Creating a new thread for this new iteration of the SPY model which produces a lot more signals. Credit to @SuckyMayor for the idea to find signals for Selling Puts. Thanks for that. Until then, signals were quite rare so the model became boring. Now it will throw signals most trading days.
Selling Puts is a bit trickier than buying calls. As I’ve tested this, I’ve been covering the sold PUT by purchasing a lower strike Put with the same exp which lowers the risk of loss. For example, today I sold a SPX 4125 June 30th PUT and bought a 4115 Put with the same expiration. I want both to expire worthless so I pocket the difference between the premium on the one I sold and the one I purchased. According to the model, there is a 73% chance this happens. I chose 4125 because it was 2% lower than the current SPX price at the time.
Below is the updated data in a new format showing signal data. Notice that today ended in a 2,3 Uptrend. The signal for this return group is to Sell SPX PUTS at 2% below the current SPX level for 30 Days out. It has a 73% success rate with a total of 412 wins over the past 100 years.
Today is starting out in a 2,3 Even return group which is one of the few that have no signal unfortunately. The strat I played yesterday is currently sitting at breakeven. Theta strats take time, especially with movements in the wrong direction.
Back to a 2,3 uptrend return group so we have another signal today. See below. Sell a SPX Put 2% lower than current with 30 day out exp. Need to buy a SPX put at lower strike, same exp to manage risk.
**Edit - my original posts incorrectly described the hedge as buying calls at lower strikes. I’ve corrected this to reflect the strategy for hedging is to buy a PUT at a lower strike, same exp.
We finally have a signal to buy calls for SPY today. It’s been a while. As of this moment, the return group is a 2,4 Uptrend. There are 4 Signals with this return group with varying win %s, all above 70%. Buy calls ATM 30 days out, Sell SPX Puts 2% lower, and Sell SPY Puts 3% and 4% lower. Selling SPX Puts 2% lower and SPY Puts 4% lower have win %s over 80%. I’ll probably put on all 4 of these.
The return group is still in a 2,4 Uptrend so all the same signals exist today as on Friday. I played all four on Friday so I’m holding onto those and will not play these today.
The return group today is a 3,4 Uptrend which has similar success levels as the return group on June 2nd when I played all 4 signals. However, the past 2 days ended in a 3,5 Uptrend which is a rare return group with very high probabilities of success. Specifically, it has a 79% win rate for SPY Calls with ATM strikes 30 days out. I’ve been out of the office and hadn’t run the return groups till now. Otherwise I would have put on that trade specifically yesterday. I do not plan to put on any trades today.
My Price Target of 436 hit today so I sold all 4 positions from the signals played on June 2nd. 60% ROI for the SPY Call. Green on all 3 theta plays from the signals, totaled about $500 profit.
Today’s best signal is to sell SPX puts 2% less than current (4,280) for 30 days out (July 14th) which has a 78% likelihood of success. I recommend buying corresponding SPX puts for the same exp and with a strike around 30-50 points lower (4,250) to mitigate the risk of loss. Using 30 points nets us $500 in premium at this moment.
If I close the vertical spread once the price target is reached (2% increase in SPX), it will likely cost me around $150 netting me $350 total. I’m technically risking $3,000 on this trade so the ROI would be around 12%.
We are stuck in a 4,5 Uptrend. There is a decent signal to sell SPX Puts 2% below current price 30 days out exp. The success rate is 78%. I’ll likely play it today at some point. My gut tells me SPX will fall more and this massive run up is destined to fall, but the data says sell puts. I’ve regretted it too many times to put gut over data so I’m going to trust data this time.
If I were putting the trade on right now, I would sell SPX 3900P exp Jul 20 and buy SPX 4270P with the same exp. This would net me about $500 premium. The risk of loss is $2,500. I could also take on more risk and reap more premium by instead buy SPX 4250P. It would net me around $800 for $5k risk.
There is a 70% chance of success buying SPY Calls ATM 30 days out as well. If SPY falls more today, I may put this trade on as well. I prefer 75% success rates, but it’s close.
Decided to hold off on putting on a trade yesterday and it was a wise choice since SPY is down today. The return group has moved to a 4,4 Uptrend. The success rate for selling SPX puts 30 days out for 2% less than current increases to 81%. I like those odds. However, I won’t put on the SPY Calls trade since the success rate dropped to 66%. The SPX trade will look like this:
Return group moved to a 3,4 Uptrend today. The best signal is the same as before, sell SPX Puts 30 days out for 2% lower than current. It has an 84% success rate so I can’t pass this one up. I’m putting on another trade.
Selling SPX Put 4275 with 7/24 exp and buying a put at 4220 with same exp.
We moved to a 4,4 Uptrend today which has the same buy signals as the last few days. Since I have two trades on currently and they are each down about 10%, I chose not to add another today to manage risk. I’m currently at risk for around $7k so I’ll hold there.
Note - SPX options have the advantage of no assignment risk. This means SPX would have to be lower than my strike on the expiration date in order for me to have a loss. If it dips below and comes back up before the expiration, the Put expires worthless. SPY options are not the same. They can be exercised at any time before expiration so you can lose anytime it dips below the strike.
I could also lose if I close the trade early for a loss because I fear a bigger loss on expiration. I’ll likely hold both of these till expiration since the data suggests only a 20% chance of that occurring.
Still in the same return group as yesterday, a 4,4 Uptrend. I’m tempted to sell more SPX Puts, but my risk tolerance is maxed out for now. 81% success rate is pretty good odds.
The trades I put on June 21st and 23rd are back to green after today’s run up. They are 6% ($225) and 2% ($100) respectively.
Return group moved to 4,3 Uptrend yesterday and remains there today. I cannot resist this buy signal with an 84% success rate and nearly 1,000 wins for each signal. That is strong supporting data.
Although I have 2 other trades on already which are up around $200 each, I’m adding more today. Here are the ones I just added.
The trades I put on yesterday are up over $200 today. Combined with the other trades from last week and the week before, I’m up around $900 on $10k risked.
The return group moved to a 4,4 Uptrend today. Same signals, sell SPX Puts. 81% success rate. Pretty good.
I was out of town last week and didn’t update the signal data so I’m catching up today. Decided to sell all my trades before CPI tomorrow since they are all up decently and not much more to gain by waiting another 10-14 days, but there is a lot to lose over that timeframe if the market drops to my strike 2% lower than current. I closed 4 trades today and made $1,250.
Today’s signal is a really strong one though. 84% success rate on nearly 1,000 data points. Even if the market declines due to CPI, these would have a full month to recover so I’ll likely put on new trades to replace the ones I just sold.
I’m closing the trade from yesterday because it’s up nearly 50% of total potential profit after only a day. $500 profit in a day on an easy trade like this is too good for me to pass up. I’ll wait to see if the market declines in the coming days and reposition.
