FALLING IN LOVE WITH MATH

 

“The math never lies!”

First up today, some more “free money” being handed out by somebody in the 

RUT2000 binaries, where again near the open for a few minutes, somebody is 

selling the lower binary at a cheaper price than somebody else is willing buy a 

higher binary at a greater price … the result? … free money. Today sees the 

1450 binary bought @ 11.50, while simultaneously I sell the 1452 binary 

@ 19.00 … 7.50 * 5 = +$37.50 guaranteed profit no matter what happens over 

the next 20 hours in the Russell 2000 stock index … the added kicker, is that if 

somehow the index closes the day at 4:15 PM EST, between 1450 and 1452, I’ll 

get an extra $88.50 PER 1 LOT, which = $442.50 … the probability isn’t high 

for this to happen, as I estimate over time you have between a 0% - 5% 

probability of hitting this jackpot … no matter though, cuz the math on this is 

simple … margin for a 5 lot is about $500, so receiving a free $37.50 = 

approximately a 7.25% return for the day on margin … if this was the only 

trade you did for the day, over a year, that $500 account would have a balance 

around $7600, and if you scaled up the number of lots as the account grew, it 

would be a helluva lot higher than $7600 … all starting with $500 … “so, don’t 

anybody sit there and “poo poo” the so called “chump change”, while you’re out 

hunting Moby Dick … remember, this is risk free”!

CoS [Chief of Staff] Milton Waddums backed the Brinks truck up last night 

and gave whoever it was doing the other side of the trade, one of the multiple 

hundred lots that was available [for about 15 minutes], and is looking forward 

to today’s close with interest … doing the math, he clears $750 no matter what 

happens, but if it happens to close between 1450 and 1452, he gains another 

88.50 * 100 = $8,850! … “if somehow the RUT2000 can come close to that level 

today, which isn’t likely but who knows, I’m gonna be wetting my pants with 

laughter watching him sweat the final minutes … where else can you get this kind 

of entertainment from math”?

In any event, directly below the NADEX EMAIL CONFIRMATIONS, for the 

signals service trades.

 

click to enlarge ALL 

 

There weren’t any good “call spread strategy” volatility plays last night, in any 

of the 21 markets … three were slightly above average and had a high 

probability of success, and they were RUT2000, EURJPY, & USDCAD 

… however, “high probability of success” ain’t good enough for me … I want 

almost risk free, meaning I want 3 𝞼 [sigma] trades, that mathematically give 

me a 99.7% probability of profit on the trade, whether that profit is 1% or 

300% or anywhere in between, on risk capital in the trade … almost all of the 

volatility strategies have expiration duration's of 12 - 20 hours, and this is in the 

main trading times for each market … so how do we measure this?

It starts with a very basic understanding of how a market trades, what its 

history is with regards a 20 Day Range Simple Moving Average [MA] over a 

large enough sample size to determine with 95% confidence what the true 

population of the range is over the entire life of the market as traded … that’s 

a lot of data, especially for markets that have been around decades or 

centuries! … fortunately, all you need is a few hundred sample data sets to 

determine the population … and from that, you get what I put up every 

Sunday night here, and over in “Traderzoo Gold” for gold & SP500 [for 

correlation], which is the charts of the 20 Day Range MA from the start of 

2018.

From these mean ranges, you can determine the 𝞼 [sigma], or more commonly 

known as STANDARD DEVIATION [SDEV] of the data. And from the SDEV, 

we know from probability theory, the distribution of these data sets and what is 

probable in the market, each and every day, that you can expect to see in terms 

of the range for that day in any particular market … in visual form directly 

below, the “normal distribution curve” which is applicable to trading markets.

 

Think of the red line above, as the set of data of daily ranges in any market, 

accumulated over many days [like a year] values for each week … at the top of 

the red line, that’s where you’ll find most day’s range for a market … as you 

move out to either side, the one to the left of abnormal LOW RANGE day’s 

values and to the right of abnormal HIGH RANGE day’s values, what you get 

is the normal distribution bell curve. SDEV measures the distance from the 

highest mean value, and tells you the probability of a data point [the day’s 

range] being away from this mean. This leads to the “68 / 95 / 99 Rule”, which 

tells you the probability of a data set NOT being in the area under the curve 

by SDEV values.

For example, let’s say hypothetically market X has a mean average daily range 

of 150 [PIPS, points, cents, whatever], and an historical SDEV of 65 … what 

this means, is that today’s range has an approximate 68% probability of being 

between 85 - 215 [1 SDEV], an approximate 95% probability of being between 

20 - 280 [2 SDEV], etc.

On the upside, the range can be unlimited, but on the downside, it is obviously 

limited to zero for any market … taking the 20 Day Range MA for any market, 

obviously gives me a good snapshot of current market volatility, and this is 

what I present to you each Sunday night, to use for the following week.

Take ⅓ to ½ , or approximately 33% - 50% [no more than 50 and the lower the 

better] of the SDEV value of the 20 Day Range MA, and IF you can do both 

sides of the NADEX “call spread (CS) strategy” for EQUAL TO OR LESS 

THAN THIS VALUE, then take the position, cuz your probability of success 

for profit is about 99.37%!

Currently, the 20 Day Range MA for the RUT2000 for 2018 is approximately 

24 index points, with an SDEV of approximately 15 index points. Doing the 

math, 0.50 *15 = 7 ½  index points, and the CS I put on yesterday for the 

signals service, I did at 6.7 index points … “winner winner, chicken dinner”!  

And, like predicted, on the first move out of the box after the NYSE open, the 

RUT2000 moves down in “Thelma & Louise” style, and we make 

approximately a 50% return of MAX risk in the trade. “Call Turnkey, or any 

other offshore broker for that matter, and ask them if this is available there 

… good luck”!

As I said yesterday, what we’re doing utilizing the “volatility call spread 

strategy”, is nothing more than a traditional options “Long Straddle”. Visually, 

it looks like the following.

 

For our trade yesterday, the apex [or strike price] was 1455 … the long side 

[call side or the 1455 - 1485 CS] is at 1457.9 [where I got long], and the short 

side [put side or the 1425 - 1455 CS] is at 1451.2 … both are only about 3 ½ 

points from the apex, and with an average 20 day daily range of about 24 

index points, and an SDEV of about 15, getting the RUT2000 to move 7 index 

points for profit is an extremely high probability event … and what did we 

see? … “that’s right Skippy … profit”!

Turning to today’s oil market … snoozefest to start, so far on this Friday, after 

late yesterday the Saudi’s goosed the market higher with bullshit … welcome 

to crude oil mi amigos!

One algo buy trade signal today in WTI Crude Oil, in the signals service 

… made a couple of cents, but really, I didn’t like the trading action so I 

simply scalped out of it with any profit … my intention is not to super scalp 

oil, but to capture some kind of pony ride … as I’ve said before, oil is very 

much a “MOMO” market, but when the action doesn’t support any kind of 

“MOMO” move, I’ll liquidate and ask questions later. In any event, the 

NADEX EMAIL CONFIRMATIONS directly below.

 

 

From all appearances in the RUT2000, our “gimme free money” arb trades 

are well out of the money [OTM], and have almost zero chance of landing in 

the sweet spot, and will expire worthless … oh well, a free $37.75 … twist my 

arm, I’ll take it!

What I want people to realize about the signals service, and its priorities, is 

that first and foremost, at the open of the trading day which happens the night 

before at 6 PM EST, we are actively scanning the “binaries” & various “call 

spreads” in all 23 markets … “THIS IS OUR FIRST PRIORITY, and then next 

morning taking a look at WTI Crude Oil & maybe NAT GAS, and taking 

algorithm signals … we concentrate first on the “slam dunks” and then move to 

trading oil”.

Now, I get many of you don’t have the time or inclination to do what team 

-vegas does every night and every day, but I’m pretty sure you’re equally 

motivated about money … and especially “slam dunk”, risk free money, and 

extremely high probability situations with “FAT” returns on risk capital 

… “quite frankly, if there was a way to do a PAMM/MAM money management 

program with NADEX, I would do one in a heartbeat … but sadly, though, there 

is no mechanism for this, and even if there was, no place on earth lets you split 

options and/or futures contracts, no matter the size … so, on two fronts it’s simply 

not possible … however, you got control over your own account, and via a couple 

of days on the demo getting used to the system, our signals service takes away the 

strategy and time consuming computer screen babysitting most people hate 

… after the free 3 month trial, it’s about 39 cents a TRADING DAY, if you 

choose the yearly payment … if not, the monthly plan is about 48 cents a 

TRADING DAY … [“yea, I can see you raiding the 401(k) to afford this”.] 

Signals service started this week on Monday, so that’s a total of 5 days 

… already, you could have paid for about 2 years of service and that’s trading 

small lots on an account of $500 or less … larger accounts, of course, and it’s 

more, but the choice is yours as to your risk profile. My point is, though, I 

can’t make you money if you don’t “play the game”, and while nobody here is 

getting rich off of this, it does reduce the “tire kickers” to the curb. So, 

seriously, what do you want & expect that is better than this? … I’ll entertain 

suggestions if you want to send them to me, especially since I’ve already said 

that ANYBODY that hasn’t made REAL MONEY from a live account after 

the 3 month free trial, where the first month can be used on the demo to bring 

yourself up to speed and then start trading a live account for the last 2 months 

or so, if you’ve taken the signals and for some reason we’re down money, I’ll 

extend the free period until your account is profitable AFTER the sub fee 

… So, you math majors out there, tell me how it gets any better for anybody, 

including the fact that we’re talkin’ about pennies a day? … and, I use PayPal 

cuz it’s easy and protects people’s bank card or account information … as 

people get close to the end of the trial period, I send them PayPal instructions 

… it’s as simple as that!

Onto next week, where we got the FED and more chaos cooked into the books 

… can’t hardly wait … I’m outta here … until sunday night mi amigos 

… Onward & Upward!!

UPDATE 4:15PM EST: As expected, our 2 RUT2000 binary positions expired 
worthless … “they twisted my arm to take the $37.75 last night, so I did”!

Have a great weekend everybody!

-vegas

OUR NADEX SIGNALS SERVICE IS UP & RUNNING … DAILY 

WTI CRUDE OIL SIGNALS & “VOLATILITY” STRATEGIES IN 20 

OTHER MARKETS, INCLUDING COMMODITIES, FX, & STOCK 

INDICES! … “what on earth are you waiting for”?