake you out of a trade.
 
I did do some intra-day testing by obtaining 15 minute intervals from TD Ameritrade. I was able to get like a year or 2 of data. I looked at probabilities for each interval and found that 10 AM was among the best.
My logic, like yours, uses the intra-day highs and lows to determine if a trade would be stopped out. For sure this is absolutely essential.
 
"Here is an example of the first 6 months of 2015 results. 41% gain for 6 months even with starting out with a 5% loss on the first trade of the year. This was done with $15,000 starting capital and reinvesting the capital each week."

I studied this in more detail. You were doing 20-point wide spreads so that's $2000 margin per contract. Since you started with 15000 and you did 7 contracts you were risking 100% of the account on each trade. What was the duration of those trades? There could not have been any overlap so they must have been 5 days or less.
 
The $15,000 was the initial amount used for the "account", not stating it was 100% of one's capital. I used $15k as I based it off someone who had $100,000 in capital and I don't recommend more than 15% of capital used to begin a strategy like this.

The duration was typically opening on Thursday and closing before or early on the following Thursday to avoid any overlap. There were times when I waited until Friday to close the prior week and open the new spread.
 
The closing debits columns for the winning weeks all show $0.00. There must have been a cost to close out the trades a day early?
 
It has been a while since I reviewed that strategy. I'll have to back and see if I have any notes on when I was actually closing / re-opening.
 
It looks like in 2014 I was closing them for a small amount. I made some changes each year and 2015 it looks like I was letting them expire and then setting new ones up possibly on Monday morning. There were years where I liked to be all cash over almost every weekend.
 
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