What matters to me is to try to do a series of routine steps that cover most circumstances, and live with the results, rather than adjusting too much. To be sure, earnings has always shown to be a wild card, but I think that regardless of the immediate outcome, in the long run one can do well with the PCCRCs in any market, as long as there are always high flyers. Here is the performace so far on these 7 trades. Notice that I have included original debit and curent debit, and % gain (profit) compared to the original debit and current debit. All the trades have lasted between 2 and 3 months, and the average gain is 18% (compared to original debit) to 40% (compared to current gain). The group includes big jumpers, big decliners and sideways movers. Exactly what you would expect, even if they were all high flyers to begin with. The worse case scenario is a decline without increase in volatility.
It is very important for me to be able to place a trade and forget about it. Go on vacation, enjoy life, while the trades work for me. Finding such a system has been my goal for the last 3 years. I think that this will do it. One needs to be home 1 week before expiration, to do the rollovers (unless you take your laptop with you). With every rollover, a large amount of cash is freed that may be used for other trades, so the cash is always working for you.
Look carefully at each trade, and draw your own conclusion. Here are some guidelines, in addition to the already discussed here, in my writen documents and in my videos.
1. Rollover to a higher strike price when the stock jumps to a higher strike price. Do not get greedy and try to increase the number of calls, buy an identical number of contracs as you sell. This way you are taking profits while preparing for a sudden decline in the stock price. Take a carefull look at AAPL, my move to roll from $75 to $80, assured me some gains in spite the unexpected reversal.
2. Rollover to a lower strike price when the stock declines to a lower strike price. Use your judgment, the idea here is to take profits. Often times the stock bounces quickly up after a large, aggressive decline.
3. Rollover both shorts to next month 1 week before the expiration. You may consider increasing the number of shorts, depending on the trend in the stock.
4. Rollover any time before expiration if the strong move in the stock has caused the current short to decline to $0.05/share. If you do the rollover, be sure that the next month short is worth >$0.5/share. Otherwise, leave the long as a "lotery ticket".
5. Remember that this trade takes advantage of spikes in volatility, so if volatility is high, target your profits at about 30% of the original debit, and exit if that target is met. DO NOT LOOK BACK with regret. Another opportunity is always around the corner. My statistics suggest taht 20% of the original debit is usually the result, thus, 30% is wonderful.
6. The rule above does not apply if the gains are DELTA gains. in such cases, follow steps 1 or 2.
Note that the feeing of capital makes my account function as though I had $102,000 in my account. Today, however, the value of the debit in the positions is only $45,967. These are only apparent numbers as cash flows constantly out of the trades with every rollover. This is one more advantage of this form of trade.
Here are the trades, be sure to examine them carefully.
BRCM
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=I|BRCM™_date=2006-01-11&sym=RCQ&num_legs=6&tra0=-15:B06:55.000:4.300:BRCM:2006-01-11:24.59600067:E8E8E8:0:0&tra1=-15:N06:55.000:2.050:BRCM:2006-01-11:50.71599960:E8E8E8:0:0&tra2=30:E06:55.000:6.300:BRCM:2006-01-11:27.80100060:99FF66:0:0&tra3=-15:E06:55.000:16.400:BRCM:2006-01-27:39.48799896:FFFFFF:0:0&tra4=30:Q06:55.000:4.050:BRCM:2006-01-11:44.96300125:66CCFF:0:0&tra5=15:E06:70.000:6.5:BRCM:2006-01-27:39.88700104:FFFFFF:0:0
GILD
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=I|GILD™_date=2005-10-31&sym=GDQ&num_legs=10&tra0=10:A06:55.000:2.5:GILD:2006-01-11:36.27099991:FFFF99:0:0&tra1=-10:A06:55.000:2.300:GILD:2005-12-22:32.34899902:FFFF99:0:0&tra2=10:M06:55.000:0.350:GILD:2006-01-11:30.24099922:FFFF99:0:0&tra3=-10:M06:55.000:2.900:GILD:2005-12-22:51.24800110:FFFF99:0:0&tra4=-10:B06:55.000:4.200:GILD:2006-01-11:42.42599869:E8E8E8:0:0&tra5=-10:N06:55.000:1.5:GILD:2006-01-11:34.14699936:E8E8E8:0:0&tra6=20:E06:55.000:5.200:GILD:2005-10-31:54.54600143:99FF66:0:0&tra7=-10:E06:55.000:9:GILD:2006-02-01:36.70299911:FFFFFF:0:0&tra8=20:Q06:55.000:5.300:GILD:2005-10-31:0.00000000:66CCFF:0:0&tra9=10:E06:60.000:6.200:GILD:2006-02-01:38.64199829:FFFFFF:0:0
MRVL
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=I|MRVL™_date=2005-11-18&sym=UVM&num_legs=14&tra0=8:L05:55.000:2.790:MRVL:2005-12-06:0.00000000:FFFF99:0:0&tra1=-8:L05:55.000:3.200:MRVL:2005-11-21:38.71300125:FFFF99:0:0&tra2=8:X05:55.000:0.138:MRVL:2005-12-06:32.48500061:FFFF99:0:0&tra3=-8:X05:55.000:1.300:MRVL:2005-11-21:35.03599930:FFFF99:0:0&tra4=9:A06:55.000:9.700:MRVL:2006-01-10:0.00000000:E8E8E8:0:0&tra5=-9:A06:55.000:4.270:MRVL:2005-12-06:13.67700005:E8E8E8:0:0&tra6=9:M06:55.000:0.08:MRVL:2006-01-09:41.75699997:E8E8E8:0:0&tra7=-9:M06:55.000:1.083:MRVL:2005-12-06:33.61000061:E8E8E8:0:0&tra8=-9:B06:55.000:10.256:MRVL:2006-01-10:25.17600060:FFCC99:0:0&tra9=-11:N06:55.000:0.5:MRVL:2006-01-09:35.85300064:FFCC99:0:0&tra10=16:E06:55.000:7.5:MRVL:2005-11-21:39.72600174:99FF66:0:0&tra11=-7:E06:55.000:17.900:MRVL! :2006-01-27:50.34400177:FFFFFF:0:0&tra12=16:Q06:55.000:4.900:MRVL:2005-11-21:39.45999908:66CCFF:0:0&tra13=7:E06:70.000:8.100:MRVL:2006-01-27:47.63899994:FFFFFF:0:0
RIG
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=I|RIG™_date=2005-11-03&sym=RIG&num_legs=12&tra0=8:A06:65.000:11.100:RIG:2006-01-13:50.83100128:FFFF99:0:0&tra1=-8:A06:65.000:2.800:RIG:2005-11-29:38.96099854:FFFF99:0:0&tra2=8:M06:65.000:0.05:RIG:2006-01-06:37.66400146:FFFF99:0:0&tra3=-8:M06:65.000:4.200:RIG:2005-11-29:31.91699982:FFFF99:0:0&tra4=-8:B06:65.000:11.5:RIG:2006-01-13:34.85599899:E8E8E8:0:0&tra5=-8:N06:65.000:0.650:RIG:2006-01-06:39.58800125:E8E8E8:0:0&tra6=-8:E06:55.000:22.600:RIG:2006-01-10:37.24800110:FFFFFF:0:0&tra7=16:E06:65.000:5.510:RIG:2005-11-29:35.43099976:99FF66:0:0&tra8=16:Q06:65.000:7.490:RIG:2005-11-29:39.41299820:66CCFF:0:0&tra9=8:E06:75.000:7.900:RIG:2006-01-10:36.92300034:FFFFFF:0:0&tra10=-8:E06:75.000:11:RIG:2006-01-30:38.75600052:FFFFFF:0:0&tra11=8:E06:80.000:8.300:RIG:2006-01-30:39.65700150:FFFFFF:0:0
AAPL
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=X|AAPL™_date=2005-12-27&sym=AAQ&num_legs=10&tra0=5:A06:75.000:5.5:AAPL:2006-01-19:190.67700195:FFFF99:0:0&tra1=-5:A06:75.000:3.100:AAPL:2005-12-27:44.38399887:FFFF99:0:0&tra2=5:M06:75.000:0.05:AAPL:2006-01-19:60.68899918:FFFF99:0:0&tra3=-5:M06:75.000:3.300:AAPL:2006-01-04:53.52299881:FFFF99:0:0&tra4=-5:B06:75.000:7.060:AAPL:2006-01-19:53.45000076:E8E8E8:0:0&tra5=-5:N06:75.000:1.350:AAPL:2006-01-19:34.89400101:E8E8E8:0:0&tra6=10:D06:75.000:7:AAPL:2005-12-27:41.80500031:CCFFCC:0:0&tra7=-5:D06:75.000:11.260:AAPL:2006-01-10:45.97700119:FFFFFF:0:0&tra8=10:P06:75.000:6.850:AAPL:2006-01-04:44.95299911:66CCFF:0:0&tra9=5:D06:80.000:8.380:AAPL:2006-01-10:44.70899963:FFFFFF:0:0
GOOG
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=X|GOOG™_date=2006-01-03&sym=GOQ&num_legs=6&tra0=-2:B06:460.000:19.800:GOOG:2006-01-03:47.57799911:FFFF99:0:0&tra1=-2:N06:460.000:27.900:GOOG:2006-01-13:55.60800171:FFFF99:0:0&tra2=2:O06:400.000:27.900:GOOG:2006-01-20:46.26699829:66CCFF:0:0&tra3=4:C06:460.000:25.075:GOOG:2006-01-03:43.60300064:99FF66:0:0&tra4=4:O06:460.000:33:GOOG:2006-01-13:49.02500153:66CCFF:0:0&tra5=-2:O06:460.000:70.700:GOOG:2006-01-20:50.85900116:CCFFFF:0:0
QCOM
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=X|QCOM™_date=2006-01-04&sym=QAQ&num_legs=4&tra0=-10:B06:47.500:1.666:QCOM:2006-01-04:38.64199829:FFFF99:0:0&tra1=-10:N06:47.500:1.308:QCOM:2006-01-13:31.98200035:FFFF99:0:0&tra2=20:G06:47.500:3.25:QCOM:2006-01-04:27.81500053:99FF66:0:0&tra3=20:S06:47.500:3.150:QCOM:2006-01-13:29.96500015:66CCFF:0:0
2 comments:
Juan,
You have shown the trades which have made money and have done well. What about the trades you might have picked and didn't do well?
I am not deliberately trying to be awkward, but we need a rule for high flyers. How many weeks have they been flying? What has been the percentage move? What about using Stocks that have been falling?
In your sample, you have 9 Stocks using the PCCRCs, total value to start with of $100,000. Is that too much invested in one single trade? What about 20?
To prove this statistically we need to construct more examples to provide us with a sound system. Statistical reliability is better when n > 30.
Backtest from each month using Platinum either the weekend before expiration or the week after expiration for the high flyers or dogs of the market.
Some thoughts.....
fortitude: I am not deliberately trying to be awkward,
Juan: You have shown the trades which have made money and have done well. What about the trades you might have picked and didn't do well?
Thanks for your imput. This is the kind of questioning that we need so help me think abou the things I did not thought about.
fortitude: but we need a rule for high flyers. How many weeks have they been flying? What has been the percentage move?
Juan: Look at my videos and written materials. That part is covered in detail. I am selecting the strongest performing stocks over the last 90 days. I am interested in stocks that have increased more than 35%. Those are totally arbitrary, but I think that these are exactly the ones that may have strong moves in either direction or volatility spikes.
fortitude: What about using Stocks that have been falling?
Juan: You would have to modify the structure of the trade. For starters if you buy and sell the same number of puts and calls in a 2/1 proportion, as I have been doing, you will end up with a bullish bias. To pick falling stocks is a problem unless they have low volatility to begin with. That is a rare finding. More likely you will see stocks falling with high volatility. It is a completely different trade. I did spent some time placing calendar trades on stocks falling in high volatility. I decided that such trades were not for me. I want open ended trades, with unlimited gains in either direction. Calendar and Condors as well as butterflies limit your gains, yet is easy for the stock to get out of range.
fortitude: In your sample, you have 9 Stocks using the PCCRCs,
Juan: These were 7 examples, I did not include CEPH, which was a huge winner (now closed). Other trades are too early, like the LRCX, is only a few days old.
fortitude: total value to start with of $100,000.
Juan: Remember, because you are constantly rolling over, reducing your cost, the total value was never $100,000. This is the beauty of this system.
fortitude: Is that too much invested in one single trade? What about 20?
Juan: I suppose you mean one strategy (PCCRC) only. It is the flexibility of the trade that attracts me. It can be bullish, it can be bearish, it can be Delta neutral, it can be Vega positive. SO it works like the ultimate combination of trades. The only concern is when the stocks drop in low volatility. That usuallly means that it will bounce back strongly, making you your money back.
fortitude: To prove this statistically we need to construct more examples to provide us with a sound system. Statistical reliability is better when n > 30.
Juan: I love statistics. Did I tell you that I am a scientist by training? anyway, I have showed you something to start with, I will be posting more real trades and continue to keep track of them. DO keep a tally on my successes and failures.
fortitude: Backtest from each month using Platinum either the weekend before expiration or the week after expiration for the high flyers or dogs of the market.
Juan: I have given you all the details now, on how to handle these trades, I hope that you would find a circumstance that I may not have considered. I count on you to make sure I don't let anything fall through the cracks. I am hoping to make this work for all of us.
fortitude: Some thoughts.....
Juan: Much appreciated. This is why I am doing this!
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