“Not a trick question … which guy do you want to be!?”
I had planned on bringing another NADEX “volatility trading strategy”
example trade to the blog post today, but last night I couldn’t find any in the
21 markets I scan that passed my criteria … a couple were close, but didn’t
quite make it past the reviewing stand … and my criteria? … “I want 3𝞼
[sigma], or 3 SDEV [standard deviations], from a markets sample size that
represents the entirety of trading over its life [population], so that the sample
represents with over 95% confidence, that my trade will have a 99.7%
probability of profit”!
Is this possible on a consistent basis? … “yup, and it occurs in many markets
more often than you think … like I said, last night saw 2 that came very close. In
fact, you could use, what I call, the “Straddle Call Spread” strategy exclusively
… do nothing else, and simply back the Brinks truck up to your back door”.
We’ll see what tomorrow brings for this strategy.
Meanwhile, again last night, somebody wants to give away free money in the
RUT2000 binaries, and everybody here in their personal accounts, as well as
the signals service, loaded up at the market ATM, and decided to collect some
“binary arbitrage” guaranteed moola … “when you see it, don’t ask why, just
do it … it isn’t gonna be there very long to take advantage, before some HFT
computer system recognizes what’s going on and gobbles up every frickin’ free
penny”. So, what’s better than 99.7% probability of profit? … “well, risk free
guaranteed profit at expiration, about 20 hours away”!
In today’s market landscape, with literally tens of thousands of derivative
products floating around different exchanges, different countries, and dozens
of markets, AND with hundreds of individual derivatives in each category, why
should it be a surprise situations like this pop up? “Cuz I got news flash for ya
… this isn’t a “mistake” like most think, but rather somebody utilizing a very
sophisticated strategy that involves selling the higher strike cheap … I learned a
very long time ago, not to overthink option markets pricing or those engaged in
giving free money away … perhaps they’re giving away LESS than what their
strategy is giving them”!
Now, since the binary pricing was so “skewed” last night in the RUT2000,
before Asia opened, I did multiple lots for the signals service … “and here’s a
hint: anytime you see me do more than a 1 lot for the signals service, understand
it’s pretty much a slam dunk “winner winner, chicken dinner” type of deal”
… and last night saw me leg into the 4 lot position … I did a 1 lot, 1 lot, 2 lot
position, in that order … each successive order saw the amount of the free
cash get LARGER … “well, OK, if you’re gonna do that, you leave me no choice
but to take the cash”! … and after the 2 lot, it never got wider, and minutes
later it popped from “free cash” back to normal risk taking.
Like the day before, I’m BUYING A LOWER BINARY STRIKE PRICE
CHEAPER, than I’m SELLING A HIGHER BINARY STRIKE PRICE
MORE EXPENSIVE, both with the same expiration time of today’s 4:15 PM
EST. close, and I’m not legging into this, hoping one position becomes
profitable and then doing the other … no, this is a “bang bang”, sell one buy
the other in succession immediately, just a few seconds apart … forget the
fancy financial lingo, this = free money.
Word of caution when you do this; “do NOT use market orders on the sell side,
when initiating the position … use limit orders … if the bid is 19.00, for example,
place a sell limit order at 19, and you should get filled … put in a market order,
expecting 19, and the market changes to 6 bid [where it’s supposed to be], and
you’ve just screwed yourself royally … you simply can’t assume the bid is gonna
stay there cuz you know it can’t for very long! … so, be smart about how you do
this … I would also advise, that if you intend to do multiple lots, space them out
so no one order can hurt you on bid/offer price changes”.
Directly below, the NADEX confirmations in initiating the total position. Here
are the 3 buy orders; 1 lot, 1 lot, & then a 2 lot.
click to enlarge ALL
So, as you can see, I got an average buy price of 11.75 on the LONG 4 lot
position in the 1458 binary.
Directly below, the NADEX confirmations in initiating the total position. Here
are the 3 sell orders; 1 lot, 1 lot, & then a 2 lot.
As you can see, I got an average sell price of 19.125 on the SHORT 4 lot
position in the 1460 binary.
Fast forward to this morning early, and the RUT200 has rallied up to the 1455
area, from last nights 1442 level. So, knowing I got a little over $7.25 on each 1
lot, which is about $30 on the total position, with over 12 hours to go to
expiration, do I take profit on this with more than $30 in profit? … And the
answer is a definite YES!
Directly below I liquidate the entire position. First up, the profit side, to nail
down the profit.
On the 4 lot, price was 33.50 … SO, 33.50 - 11.75 = +$21.75 * 4 = +$86.50 total
profit on the buy side of the position.
Now, the sell side of the 4 lot bought back with a liquidate buy order.
On the 4 lot, price was 28.25 … SO, 19.125 - 28.25 = -$9.125 * 4 = -$36.50 total
loss on the sell side of the position.
Bottom line: total risk free profit before commissions of $50, versus holding to
expiration, and likely seeing about $32.
Now, I know what some of you are gonna think … “hey -vegas, what’s with the
peanuts of a few bucks … so what I make $32? … this is chump change”! MY
RESPONSE: “well, your “chump change” came via 1) a risk free position, and
2) if this happened every day, a $500 dollar account would be at approximately
$7600 at the end of the year”! Do the math Skippy.
Turning to the WTI Crude Oil market … “I only hope oil hasn’t caught the
“market flu” from gold” … action so far today very muted … oil inventories
due at 10:30 AM EST will wake things up. “And wake shit up they did”!
First algo trade today in WTI was actually a mistaken buy … I was positioning
the order box on NADEX, and then BOOM! … filled … and while it turned
out OK, we came close to getting stopped out, before I liquidated it with a
couple of pennies profit … the actual algo buy came about 19 cents lower, but
live & learn … I now know NOT to fill the buy field size in until I’m ready for
execution, cuz without that there isn’t any way any order gets executed.
Directly below, the NADEX EMAIL CONFIRMATIONS of the trade for the
signals service.
Here in the New York afternoon, we get an algo buy signal in Nat Gas, for the
signals service … since it’s afternoon, I’m treating it as a scalp with about 90
minutes to expiration. Directly below, the NADEX EMAIL CONFIRMATION
of the scalp trade.
Overall, a little disappointed in the liquidation fill, as we suffered a hair
slippage … still, a profitable trade from the algo, with each tenth of a penny
move worth ± $1 per 1 lot … today sees NAT GAS with about a 25 cent range,
which is analogous to about a $2.50 cent range in WTI Crude Oil … and like
oil, you can make this as big or as small as your risk profile allows … so, we’ll
take the $8 before commissions and with our other profits on the day, time to
hit the exit gate.
The key to making money in a market, any market, is knowing 1) what kind of
market is it? … “MoMo, or range bound & choppy”, 2) what is the markets
“fingerprint” for usual corrections after a nice move? … every market has its
unique “fingerprint”, and 3) an algorithm or trading method specifically
designed for that market to take advantage of its character. And, it should go
without saying, that if you buy spikes up & sell spikes down, to initiate a
position, you’re gonna lose money … period. WTI Crude Oil is definitely a
“MoMo” market … in other words, a “Secretariat Market” … let the ponies
run!
Quite frankly, I don’t know what to make of the clusterfark @ 18:21 &
18:22 … down 40 cents and then up 40 cents … WTF is that? An OPEC or
Ruskie Apparatchik opens his Pie Hole? … welcome to oil trading, at least it
moves!
Today and yesterday, I’ve laid out the “Binary Arbitrage Strategy” [both times
in RUT2000], and you’ve seen how it works and how it yields risk free returns
when the positions are put on properly. I’m hoping tonight [tomorrow’s trade
date] sees an opportunity for another “volatility strategy” in one of the 20
markets plus oil … these strategies [there are three] supplement the signal’s
service strategy of using our proprietary algorithm in trading oil & nat gas, in
the “NADEX Call Spreads (CS)” each day … “and I can tell you right now, once
you get your head wrapped around the NADEX “Straddle Call Spread Strategy”,
as I lay it out with an example, your head … I guarantee! … will explode once
you come to grips with 1) the limited risk, and 2) the defined nature of an options
straddle incorporated into a futures contract or CFD that allows the winning side
to move with the underlying tick for tick” … and when we get an example here
shortly, that we put out on the signal service, I’ll explain how we set the trade
up, what parameters we use for each market, and when to liquidate
… normally, these trades “pop up” once to three a week in different markets,
but unless something really underwhelming hits the market and cause it to go
“gold” for the entire frickin’ trading day… meaning totally dead … our
probability of profit approaches 99.7%. Stay tuned.
Over this coming weekend on Sunday night, I’ll be posting a “Signals Service
Tutorial”, in a newly created “Download Links” section in the right hand
column … just like we have over in the Traderzoo Gold website. This tutorial
will address the different strategies we use with NADEX Binaries, Call
Spreads, & Touch Brackets, and give you a good indication of the “what,
where, when, & why” of our signals service including our daily WTI Crude Oil
& Nat Gas trades … all this to subscribers for literally peanuts … trust me,
this ain’t to get rich, only to weed out the “tire kickers”.
Another good day of trading … less than an hour to the energies close, so
we’re outta here … time for a cold one! … tomorrow another day of
opportunity … 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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