“Heads I win … tails you lose!”
“Well, that didn’t take long” … and we were right there at the 6 PM EST,
NADEX open last night, where we hit the “daily double”, so to speak, first
with some more “Binary Options Arbitrage Strategy” risk free winners in the
RUT2000, and then more fortuitously, a “Call Spread Volatility Strategy” in
the RUT2000 as well … and now for the details.
First the binary options in the RUT2000 … all markets go in cycles, and a few
weeks ago, we here at -vegas HQ were doing risk free “arbing”, in GBPUSD
and Copper … well, NADEX has dropped Copper from the binaries list, along
with soybeans, so those simply have the “call spreads”, and soon to be “touch
brackets” … now, though, lately we’ve been getting good arbitrage
opportunities in the Russell 2000 [RUT2000] stock index … and again last
night, right out of the gate seconds after the 6 PM EST open for the new day,
somebody is giving money away … “ummm, OK, we’ll take some”! … and so
first up is buying the 1472 binary @ 11.25 on a 5 lot, and then immediately
selling the 1474 binary @ 19.00 on a 5 lot; that’s 7.75 for 5 = $38.75.
NADEX margin for this trade, although risk free and the computer system
doesn’t recognize the spread, is about $100 per 1 lot. So, when you see me do a
5 lot for the signals service, you can rest assured it’s a “slam dunk” … simply
cuz I’m assuming an account size that is below $1k … if you don’t have enough
in your account to do a 5 lot, simply do a 1 lot. In any event, it’s risk free
money, with an added kicker that $38.75 has a low probability of seeing an
additional $88.75 if the RUT2000 closes at 4:15 PM EST, between 1472 and
1474 … which about 5% of the time, will hit and you’ll feel like a genius … if it
doesn’t, no matter if the RUT2000 is at 0 or 2,000+, the gain is the same at
$38.75. Directly below the NADEX TRADE EMAIL CONFIRMATIONS.
click to enlarge ALL
And a few minutes after the open, I initiated a position for the signal service,
utilizing the NADEX “Call Spreads” in RUT2000 as well. Combining two [2]
“call spreads”, one with a floor and the other with a ceiling equal to the same
index price, IS EQUIVALENT TO BEING LONG AN OPTIONS
STRADDLE [long call & long put at the same strike] AT A EQUAL STRIKE
PRICE.
The first “call spread” I bought was a 1 lot in the RUT2000 1455 - 1485 Call
Spread (CS) @ 1457.9 … this CS has a 1455 floor, so price cannot go below
1455, no matter what the underlying RUT2000 does, and it has a ceiling of
1485, and price cannot go above 1485, no matter what the underlying
RUT2000 does … in between the limits, it trades like a CFD or futures, and
around the limits it has an “optionality” to it, cuz with any time until
expiration, it still has time value left for the market to come back. I bought
this with an approximate 20 hour time to expiration [4:15 PM EST] @ 1457.9,
meaning my total theoretical risk in this CS is 2.9 index points, or $29 per 1
lot.
The second “call spread” I sold was a 1 lot in the RUT2000 1425 - 1455 Call
Spread (CS) @ 1451.2 … this CS has a 1425 floor, so price cannot go below
1425, no matter what the underlying RUT2000 does, and it has a ceiling of
1455, and price cannot go above 1455, no matter what the underlying
RUT2000 does … in between the limits, it trades like a CFD or futures, and
around the limits it has an “optionality” to it, cuz with any time until
expiration, it still has time value left for the market to come back. I sold this
with an approximate 20 hour time to expiration [4:15 PM EST] @ 1451.2,
meaning my total theoretical risk in this CS is 3.8 index points, or $38 per 1
lot.
My short position is equal to being LONG A PUT with strike price of 1455,
and my risk is 1455- 1451.2 = 3.8 index points or $38. My long position is equal
to being LONG A CALL with a strike price of 1455, and my risk is
1457.9 - 1455 = 2.9 index points or $29 pe 1 lot. Add it all up, 29 + 38 - $67 per
1 lot, AND THIS IS MY MAX THEORETICAL RISK OF LOSS IN THE
POSITION AT EXPIRATION IF THE RUT2000 IS EXACTLY AT 1455.
Directly below, the 2 NADEX EMAIL CONFIRMATIONS for the volatility
trade.
Ok, this synthetic straddle has a total risk of $67 per 1 lot, or 6.7 index points
… EXIT QUESTION: “do you think the RUT2000 will have a range today in
excess of 7 index points"? … if so, the straddle will make money … overnight, I
missed selling the small rally high by 0.4 index points on a limit sell order.
Nonetheless, when stocks opened today, the necessary volatility shows up
[didn’t need much] and on the initial “Thelma & Louise” drop, I liquidated the
profitable short position right near the low of the move @1446.9. The
RUT2000 chart from NADEX directly below, with the black pencil mark to the
left of the red M1 near my price.
Here is the NADEX CONFIRMATION EMAIL OF THE LIQUIDATION
FILL.
Ok, time to liquidate the other side. Filled @ 1457.0
Here is the NADEX CONFIRMATION EMAIL OF THE LIQUIDATION
FILL.
OK, let’s analyze this … 1451.2 - 1446.9 = +4.3 index points = +43
… 1457.0 - 1457.9 = -0.9 index points = -$9 … $43 - $9 = + $34 profit per 1 lot.
My MAX theoretical risk was $67 … actual risk is about half that … “So, my
percentage profit on theoretical risk was about 50%, and my return on actual risk
was about 100% per 1 lot … and this is on a trade where all the RUT2000 has to
do over 20 hours is move a handful of points and I make money … as I said
earlier in a previous blog, this is the way to trade! … sit back and let the scumbag
LP banks do whatever the hell they want to longs & shorts cuz I don’t care … you
work for me now fellas!! … all I need is a minimum of intraday volatility and I
got about a 99.7% probability of profit … I like those odds”!
Granted, in hindsight, which is always 20/20, it would have paid to hang onto
the short CS … however, making 50%+ a day on risk capital in a trade ain’t
anything to sneeze at, and you simply must take advantage of the “Thelma &
Louise” waterfalls to exit short positions … anybody can look back, but I’m
totally fine with 50%+, almost each and every time I utilize the “Call Spread
Strategy”!
In addition to these first two trades, there were algorithm buy signals
generated, for the signals service, in both crude oil & nat gas as well
… directly below, both trades in succession.
Add it all up for the day, and we got $38.75 + $34 + $5 + $9 = $96.75 before
commissions … on a small account with less than $1,000 in it, and considering
the first profit was guaranteed, the second had a greater than 99% probability
of success for profit, and the other 2 were for scalps, if it was my account, I’d
be rather happy with the result … like I said, a different way to trade AND a
better way to trade!
Now, I’ll admit, for Newbies, this is a lot to wade through and digest … but in
today’s trading environment, this is the way to think and the way to trade … if
you’re simply buying/selling and putting a stop in, you have no flexibility and
no way to play volatile markets with a very high reward to risk ratio … and as
you’ve seen today, it makes NO DIFFERENCE WHICH WAY THE MARKET
GOES, if it moves at all over the course of the day, you make money! … and we
did in the RUT2000!
I’m looking at oil still, but with little time to the NADEX close, it’s time to pack
it in and call it a day. Onto tomorrow, or tonight on the open, and we’ll be there
to scan, analyze and place risk free and/or highly probable, and profitable
trading positions on for the upcoming day … if you need help, write me at the
email address in the header, and I’ll be glad to respond ASAP … I’m outta here
… until tomorrow mi amigos … Onward & Upward!!
Have a great day 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”?
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