Month: August 2017

PC2 – This week

I’m in London making my way back home to Cayman. I don’t think I’ll be traveling for at least a year in any major way (more than a week). During the travels, I had a lot of downtime due to newborn naps etc and during that time I’ve been backtesting PC2 and other things like the variants of T5. Probably put in 200-300 hours total of backtesting. Lots of dead-ends but came up with a solid plan for the rest of the year. It was kind of a necessary evil.

Going to start full deployment into the PC2 this week for all my accounts. I am content with the backtesting, the risks and well the no, literally 0, recorded losses 🙂 I’ll be adding one long put at 12% to help with margin and act as a real hedge on a down move. I’ll sell enough NPs to cover that and the black swan hedges. I have to add in another portion of backtesting as I want to switch how I manage it on the downside (might do bearish STTs). But I’ll do that next week and switch when satisfied.

Slow ass year but I hope the next 3-4 months with the combo boost up the returns and gives me a good end to the year and a 2018 that does 5% a month plus. I’ll be doing opportunistic T5s at a very small amount to boost some of the PC2 returns. As I get further down the rabbit hole, the amount of return I reasonably think I can return on large accounts goes further down, there’s just no free-lunch w/out risk and I don’t really like risk anymore 🙂 Non-compounded I am guessing it’s closer to 45-50% a year for the core PC2 trade after slippage and all that. Compound that and it’s eventually going to crush anyways. Three years at 45-50% and you’re at 225% or 75% annually ish. The T5 should add in a lot of boost and maybe we can get up to 75% non-compounded, who knows. We’ll see!

Had a really rough mid-Aug with starting the T5 trade at the worst possible time (before the NK issues) and back month vol sky rocketed. I had a max draw down of 3k a unit (and I had lots of units on) but I’ve recovered nearly all of it since. Back to all time highs but that’s been stagnant for the last 6 months.

I played in the Barcelona tournament, I did get to add a Spanish flag to my Hendonmob profile by getting 102nd out of 782 in the 2k NL tournament. I exited that one with AK vs 66 and the board was AK6xx. Too bad, had I got that one, I’d have had a shot at the final 20 and a much bigger cash. In Bahamas last year I had AA vs AK and the guy flopped KKT. That was a big one, the hand itself was worth 40k in cash no doubts re payout ladder. Ah Poker…

Aug 8 Trade and Travel Update

I am on my very last 2 day leg with my family in Milan. On Aug 10, I’ll drive up to Munich to meet some friends and do a beer tour around Germany and probably Pilsen (Czech) and maybe Krakow, Poland. On the 19th, I’ll be in Barcelona to play a big poker tournament and then I’ll be heading home to resume normal life. I think this will be the last EU tour for a little while. We’re building a house in Canada next year and I think we’ll use that as our summer base and slow down the EU tours as I think I’ve seen most of it now. It’s not as exciting as it first was and it’s been more of a drain than a rejuvenation. As my account grows, I need to fully concentrate on trading and take only brief breaks on weekends etc.

As for the trades, well, the market is in a historic area right now. The DOW has made 9 all time highs in a row and the VIX (and thus option premium) is at all time lows. It’s a bad time (the worst) to be an option premium seller. It’s the worst time for strategies I used and the plan I had 🙂

I saw this graph of VIX futures and it really sings a song.

Anyways, I know a lot of people are being challenged right now. It’s been a rough 20 months for trading these types of strategies. Slow. I started trading the Rhino (which really likes any market other than a 5% up market in a 45 day period) and as soon as I initiated that trade at full volume, the market had like 15 months where 9 of them (RUT) went up 5% or more 🙂 I have terrible timing. I think the RUT moved up 50%+ in the last 15-20 months. The SPX went from 1828 to 2475 in what 16 months? Incredible move. So I had low’ish returns for that trade over the course of 2016 (I was positive just meh, I think 20%-25% overall). Then 2017 came along, and I had started the STT full on but still had Rhinos on from previous. The rhinos got decimated in the environment and is still affecting my overall return for 2017. This environment for the STT can still be done well I just wasn’t able to kill it this summer. As to do well, you really had to be perfect in timing for paying off the BSHs and for initiating the STT. It took a certain plan and without knowing how the market would have gone, it would be hard to do well in that environment sans Combo trades (the combos would have crushed). The vol has been so so so low that I’ve been dragging heels on initiating new STTs. I mean, you’re a net seller of vol and vol is at historic lows, you haven’t gotten a worse price on this ever. So I wasn’t excited about initiating new trades. I know it can be done if you arrange a + UEL and if you are very prudent at paying off those BSHs but that’s not easy. On big up moves, I’d initiate BSH and RC (RC pays off about half of the BSH) and I’d wait for some vol to enter in STTs. That vol never came (ever!, it’s so damn crazy how low the vol is..we haven’t had 0.3% daily moves in record times) and I was stuck putting on STTs in low vol(Crappy prices) and when my BSH/RC combo was down. Still it profited but just nothing much at all. Typically, the plan was this: Put on RC/BSH as the market has a big up day, wait for down day and enter an STT. In ANY normal market, or any market that’s not this market, you’d have that opportunity. Down days are fairly common…just not this year. That all said, poor (slightly profitable) results because of the management/plan I chose for the year. That’s got me a bit bummed out but at the same time I haven’t been more excited for what is coming in my trading career.

The combos that we are working in the group and the testing that we’ve done suggest very very consistent results. I’m showing a result of 8.75% on margin in 45 DIT. Thats 5.833% per month on margin used. We use only about 65% of balance, so total balance return would be 3.8%. Not that exciting when looked at as a single component. However, If we combine this with a T5 (TTT555) trade the margin reduces significantly. My goal is to get it to 5% a month on whole account for the STT combo alone. The T5 trade has gone from 1200 to 20k in 2.5 years in backtesting. That thing returns 100% 70% of the time within 10 days and loses equivalent 30% of time. You obviously can’t do too much of these as you’d wipe yourself out psychologically (and 30% of your balance) if you had 3 losing months in a row but the boost and the margin reduction makes it very attractive. My goal is to have the combo, the BSH factory and the T5 trade working together to provide a total account return of 100%. That’s exciting but it’ll be a lot of work, a lot of organisation and diligence in process. Further to that, we’ve got a T5 timer that helps immensely with entries and exits. Unfortunately, I went about 40 units in for the T5 before the timer exists and I entered at a shitty time, it’s down at them moment but the risk profile looks great. Like I said, I have the worst timing for everything and I have to create a life and trading plan that negates my awful cursed timing 🙂

I was asked to do a presentation on the PC2 trade but I am on my last two days with the family and I just can’t sacrifice the time w/ them without having a very angry wife so I am hoping I can just do it early September instead.

House Progress (4 years in the making)

Our house is nearly nearly there. We started building about 20 months ago and it’s just about finished. I was lucky to have gone to school with one of the best Canadian architects (in my opinion) and he agreed to design this one for me.

The design is amazing. We just told him we wanted three pods (separate living spaces) that integrated with the outdoors but also were connected by a top floor. This is what he came up with

Thanks Joe (fellow Trading Dominion user) for taking the pics in my absence!

Hopefully will be in by October/November.

Aug 3 – Trade update and plan for the year

I’ve just arrived to Arona, the final leg of the trip with my family. The last 2 road trips, we use this as a rest and catch-up stop (so I’ll be backtesting and working like mad). There’s not much else to do but that 🙂

I’ve had a very slow summer re P/L as the market has been the lowest vol possible and I am a net seller of premium and premium hasn’t been cheaper 🙂 I’ve been sidelined a lot waiting for high vol entries for the STT and it’s never come. The trades on entry do prefer a higher vol (STT) and while the BSHs love a low vol entry, I’ve been using RCs to pay for them but it’s not keeping up on the pay-off. I try to have a positive UEL on the STT at initiation to compensate but I haven’t put on enough STTs! So I have too many BSHs to STTs right now as I am sure most of us do. You put these things on in low vol and get them paid for so that when you get your higher vol entry for an STT, you’re nice and hedged. I wait for two days of vol or down days to get into additional PCS to help pay for them OR I set the STT at higher UEL (basically same thing as adding PCS right) but we just haven’t had that. It’s incredible really. Frustrating market. So in essence, the market has been pretty much the worst for the trades…at least the worst ‘now’ seems to be just slow profit. On Jul 27th, we had a single large vix spike and down day and the balances jumped super high, I liked that..but it lasted a few hours lol. I am sure vol is coming soon..just waiting it out. My Dec trades have a negative UEL right now and I am waiting for one larger down day to get that fixed..maybe I should just do it soon..vol is so cheap though, I’d be getting paid crap 🙂 The trials and tribulations of decision making. The combo trade I am discussing below should fix all of this for me.

    Combo Trade

I’ve been developing a combo trade that can be put in on ANY market type and will profit an average of 8.5% on margin per 45 day period (and I haven’t seen a loss in 30 months of backtesting). I had previously posted returns for one version of it on this blog. I’ve tweaked it a bit and and am finishing it up and will post those results as well. I think the mastermind group is dedicating 1.5 hours next week to investigating and talking about the combo trades. I am very hopeful that this is the base trade going forward, it’s not had a loss yet in backtesting and survives Aug 24 w/ large profit.

I’d probably slap them on via the IB desk as one large order. It’s completely hedged in a black swan and can be scaled high. The average draw down is ~$700 per unit(very rare) and the profit target is $350.

I’ve been testing this combo since May in various forms and I had abandoned it when I incorrectly calculated the margin in May. Stupid mistake. Had I not, I’d have had them on for the summer most likely and they’d have reached profit target. Instead, I was doing STTs, BSHs and RCs separately. I’ve done poorly paying off the BSHs via the RCs due to the environment and I’ve got caught with the STTs a bit with negative UEL issues waiting for a down day. Frustrated but I have to wipe the slate clean and start fresh for the year though and get these combos and 555s going and aim to close off the year with good profit.

    Returns

As mentioned, it does about 8.75% on margin per 45 day period. So its a 6% a month trade but we always have 35% of our balance available so it’s more or less like a 4.5% return per month nen-compounded. That said, I am mixing in 10% of the account with the TTT(555) trade which reduces margin drastically thus boosting that return on margin and also provides really good returns in and of itself. The plan is to go live with the PC2 and TTT(555) trade soon and start bringing in the returns that’s been lacking this year so far as this exploration and trial for finding the perfect trade starts coming to an end ‘ish.

    TTT(555)

The TTT(555) trade was developed by Ron (Trading Dominion) and was a take on a previous trade that took advantage of skew dynamics across expirations. Essentially selling the part of the curve that at it’s highest and buying the part of the curve at it’s lowest across expirations. The margin requirement is the minimum and if you have other trades like the STT on, it would actually reduce overall margin heavily. The average days in trade is 10 and the profit is typically 100% of margin in 10 days (about 67% of the time) and the other 33% of the time you lose similar. The equity curve from 2015-to date was 1k turning into 22k. Incredible returns. For more information, join the mastermind group! If it isn’t obvious, I am just a member, I don’t make anything from the recommendation except hopefully leveraging the ideas you add to the group 🙂 Ron only charges I think $30 a month to keep the lights on for the group (site, organising the mastermind sessions etc).

Here’s the direct link to extra details about the course dealing with the Space Trip Trade, Foundations, and the Black Swan Hedge. Once you get through that, join the mastermind and that’s were we’re discussing all these trades. Invaluable.

https://academy.tradingdominion.com/pmtt/