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Wow, I don't even know where to start. Was such a crazy two days. I couldn't even post yesterday because IB's TWS had all the numbers messed up for some reason. I felt fairly confident the NetLiq was correct, but nothing made any sense. I would not have been able to say how I did on separate portions of my trading. And I did a LOT of trading. I did more research over the weekend, but ultimately I decided the absolute best way to learn, to get the creative ideas flowing, was to just throw some crap against the wall and see what happens. I think a lot more clearly when actual cash is at risk. I suspect I am not alone with that.
Option Side: I am lumping everything not strictly related to my day trading methodology here. It wasn't all option stuff, but for now, I don't want to add a 3rd category. I did do some option stuff yesterday. I bought ES at 2857 and sold a 2860 Call for same day expiration (yesterday, Monday). When the market got to 2860, I sold 2 2865 Calls and then placed an order to buy 2 on a stop at 2865. When those were filled I was assured of profit down to about 2855 and up to infinity. So all I needed was no big dump. It actually went sideways most of the day before exploding up at the end. All my short Calls were assigned and they filled against my 3 long ES. But TWS was strange. First it showed my trade with a 423K profit (I wish!), and then it showed up as a 2385 loss. I knew that wasn't correct, but it never did correct itself. I did approximately 10 Equities spread trades and 8 of them were losers. All small, as I was cutting them off quickly as I assessed them. It does not seem that I can day trade the equity spreads, at least at the size I am doing. I am using the same sizing algorithm as I use for my daytrading program and the number of shares was generally small. Today I decided to take a longer term viewpoint and use weekly data. I did 3 trades today and all are off to profitable starts. I have no idea what the exit rules should be. I suspect they will evolve as I go along. For now I plan to hold on to them for a few days unless one goes bad. I spread GS/BAC, +$10 at the close; MDE/PFE, +$51 and COST/KHC, +$163. Longs are listed first. So they aren't making me rich just yet, but it will be interesting to watch them and see what happens. I am especially keen to create an exit strategy, at least the basic structure of one. For each trade respectively, the share sizes are +33/-224, +77/-196 and +30/-128. TWS is reporting a RegT margin of 19,729 but also an Initial margin of 10,658. I do not know why it is broken up like that. I also don't know if I am tying up 10K of capital, 20K or 30K. I have no futures on. Other than the 3 equity spreads just described, I am completely flat. I believe, all things considered I was up about 2000 for the two days combined, most of it on the ES covered call trade. I like the way that worked out. I may try it again tomorrow if an opportunity presents itself.
Day Trade: I did one unit yesterday as the overnight range was huge. It was a loser. Down 981.54. I did one unit today as well since I knew I'd be involved in all the other stuff. Today was a very nice winner, up about 1948. So up just under 1K for the 2 days combined. I won't recap the trades as this post is already absurdly long (Sorry about that).
Very interested in what you’re doing here with spreads in individual equities as I do something similar.
When you say weekly data do you mean calculating percent change from Friday’s close? Longing the leader and shorting the laggard of each sector for the week?
I don’t have the means to backtest this strategy efficiently with code, but could do it visually, week by week.
Yesterday I did exactly that, similar to how I do my day trading spreads. But I don't think that this method is going to work as a daytrading approach. It may not work at all, I don't know at this point. What I did today was use a weekly chart (yep, I actually created a big fat chart), and used some combination of strength indicators and % change. I do not use indicators a lot, so I have no idea how wisely I chose. Again, I am in the trial-and-error phase, but that's when I learn the most and think the most. I will have hundreds and hundreds of ideas over the next few weeks as I monitor this. Some will work. Most won't. Will enough work to make this a working strategy? Too early to tell. And if you have any input, I'm all ears.
An odd day for me. I had to leave from 10am - 3pm, so I missed out on a few things. I was unable to put on the 1-day option trade that I did on Monday. That's too bad because ES set up perfectly for it and it would likely have been a nice winner. I'll try again Friday. I like the idea of this trade. What I need (don't want, but need) is to have it go awry. I need to see how much damage is done when a trade goes bad and how effectively I can get out. Once I get a feel for that, I will know how aggressive to be in pursuing this type of trade. Fear not, an opportunity to deal with a loser is almost always right around the corner in this business. I also did not get my 3rd leg on for my day-trade methodology, but it would have been a small loss anyhow, so no harm done.
Option Side: No actual options. I added a 4th Equity spread in a new sector. Long ECL, short DOW. It did not get off to a good start. Down about 160 today. The 3 existing trades from yesterday all stayed on and had a net today of about -40. I say about because IB doesn't seem to be able to display actual settle prices. I guess I'll find out in the morning. Still formulating an exit plan. I am toying with the idea of just keeping a trade on until something else displaces it, i.e. another stock in the sector becomes the strongest or weakest and then adjust. We'll see. I am going to let it work for a few days and see what thoughts pop up in my brain. Total for the day down ~200
Day Trade Side: As mentioned only got 2 legs on. It was pretty much a nothing day. Trade never took much heat, but never got cranking either. High water mark was about 450 and after I got back home it had trickled down to about 1/2 of that, so I just exited. It was nearly 3:30 anyway. Up 236.
Option Side: Again, no actual option trades today. Hope to put something on tomorrow. Only change in the equities was in the sector I added yesterday. I closed out ECL and went long VVV instead. Stayed short DOW which has been on fire since I shorted it (you're welcome DOW shareholders). So far, not much to get excited about with these trades. Near as I can tell I was up 11 bucks for the day.
Day Trade Side: Did 2 units, 1st leg was negated (was short Russell). As Russell continued to strengthen, the trade slowly worked its way back and then became profitable. It was a grind of a day. Didn't get to even until almost 3:00. Then I had the only real positive spurt, so I stayed in past my normal exit time, getting out nearly at RTH close. It proved to be well worth putting in the extra time and the trade finished +780 on the day.