3309 Drysdale Ct
Edwardsville, IL 62025
I've' just been busy working through these option models for SPY
and ES systems. As you know the ES Breakout system is long
from Oct 28th and doing well, whereas the SPY breakout system
failed to trigger. I am considering sending out trade signals
to both ES and SPY systems, but will work through the data.
Here's how the data is working out thus far: What I'm
doing is taking trades on both the SPY and ES Systems they they
occur, no matter if there is overlap or not. I'm placing 2%
of capital into each trade for 1st entry, and 4% for 2nd, 6% for
This year the systems would be up 50% with a max utilization of
capital of only 18%, and an average utilization of 11%. What I mean
by that is if one was trading with a 100K account then 18,000
maximum would have been invested at one time with an average of 11K
used. The max draw down was 4% or 4K.
For 2019 using the same model the systems made 120%, the max
capital utilization was 45%, which is higher than I would like but
that was in late Dec when Bear long was in 4 entries on both the
SPY and ES, CCI was long 2 entries, and QE was long 2 entries.
However the average capital utilization was around
2017 was the lowest return year by far because it was the least
volatile year in 100 years! None of the systems took 2nd
entries, everything was 1st entries. The return was 20% for that
year, however the max capital utilization was only 9% with an
average of only 2 - 4%
I'm working on 2016 and 2015. 2016 will probably do close
to 100% or more and I'm sure 2015 will be similar.
I'll also see if I can do 2011 which was a volatile year, and
2008 if there's data, I'm not sure if I can get historical options
data back that far. Because this is such a time intensive and
tedious process I'm not doing every year, I think a handful of
years is plenty. Once I have the data I'll present it.
Matt, when you say these option systems are up 50% with only 18%
capital being used; on an account of 100K would that have made 50K
for 2019? If so much capital is sitting on the sidelines would you
do anything else with that money or just have it available for the
system were the market to really tank like in 2008?
remember guys - use the search feature on the blog works well,
just type in 15 min gap rule and you see tons of posts, here's the
well you could trade that capital obviously. I'm just
being conservative trying to use a small amount of capital, also
it's up 55% for the year. However a lot of years are 100%, 2018 was
115%, 2016 was 110%, 2014 was 100%. And these are with a max
capitial utilization of about 35%. Clearly if you set aside
capital and used all of it those numbers would be 3X or 300%
annual. Anyway I have a lot of data to compile yet and will
probably take me another week. This year also isn't over yet and
assuming we have a handful more of trades left
Thanks Matt, this sounds exciting, looking forward to the final
that's a good point, leaving 65% of the capital always off the
table may be a bit conservative, so if one doubled the position
size so that the max invested would e 70%, then this year would be
up 110%, last year 230%, 220% for 2016 etc. Also when I say
35% invested max or 70% if you doubled that, that condition was
only for 1 week LOL it's not very long. That max condition is where
a bunch of sub systems overlap and quickly drops off because
systems start closing out. That max condition was where the Bear
Long was in 4 entries on both the ES and SPY systems, the CCI
system was in 2 entries, and the QE BTS was in 2 entries, so you
basically had 12 entries overlaping . This lasted from late 2018,
Dec 21st - Dec 26th only, so less that a week
however those of you wanting to do SPX options over SPY options
for the 60/40 tax benefit you won't be able to do that with less
than a 200K account. SPX options cost roughtly 9 - 10 times the
price over SPY. 2018 and 2016 trading one would have made
385K those eyars trading SPX options, but agai nit's not something
you can trade with 20K or 50K or 100K. As those options range
from $10,000 to 40,000 per option.
I finished 2016 and and also working on 2014 and 2015. I
can't get reliable option data from 2008, there's too many missing
holes; for example some prices will display for various options but
most of the delta values do not, which is what I need. I makes
sense anyway that there isn't reliable data from that time on the
options. So I'll probably do maybe 2013 - 2019, maybe look to see
if I have good data for 2011 and I think that's enough years and
data to make conclusions.
As an example: taking both trades from the ES and SPY systems
for 2016: there were 40 sub systems trades, 21 from ES and 19
from SPY. What I mean by sub system trades is the total trades, not
2nd or 3rd entries. So if a sub system had 2 or 3 entries I'm
counting that as one trade.
If you count each entry, you have 59 total entries.
25 of the system trades were 1 entry out of 59 total
10 of the system trades had 2 entries
2 of the system trades had 3 entries
There were 31 long trades out of 40 total trades and 9 short
trades out of 40.
Percent gain was 115% with a one time max utilization of capital
of 35%. So clearly if one was willing to us 70% or 100% of the
capital the % gain would go to 200 or 300%.
anyway I still probably have a week left on compiling the data
and will put it into a clean table, right now it's a mess in a
Lastly, do you take into account a decay in options with time in
your calculations, and do you compute a duration of each trade?
That is not an issue with index funds, but could be an issue with
options that works in your favor or your disfavor. Thanks again for
your visionary work!
This is very impressive. To be clear, do you use the same
position for each entry or a progressively larger position? That
is, one SPY option with the same delta or one ES contract for each
entry? Or more with each entry?
Also, you calculate this based on the assumption that every
trade for every subsystem is entered, don't you?
Thank you for clarifying!
Looking forward to your data! Thanks for this labor!
That amazing Matt, I have been trying to figure out good
position sizes for the SPY system. So if I understand you
correctly, the allocations are not the same into SPY, SSO, UPRO.
First trade, with the 100k example, would be $2K(SPY), second
$4K(SSO), and third $6K(UPRO)? Occasionally with a fourth
position you would add another $6K into UPRO. Am I
understanding you correctly?
maybe OPTIONS, not etf's . That's how he's getting those
Thank you Matt. You have great vision
very interesting, thanks Matt.
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