Post by Admin on Feb 19, 2015 19:25:38 GMT
Today, I traded the spy intraday. Total trades was 4. Total Wins was 3. These are the rules I've developed over this day. This will be put to the test to see how viable they are.
SPY day information:
-Thursday T-1 from expiration day.
-no upcoming news that may affect spy. (determine a list that may affect spy)
- SPY is an ATM trade
-IV rank is 39%.
-theta 0.43 and 0.45
-delta 0.55 and 0.45
Rules:
1) calculate expected daily range using the daily IV. This is the IV divided by sqrt of 252 or 365 (optimal period must be determined).
For example 2015 Feb SPY: 210.13 previous close.
IV:14
14/ (19.1 or 16)
expected percent range of spy = 0.73% to 0.875%
expected dollar range of spy = 1.53 to 1.84
2) Calculate the expected daily range over the trading time period. Take the daily calculated IV and multiply it by sqrt 8 and divide by sqrt of (24).To my understanding, this should give it the expected range over the next 8 hour period. ALSO CALCULATE THE THETA AND DELTA TO DETERMINE EXPECTED ENTRY AND EXIT POINTS.
For example same underlying as bove:
(0.73 to 0.875 x sqrt (8)) divided by sqrt 24(we will use average for this example)
expected % move:
0.73 -> 0.42%
0.875 ->0.505%
expected $ move:$0.88 to $1.06.
*plot these ranges and break them down into 0.25,0.5,0.75 levels above and below mean
3) wait until open. Wait until SPY makes one full move of a 0.25 move. **assumption is that this determines the direction. Todays trade Feb 19.2015, the spy opened between the 0.5 and 0.75 std levels below the mean. Spy then moved down to 0.75 level and then back up to the 0.5 level.
See chart
Red: 0.5 move
blue:1 move
orange: 0.25 Move
Spy continued upwards to about a 1 STD move from low.
4) take position in direction of the initial full 0.25 Move from the open. This is expected to be the direction.
5) initiate stop loss 0.25 from entry point.
6) initiate trailing stop loss that trails the equivalent of 0.25 STD. Attempt to exit between 0.75 and 1 STD move.
*do not initiate/look to initiate counter position from initial 0.25 move until the spy has moved at least 1 STD.
*this trade was on a low IV rank day <50. expectation is that during High IV rank times, there will be a higher fluctuation of prices that can range into the 1 STD move. Below IV rank 50 I think that it is good to use the daily calculated ranges.
*use candle stick chart
SPY day information:
-Thursday T-1 from expiration day.
-no upcoming news that may affect spy. (determine a list that may affect spy)
- SPY is an ATM trade
-IV rank is 39%.
-theta 0.43 and 0.45
-delta 0.55 and 0.45
Rules:
1) calculate expected daily range using the daily IV. This is the IV divided by sqrt of 252 or 365 (optimal period must be determined).
For example 2015 Feb SPY: 210.13 previous close.
IV:14
14/ (19.1 or 16)
expected percent range of spy = 0.73% to 0.875%
expected dollar range of spy = 1.53 to 1.84
2) Calculate the expected daily range over the trading time period. Take the daily calculated IV and multiply it by sqrt 8 and divide by sqrt of (24).To my understanding, this should give it the expected range over the next 8 hour period. ALSO CALCULATE THE THETA AND DELTA TO DETERMINE EXPECTED ENTRY AND EXIT POINTS.
For example same underlying as bove:
(0.73 to 0.875 x sqrt (8)) divided by sqrt 24(we will use average for this example)
expected % move:
0.73 -> 0.42%
0.875 ->0.505%
expected $ move:$0.88 to $1.06.
*plot these ranges and break them down into 0.25,0.5,0.75 levels above and below mean
3) wait until open. Wait until SPY makes one full move of a 0.25 move. **assumption is that this determines the direction. Todays trade Feb 19.2015, the spy opened between the 0.5 and 0.75 std levels below the mean. Spy then moved down to 0.75 level and then back up to the 0.5 level.
See chart
Red: 0.5 move
blue:1 move
orange: 0.25 Move
Spy continued upwards to about a 1 STD move from low.
4) take position in direction of the initial full 0.25 Move from the open. This is expected to be the direction.
5) initiate stop loss 0.25 from entry point.
6) initiate trailing stop loss that trails the equivalent of 0.25 STD. Attempt to exit between 0.75 and 1 STD move.
*do not initiate/look to initiate counter position from initial 0.25 move until the spy has moved at least 1 STD.
*this trade was on a low IV rank day <50. expectation is that during High IV rank times, there will be a higher fluctuation of prices that can range into the 1 STD move. Below IV rank 50 I think that it is good to use the daily calculated ranges.
*use candle stick chart