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So as you know vertical bull put spreads are very profitable. I have attempted with a colleague Rajats179 to create an algorithm that times the market bottom when VIX RSI crosses 60. If it gets it wrong -- which it does sometimes during a continued selloff with even more RSI infraction happens. If I remove the stop loss and cooldown period I get like 200% return per year until of course the massive RSI plunge.
Somehow there has to be a way to get this to work better.
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Goldie Yalamanchi
Yes just wanted to make sure I included the version that makes like 300% return then crashes about 80%. If we could just somehow if the spread goes against us maybe buy a clutch delta put or buy multiple lower delta long puts to break the "loss" as it is happening.
Kevin Du
Goldie Yalamanchi can you add me on slack Kevin Du
Kevin Du
I'm been thinking about improving this by using prob ITM and expected return.
SPY is trading at today at $370
12/11/2020 360 P is trading at $a with b% prob ITM
12/11/2020 355 P is trading at $c with d% prob ITM
12/11/2020 350 P is trading at $e with f% prob ITM
sell a credit spread of 360 P / 355P with expected return of 100(a-c) * (1-b) - (500 - 100(a-c)) * d
sell a credit spread of 360 P / 350P with expected return of 100(a-e) * (1-b) - (1000 - 100(a-e)) * f
Sell the combination with highest expected value
Kevin Du
how about using MACD of SPY itself instead of RSI? Only trade when MACD is above 0?
Goldie Yalamanchi
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
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