ROM of HIPS and LOBS

The below expired.

6/21/18 STO SOLD -1 /ESU8 1/50 JUN 18 (Wk4) /EW4M8 2745 PUT @2.00

The return on margin for the last three weeks of this strategy is about 9%.

This conclude the review of HIPS and LOBS.

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LOBS signal setup

Today LOBS signal appeared.

6/21/18 STO SOLD -1 /ESU8 1/50 JUN 18 (Wk4) /EW4M8 2745 PUT @2.00

The below expired.

6/18/2018 STO SOLD -1 /ESU8 1/50 JUN 18 (Wednesday) (Wk4) /E3CM8 2795 CALL @2.00

Kum Seah Chu

Kum Seah Chu

Below is the summary:

  1. Selling option involve undefined risk.
  2. Buying option limit the risk.
  3. Risk profile provide a graphical view of risk.
  4. Option’s return are dependent on whether one adopt long, short or neutral strategy.
  5. It is possible to manage risk with adjustment.
  6. Option learning curve is not easy, Fullness of Time is necessary.
  7. Trade Well with your system.

Back Testing Weekly Option on SPY

backtest SPY

The above is the result of back test of SPY using delta neutral strategy.

Assumptions

  1. Weekly option open on Monday
  2. Premium collected around $0.15
  3. Close on the last day market close
  4. Loss is calculated base on the different of the 1 SD and closing price
  5. Strategy used is Delta neutral (Strangle or IC with $2 wide spread )

Observation

  1. The 17 trades resulted in a net loss
  2. Undefined risk or wide spread protection will result in higher loss
  3. Winrate 82% but the 3 trades loss can wipe out the profit
  4. Commission will result in a bigger loss

Conclusion

Even with stop loss for every trade or use 1 SD IC with maximum $1 loss spread will result in a loss and the commission will wipe out that profit. This option system is not workable in long run.