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IFA Trade Management - Releasing a Vertical Spread in an Iron Fly

Most of the IFA strategy was flushed out in this post.  Recently though some trades like KRE, SMH, and IYR have tested their top long call as the market has continued to rally, which can be expected.  When we buy that call typically IVR is high, and the strikes widen, and now that one side has been tested, I want to look at trade management as potentially one side of the trade is collected virtually all of its value.  When one side of the trade has lost 85% of its value, I want to close out the untested side, and then remain short a vertical spread if enough time is left in the trade.

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SPXEPS Money Management FULL Premium

Identifying a profitable strategy is not enough.  We must apply a money management system to every strategy.  Both the strategy and money management must fit our trading personality, otherwise it will fail.  Money management asks a few questions, how much can I risk losing in a single trade, and how much do I want a strategy to lose as a whole.  There are few input variables investors can control when entering a trade; one is size.  Size is often the most important aspect to trading, but understanding size and how it fits our system is also important.  In this post I talk about applying the money management system to the SPXEPS strategy.

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Testing Sampling Bias in SPXEPS Using Data to 1990 Part Premium

When testing strategies we have to be careful from sampling bias.  So instead of using the start point of 1998 as our original data point for the trend following strategy SPXEPS, I will look at the available data from stockcharts.com dating back to 1990.  The results confirm most of the strategy already, but also highlight some new trades for the short side of SPX and buying gold during sell signals.

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Strategy Development: SPXEPS - Can EPS Predict Bull and Bear Markets? Part Premium

This post I continue, that we started earlier from this post, to refine the long-term trend trading system that uses the EPS of the $SPX to define buy an exit points from 1998 to today. I also look for some additional correlation across other asset classes such as $GOLD, $30Y bonds, and real and nominal GDP. The main purpose of this strategy is to help determine broad market trends and trend changes, but also show how you can also refine your own trading strategies.

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How does your quant model account for 10,000 year low interest rates?

Many traders, myself included, try to use logic, math, and quantitative techniques to discover ways to make money in the markets. However what if our data taken from the past 10 to 30 years is skewed due to an over-arching market theme. This theme has been happening for so long, and is currently so pervasive, people assume it “has always been this way.” But what if recently this theme’s series of data points had gone to such an extreme that there was no comparable backtest to itself throughout all of human history, and therefore making almost all backtests, connected to every global market, to any symbol listed on any exchange, useless. How confident in our backtests could would be at this extreme? The theme I am referring to is the 10,000 year low interest rates.

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Not so Fast: Have we Entered a Bear Market?

A lot of talk around the market today is the enviable recession, or the bear market is just around the corner.  Yet a few years ago I found a chart that ties in some fundamental analysis to technical analysis that stands as a counter to these claims.  When analyzed the results are surprising, and also outlines a potentially viable trend following trading strategy that can predict broad market cycle moves.

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Fitting Your Trade Strategy's Personality

Each investor has a different expectation on what they can get from strategy, varying from risk tolerance, average time in trade, rate of return per trade, and annualized return for a strategy as a whole. These factors make up the “personality” of the trade strategy, and must fit the trader’s personality to function within the given lifetime of a strategy’s viability.

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Beating Commissions in a Trading Strategy

One overlooked aspect to trading is commissions and their costs to the trader. Today most brokers offer very little in terms of competitive advantage compared to other brokers for most strategies. Some brokers do offer software advantages, like Tradestation is better for programmers who want to learn Easy Language and backtest trading systems, and Tastyworks offers software tailored for those looking to trade on their research.

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Iron Fly Agent Trading Strategy

The Iron Fly Agent (IFA) strategy is a MEAN REVERSION, intermediate to advanced, option selling strategy that aims on collecting near ATM extrinsic premium, while at the same time defining our risk.

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