Post by Admin on Mar 7, 2015 6:09:14 GMT
Chart is calculated on a weekly basis.
Hypothesis: Stock prices generally bounce off IV levels after its price has crossed more than one. Trade works best with stocks that have high implied volatility (40% or higher)
USO:
Current price 19.01
IV:48%.
Bi-weekly/monthly.
strategy 1:
Purchase shares of stock after 0.25 standard deviation move, with expectation of 0.2 STD move upwards. Set stop loss to 0.2 STD move. adjust for trailing.
Strategy 2:
Purchase shares of stock after 0.5 Standard deviation move, with expectation of 0.2 STD move upwards. Set stop loss to 0.2 STD move. adjust for trailing.
Strategy 3:
Purchase shares of stock after 0.75 or greater standard deviation move, with expectation of 0.2 STD move upwards. Set stop loss to 0.5 STD move. adjust for trailing.
expectation is strategy 2 and 3 have highest probability of success.
Trial entry:
strategy #2.
buy USO @ 18.20 March 6, 2015.
Stop loss @ 17.85
Max loss @ 1.9%. convert to trailing stop loss once USO meets the 1.6% return mark.
expected return @ 1.6%
trade duration: expected 2 weeks.
Annualized loss: max 49%. if 100% losses.
Annualized return: max 41.6% if 100% win.