Jul 21 STT + BSH Update

Since April/May, I was working on combos (known in the group as PC2 and PC3 (Patricks Combo) where the 2 represents 2 BSH and the 3 represents 3 BSH. The results from those backtests are mind bogglingly good re consistency and no-loss. Due to a silly assumption/mistake, I miscalculated the margin requirements on them and had assumed it much higher than it actually was. So instead of a 4 maybe 5% return on 65% of the account where 35% is dormant, it’s actually more like 9-10% on the 65% within 40 days in the trade. Due to this false assumption, I had put them on the back burner and went down various other rabbit holes re variations of the GA/VM trades, TTT trades and LTE STTs. I am excitedly re-examing the combos and after further testing I will put them live as the base trade for my accounts. I probably have 1-2 more weeks of testing left.

The reason I bring this up is that I am underwhelmed by the live results since January. The STTs are doing great, they have been since January. The BSHs were poorly paid off up until April and I am down on a big set of them right now. Further, I had big losses in the old Rhinos till March/April. Lately I’ve been having a really tough time paying off the other BSH funding due to the constant grind up and poor timing of “pay off” strategies after the RCs are removed. I always have 1:1 RC to BSh but that only covers half the cost. Suffice to say, its extremely slow profit lately. The trades all still like SOME volatility and some down moves and we’ve not gone down more than 2.8% this year. I got a brief taste of big profits a month or so ago on that big down day but since then its slow and grinddy and underwhelming. I think a lot of people are experiencing the same thing with STT+BSH combos. Just slow, profitable, but slow. It’s not like this with the combo trades and hence why I am very relieved that I can reinvestigate and start ramping it up. The backtest results for the last 3 years were incredible (I showed some of my friends back about 3 months ago).

All that said, I am in a mixed mood, I am meh on the slow results but I am looking forward to combo trades that work in all environments and that will cut out the issues I have with the BSH performing underwhelming to the STT(which doesn’t quite producing good returns). Along with that, I am slowly moving towards the BSH factory. The goal is to end the summer with a complete BSH factory that not only pays for itself but produces income. This would leave with with three things BSH Factory + Combo Trades + STT LTE where each one is producing income and requiring less opportunity/timing. I guess patience. But it seems like a lot of that lately.

We left Stockholm yesterday and have arrived in Gdansk. I’ve got 5 days here then we hit Poznan and Berlin.

4 thoughts on “Jul 21 STT + BSH Update”

  1. I ended up signing up for the course and am about halfway through the STT portion – really informative stuff so far!

    Are the trades you’re referencing (PC2 & PC3) discussed in the private forum?


    1. Awesome! Glad you are enjoying it. The community is great. I randomly created a Skype group about 20 months ago (Index Income trading). Ron joined and eventually presented his idea for the STT to the group and now the rest is history. Best decision ever was creating that Skype group. We’re sitting among the best
      retail complex options traders and they’ve changed the way I view trading, I am lucky to be part of the group. I honestly think we’re on the fore front of complex option trading. I was an old Modified Iron Condor trader turned M3 trader and now turned STT trader trying to navigate my way to 100% yearly returns, getting better and better each year but it’s a constant learning process. Welcome to the club 🙂

  2. I cannot recall “LTE STT”. Can you remind me what that is?

    It is a good idea to compartmentalize the three components and makes them income producing individually yet complement each other in greeks.

    What I hate however is the # of contracts one needs to move and the commission associated with that.

    I am willing to tolerate more volatility in PnL and higher margin requirement if I do not need to move that many contracts. RC+some delta hedge seems to have advantage on that aspect.

    1. Hi Rui,

      Sorry about that, I think I have my own names for things. The LTE is just the longer term STT (150-180 DTE) which takes up less margin and thus has a lower profit target (350 per unit w/ commissions).

      I was wary of the # of contracts as well re the PC combos. What makes me more at ease is being able to send the ENTIRE order through to IB desk and get it filled all at once. If your worry is the commissions, I mean the backtesting does include the commissions and if history is any valid of a measure, then the trades should do 7-10% a month on used margin w/ commissions. I do agree I wish there was some way to make the STT+BSH base trade w/ all its characteristics more efficient. For now, it is what it is. Everyone has a focus on these cross expiration setups (TTT, GA TTT(555), VM etc) and those seem to be getting so damn efficient day by day, I mean, Ron’s latest adaption (the 5-5-5) went above and beyond the GA trade (at least preliminary). I wish there was more focus in the group on the bread and butter trades like the STT and BSH but everyone seems to be uber focused on the other trades. So far, none of the cross-expiration setups are do-able on large scale with large amounts of your total capital. They’re booster trades. I mean, the GA trade, simply can’t be scaled much past 10% of your total account due to potential, sometimes not at all predictable change in skew.

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