A member (tumbler) did some great work on using options for
the SPY system and he sent me an Excel spreadsheet this
morning. I have converted that spreadsheet to a Google.Doc
file so that you can look at it without Excel. It's pretty
neat, he has a program where you can back test options. There
are three tabs in this spreadsheet; an information tab, a condensed
table, and a tab showing each individual trade. The results
are very good, and this is without compounding! Here's a link to
the Google Doc file
Tumbler, thanks for your work on the spreadsheet, I initiated a
paper trade using ATM SPY options for the current trade and will
see how it works out. Watching volatility and theta.
Didn't I post the options closing time last week? Still nice to
have it confirmed.
Just be careful because the liquidity may not be the same, and
the prices tend to jump around more...I suggest watching the at the
money calls or puts or both for a few days from 4-4:15 with the SPY
after hours bid-ask in view to make sure you get a 'feel' for this
15 min worth of trade.
Not too big a deal but they can scalp you for 3-4 ticks
but then I have made 3-4 better entry too at times so it is
probably a wash!
Posted by lessarda on 10th of May 2011 at 01:12 pm
Given the high % of total returns that have been logged in
overnight sessions for years now, combined with the time decay even
in 50+ day options, I wonder if the holding period with options
might not be optimized by selling gaps. For example, in one trade I
did take near-the-money SSO calls on this signal and the next
morning's gap put them up by about 75% at the open and they have
yet to get back to that level. I used May calls, so the decay is
higher, but I wonder if just selling that kind of gap result
wouldn't be best. I would be glad to do an overnight version with
OptionVue; I'll look into it. Thanks.
I think this is a topic we can expand on. I have even been
thinking about how a portfolio could utilize futures, options and
the SPY itself. Maybe with the SPY being the largest dollar
component and then the futures and options as more leveraged
components or possibly going into the SPY first and leveraging up
on the scale-ins etc.
I think the problem is people will need to remember that with
increased reward comes increased risk. Futures are futures
and I think everyone understands the implied risk there with the
amount you can lever up. With the options and referencing
tumblers amazing work he was using predominantly at the money
options so heaven forbid the system ever dares to have a losing
trade, even a small one, and then entire premium paid for the
option will be lost which could/would amount to likely a greater
percentage than just buying the SPY itself. What I keep
coming back to is some way to possibly diversify and maybe with the
scale-ins to add leverage at fulcrum points and then possibly exit
then prior to the system signal to decrease risk (while maintaining
the larger net dollar position in the SPY until the next
signal).
Anyway, just my thoughts so far and I like the idea/discussion
and all the work some members keep putting in on the System!
Posted by lessarda on 10th of May 2011 at 03:44 pm
The two most remarkable elements of the system as I understand
it are: 1) the identification of high probability conditions for
entries/exits; and, 2) the ability to adapt to market conditions
(the system's heuristic power). This combination allows for what
could be called prudent risk-taking, in which even leveraged
instruments can make sense within a consistently executed plan. It
might be prudent to add early sale rules with quick gaps -- selling
half on a double, etc. -- but because the system has many built-in
risk management controls, it can allow for opening the throttle a
bit in execution.
I back tested SPY options (using Optionvue software), and Matt
posted the google doc. Keep in mind the results are directional and
not exact, because the software uses option mid-prices. Never the
less the results, in my opinion, make the use of options a no
brainer. SPY option liquidity is excellent, so spreads are narrow
and easy to execute. I don't recommend trading the bigger SPX
contracts as they are much more challenging to get good fills
(especially when the market is moving quickly).
Few thoughts:
- I have not tested options on leveraged ETFs. Liquidity looks
good in SSO, but I have no idea how these behave over longer
periods. Leverage on leverage is an interesting but volatile
concept. I'll take a look at these soon.
- I will keep the spreadsheet updated. Also, happy to post my
option entry/exits.
- Think you all know this but one limitation for options is that
they can't be traded pre-market and are very limited after the
close.
- When you consider the flexibility of investment, defined risk
and leverage options provide they really are a great complement to
a great system.
- If you would like the spreadsheet send me a pm with your email
address and I'll send it to you.
- While I only back tested 6 years of data it was a real eye
opener. If you haven't done so spend some time evaluating the
historic trades. You will gain an even stronger appreciation for
the system.
SPY system using options on SPY
Posted by matt on 10th of May 2011 at 12:13 pm
A member (tumbler) did some great work on using options for the SPY system and he sent me an Excel spreadsheet this morning. I have converted that spreadsheet to a Google.Doc file so that you can look at it without Excel. It's pretty neat, he has a program where you can back test options. There are three tabs in this spreadsheet; an information tab, a condensed table, and a tab showing each individual trade. The results are very good, and this is without compounding! Here's a link to the Google Doc file
SPY Swing System using options, Google Spreadsheet
Tumbler, thanks for your work
Posted by jambo1 on 12th of May 2011 at 11:33 am
Tumbler, thanks for your work on the spreadsheet, I initiated a paper trade using ATM SPY options for the current trade and will see how it works out. Watching volatility and theta.
Extend Hours for SPY Options
Posted by cclammers on 10th of May 2011 at 04:24 pm
Thank you for contacting the Options Institute. Yes, you are correct the
SPY day options stop trading at 4:15 ET.
If you need any further assistance please feel free to contact us.
Thank you for your ongoing support of CBOE.com
Laura
Laura Johnson
Program Administrator
Options Institute
Chicago Board Options Exchange
312.786.7818
could have sworn I did
Posted by perthx on 10th of May 2011 at 04:42 pm
Didn't I post the options closing time last week? Still nice to have it confirmed.
Just be careful because the liquidity may not be the same, and the prices tend to jump around more...I suggest watching the at the money calls or puts or both for a few days from 4-4:15 with the SPY after hours bid-ask in view to make sure you get a 'feel' for this 15 min worth of trade.
Not too big a deal but they can scalp you for 3-4 ticks but then I have made 3-4 better entry too at times so it is probably a wash!
Matt, Thanks for the info on
Posted by BigD on 10th of May 2011 at 04:21 pm
Matt,
Thanks for the info on spy system & using Options! Great info. Please tell me more or keep updating!
Overnight gaps raise a question with options
Posted by lessarda on 10th of May 2011 at 01:12 pm
Given the high % of total returns that have been logged in overnight sessions for years now, combined with the time decay even in 50+ day options, I wonder if the holding period with options might not be optimized by selling gaps. For example, in one trade I did take near-the-money SSO calls on this signal and the next morning's gap put them up by about 75% at the open and they have yet to get back to that level. I used May calls, so the decay is higher, but I wonder if just selling that kind of gap result wouldn't be best. I would be glad to do an overnight version with OptionVue; I'll look into it. Thanks.
I too purchased SSO options
Posted by cclammers on 10th of May 2011 at 08:42 pm
I too purchased SSO options at the money, only I purchased June. Just today at the close was the bid back up to the level I saw on the gap up.
I think this is a
Posted by tom on 10th of May 2011 at 03:08 pm
I think this is a topic we can expand on. I have even been thinking about how a portfolio could utilize futures, options and the SPY itself. Maybe with the SPY being the largest dollar component and then the futures and options as more leveraged components or possibly going into the SPY first and leveraging up on the scale-ins etc.
I think the problem is people will need to remember that with increased reward comes increased risk. Futures are futures and I think everyone understands the implied risk there with the amount you can lever up. With the options and referencing tumblers amazing work he was using predominantly at the money options so heaven forbid the system ever dares to have a losing trade, even a small one, and then entire premium paid for the option will be lost which could/would amount to likely a greater percentage than just buying the SPY itself. What I keep coming back to is some way to possibly diversify and maybe with the scale-ins to add leverage at fulcrum points and then possibly exit then prior to the system signal to decrease risk (while maintaining the larger net dollar position in the SPY until the next signal).
Anyway, just my thoughts so far and I like the idea/discussion and all the work some members keep putting in on the System!
All true, Tom.
Posted by lessarda on 10th of May 2011 at 03:44 pm
The two most remarkable elements of the system as I understand it are: 1) the identification of high probability conditions for entries/exits; and, 2) the ability to adapt to market conditions (the system's heuristic power). This combination allows for what could be called prudent risk-taking, in which even leveraged instruments can make sense within a consistently executed plan. It might be prudent to add early sale rules with quick gaps -- selling half on a double, etc. -- but because the system has many built-in risk management controls, it can allow for opening the throttle a bit in execution.
Tumbler - what program did
Posted by ascr on 10th of May 2011 at 12:53 pm
Tumbler - what program did you use? I'd like to backtest SPY LEAPs with the system.
SPY SYSTEM -OPTIONS
Posted by ihbdsb on 10th of May 2011 at 12:37 pm
Tumbler - Thank-you for this exceptional work and sharing- Will you continue to updae this for the community ?
SPY SYSTEM with Options
Posted by tumbler on 10th of May 2011 at 01:01 pm
Hi all,
I back tested SPY options (using Optionvue software), and Matt posted the google doc. Keep in mind the results are directional and not exact, because the software uses option mid-prices. Never the less the results, in my opinion, make the use of options a no brainer. SPY option liquidity is excellent, so spreads are narrow and easy to execute. I don't recommend trading the bigger SPX contracts as they are much more challenging to get good fills (especially when the market is moving quickly).
Few thoughts:
- I have not tested options on leveraged ETFs. Liquidity looks good in SSO, but I have no idea how these behave over longer periods. Leverage on leverage is an interesting but volatile concept. I'll take a look at these soon.
- I will keep the spreadsheet updated. Also, happy to post my option entry/exits.
- Think you all know this but one limitation for options is that they can't be traded pre-market and are very limited after the close.
- When you consider the flexibility of investment, defined risk and leverage options provide they really are a great complement to a great system.
- If you would like the spreadsheet send me a pm with your email address and I'll send it to you.
- While I only back tested 6 years of data it was a real eye opener. If you haven't done so spend some time evaluating the historic trades. You will gain an even stronger appreciation for the system.
Good trading everyone!
Fantastic! Thank you very much, Tumbler!
Posted by lessarda on 10th of May 2011 at 12:23 pm
Was looking for a program to do that backtesting with.