yes generally that exhaustion trade occurs in the middle of a
trend just like it did in late Nov, however also as I commented in
the video the fact that this is occurring once again so soon is
rare, so maybe that's indicative we are nearing the end of this
particular trend, kind of in the back of my mind anyway. Not bull
market top mind you but maybe a larger pullback is finally getting
close and we are starting to see some parabolic nature now
as far as bringing the ES system signals to the website, that's
still in the works. However see my previous posts about the issues
we could have since the ES system trades do not actually confirm
until 1 hr after the cash SPX market closes. Options no longer
trade when ES closes at 5 PM EST, thus we'd have to buy the options
an hr before ES closes and the signal actually confirms. As
you have seen with the SPY system, many times we have trade signals
showing intra day only to disappear before the close, thus it's s
possible we could do the trade at the 4 pm EST, but the signal
disappear by the time the ES closes at 5 pm EST. Now because
the market is generally FAR less volatile after the cash market
closes I think it would be rare for signals to change within that
1hr time window, but it is a possibility. Also what do we do
in a situation like that? ETF's can be bought and sold in after hrs
markets so no real issues there, however for options you either
have to sell the next day or hold with some sort of exit plan
outside of the system.
Because of all this it might make sense for me to stick to he
futures signal trade instead of the other instruments. ES is highly
leveraged futures and not for everyone. However the micro ES
futures contract my be an option I can consider as it's 1/10 the
value and margin over the ES. For example trading 5 MES contracts
is like trading 1 ES contract, or 2 MES contracts is like trading
1/5 of an ES contract. Anyway for those scared of futures or
waiting to go really small or with small accounts that could be an
option. Futures also have the 60/40 tax benefit over trading ETF's
and SPY options.
anyway I have not decided the best course of action there.
In my experience, one MES contract is roughly equivalent to one
SPY option. MES trades 23 hours per day. and can be used to hedge
SPY options, or vice versa, a position in MES can be hedged with
SPY options in heavily trending markets. 1 MES is one tenth of a
one ES contract.
thx for the info, though you leave out one very important piece
of info which is what type of SPY option. There's a big difference
in price between a SPY option with a 0.9 delta and one with a 0.5
delta and of course price movement, and the amount of time
you go out, 1 or 2 months. However the most important part is the
delta really. If you can reply back approximately which SPY
options you are referring to that have about a 1:1 correlation with
an MES contract (delta especially).
Options with 0.9 delta. One difference though is that options
require a constant margin while MES contracts eat the margin slowly
but relentlessly. However, for hedging overnight between market
closes that is not a problem. If there is a trade at 4pm but it
disappears by 5pm, selling one MES till the next morning as a hedge
will do.
Then there is a slight difference between MES and MNQ: MNQ moves
more than MES nowadays. One could combine a SPY option with one MNQ
contract for a fine hedge.
Sorry, I got it backwards. It is SPY options with 0.5 delta
which you use for your 1st entries. Options on SPY with 0.9 delta
behave like MNQ. Both MNQ and MES are worth about $15,000 of the
underlying index.
Quick video on the exhuastion statistics
Posted by matt on 17th of Jan 2020 at 02:56 pm
Here's a quick video I recorded on the exhaustion statistics
https://secure.screenrec.com/oIgUjp0bNy
Thanks for creating/posting this educational
Posted by steverobin on 18th of Jan 2020 at 04:53 am
Thanks for creating/posting this educational video on this rare trade!
Thanks Matt for the helpful
Posted by cozz101 on 17th of Jan 2020 at 03:45 pm
Thanks Matt for the helpful vid! It's good to know that this short is probably one that is occurring within a trend vs capping the end of the trend.
Btw, are you still working on or considering including the ES system on the website? Does that have any short components?
yes generally that exhaustion trade
Posted by matt on 19th of Jan 2020 at 01:05 pm
yes generally that exhaustion trade occurs in the middle of a trend just like it did in late Nov, however also as I commented in the video the fact that this is occurring once again so soon is rare, so maybe that's indicative we are nearing the end of this particular trend, kind of in the back of my mind anyway. Not bull market top mind you but maybe a larger pullback is finally getting close and we are starting to see some parabolic nature now
as far as bringing the
Posted by matt on 19th of Jan 2020 at 01:51 pm
as far as bringing the ES system signals to the website, that's still in the works. However see my previous posts about the issues we could have since the ES system trades do not actually confirm until 1 hr after the cash SPX market closes. Options no longer trade when ES closes at 5 PM EST, thus we'd have to buy the options an hr before ES closes and the signal actually confirms. As you have seen with the SPY system, many times we have trade signals showing intra day only to disappear before the close, thus it's s possible we could do the trade at the 4 pm EST, but the signal disappear by the time the ES closes at 5 pm EST. Now because the market is generally FAR less volatile after the cash market closes I think it would be rare for signals to change within that 1hr time window, but it is a possibility. Also what do we do in a situation like that? ETF's can be bought and sold in after hrs markets so no real issues there, however for options you either have to sell the next day or hold with some sort of exit plan outside of the system.
Because of all this it might make sense for me to stick to he futures signal trade instead of the other instruments. ES is highly leveraged futures and not for everyone. However the micro ES futures contract my be an option I can consider as it's 1/10 the value and margin over the ES. For example trading 5 MES contracts is like trading 1 ES contract, or 2 MES contracts is like trading 1/5 of an ES contract. Anyway for those scared of futures or waiting to go really small or with small accounts that could be an option. Futures also have the 60/40 tax benefit over trading ETF's and SPY options.
anyway I have not decided the best course of action there.
Hi Matt, am I missing
Posted by mundy on 20th of Jan 2020 at 11:29 pm
Hi Matt, am I missing something here on the micro contracts. I was/am of the view that the micro is 1 tenth of the E-minis
In my experience, one MES
Posted by junkie on 20th of Jan 2020 at 08:39 pm
In my experience, one MES contract is roughly equivalent to one SPY option. MES trades 23 hours per day. and can be used to hedge SPY options, or vice versa, a position in MES can be hedged with SPY options in heavily trending markets. 1 MES is one tenth of a one ES contract.
thx for the info, though
Posted by matt on 20th of Jan 2020 at 09:28 pm
thx for the info, though you leave out one very important piece of info which is what type of SPY option. There's a big difference in price between a SPY option with a 0.9 delta and one with a 0.5 delta and of course price movement, and the amount of time you go out, 1 or 2 months. However the most important part is the delta really. If you can reply back approximately which SPY options you are referring to that have about a 1:1 correlation with an MES contract (delta especially).
thanks
Options with 0.9 delta. One
Posted by junkie on 21st of Jan 2020 at 12:22 am
Options with 0.9 delta. One difference though is that options require a constant margin while MES contracts eat the margin slowly but relentlessly. However, for hedging overnight between market closes that is not a problem. If there is a trade at 4pm but it disappears by 5pm, selling one MES till the next morning as a hedge will do.
Then there is a slight difference between MES and MNQ: MNQ moves more than MES nowadays. One could combine a SPY option with one MNQ contract for a fine hedge.
Sorry, I got it backwards.
Posted by junkie on 21st of Jan 2020 at 12:47 am
Sorry, I got it backwards. It is SPY options with 0.5 delta which you use for your 1st entries. Options on SPY with 0.9 delta behave like MNQ. Both MNQ and MES are worth about $15,000 of the underlying index.
Any update on PRED???
Posted by mockgt on 17th of Jan 2020 at 03:13 pm
Any update on PRED???
Slide Deck
Posted by steve on 17th of Jan 2020 at 03:34 pm
https://predtechgroup.com/wp-content/uploads/2020/01/Predictive_Technology_Group_January_2020_Print_v2.pdf