Input to Trade Entry Form for Loss at 3.5% Down at T+10

Discussion in 'General Discussion' started by NoMoWork, Jan 28, 2017.

  1. NoMoWork

    NoMoWork Member

    Can anyone help me here. On Dan's presentation of how to ener the data on this form from TOS, He said he uses 10 DTE for this field entry, but I couldn't catch if he was actually setting the Day Step Value to 10, or setting the value to a setting that would show 10 DTE in the Value Box in the lower left hand corner of the Risk Profile Chart.
    upload_2017-1-28_16-0-1.png
     
  2. DGH

    DGH Administrator

    This approach is used to estimate the possible loss at 3.5% down in only 10 days. So, set the day step window to 10 as you have shown above (using +2, +3, or +4 @ day step for the number of lines you wish to see) and then read the value on the line which corresponds to 10 DTE at the value of SPX equivalent to 3.5% down. If the criterion is NOT met, then your short strike is probably too close to the money.
     
  3. NoMoWork

    NoMoWork Member

    Thank you for clearing that up for me. I've spent hours today practicing setting up trades using this entry form, but can't seem to get the right combination of strikes to pass all the parameters. I'm wondering if the trade form was specifically set up for the larger lot trades used by Dan and Tom? I have been using smaller lots such as this one at 3/6/3, ad a expiry of 4/21/17. Can anyone suggest adjustments to this trade that would pass on the entry form. Here are screen shots of my latest attempt.
    I've uploaded a PDF file with the screen shots of what I was trying to accompish.

    Thanks
     

    Attached Files:

  4. DGH

    DGH Administrator

    The Tool should work on all sizes, except, possibly, a 1 lot. Haven't tried that. However, try this one with a 3 lot. 2260/2210/2130 http://imgur.com/a/22TV0 Click to magnify The theta didn't quite pass, but I don't view that as a problem. This trade appears to have low risk but ample returns. If a DS/CS Combo were added, I think the setup looks good. Other comments?
     
  5. garyw

    garyw Well-Known Member

    NoMoWork:
    As Dan points out, all tests do not pass for an SPX RTT based on Friday's closing prices. For some reason I get different results from Dan on step 4 (I get a failure there as well).
    The closest match to the criteria (maximum number of passing tests) seems to be as follows: (Note: since you are doing a smaller size I guessed at a Max Risk of about 10K -- instead of the normal 17K and I reduced the min lot size from 5 to 3 for this test)
    1: Evaluating a (50/80) +3 SPX170421P2280/-6 SPX170421P2230 /+3 SPX170421P2150, price 1.54, Risk: 9450
    - Short Strike (-0.320 DELTA) distance from market (3.5% goal) 2.82%
    + PnL at 3.50% Down (2204.78) at 15 DTE is 2503.14 (25% goal) 26.49%
    + PnL at T+10 is -202.17 (-3% goal) -2.14%
    + Upside PnL limit (with no adjustments) =-462 Upper Loss % of margin (-5% goal) -4.89%
    + Initial Theta= 13.29, Theta % of margin (0.13% goal) 0.1406%
    + PnL at point up 1.5% {2329.11} from trade launch @ 15DTE = 607.14 (5.0% goal), ROR% 6.42%!
    + Confluence occurs at Price= 2174.00, PnL of 15 DTE @ Confluence point is -973.05, -10.30% (< -30% goal).
    Grade is 6 out of 7!
    -- By Monday, we may have better choices available.
     
  6. garyw

    garyw Well-Known Member

    Just FYI (for information only) I currently observe the following, assuming interest in 80 DTE RTT.
    Qualifying BWB's with DTE=80, last price of SPX=2271.12, on Date = 01/30/2017, Time = 08:08:17
    Criteria filter prior to evaluation (user configurable):
    DTE range from 70 to 85.
    Maximum Risk permitted on open: 17000.
    Minimum Lot size: 5.
    Minimum Open Interest: 0.
    Lower wing width divided by Upper wing width Minimum value: 1.25.
    Lower wing width divided by Upper wing width Maximum value: 1.60.
    Number of Strikes required to be multiples of 25: 0.
    Short Strike Delta minimum: -0.35.
    Short Strike Delta maximum -0.20.
    Minimum number of passing tests to permit display: 7.
    RTT Entry Planning Tool Critera below: {Note: ROR is Return on Risk}
    Short Strike Distance from Market Goal: 0.035.
    P&L @ 15DTE with market down 3.50% (ROR Goal): 0.25
    P&L @ T+10 with market down 3.50% (ROR Goal): -0.03
    P&L @ upper expiry max loss (ROR Goal): -0.05
    Theta percent of Risk Goal: 0.0013
    P&L at 1.5% market move up @ 15 DTE (ROR Goal): 0.05
    P&L at confluence point (ROR Goal): -0.30
    *** Begin Road Trip Trade Entry Planning Evaluation now! ***

    ***** PASSED ALL TESTS *****
    1: Evaluating a (50/80) +5 SPX170421P2240/-10 SPX170421P2190 /+5 SPX170421P2110, price 0.29, Risk: 15125
    BUY +5 BUTTERFLY SPX 100 21 APR 17 2240/2190/2110 PUT @0.30 LMT
    + Short Strike (-0.294 DELTA) distance from market (3.5% goal) 3.57%
    + PnL at 3.50% Down (2182.79) at 15 DTE is 4828.95 (25% goal) 31.93%
    + PnL at T+10 is -278.25 (-3% goal) -1.84%
    + Upside PnL limit (with no adjustments) =-145 Upper Loss % of margin (-5% goal) -0.96%
    + Initial Theta= 21.60, Theta % of margin (0.13% goal) 0.1428%
    + PnL at point up 1.5% {2305.19} from trade launch @ 15DTE = 1123.70 (5.0% goal), ROR% 7.43%!
    + Confluence occurs at Price= 2128.00, PnL of 15 DTE @ Confluence point is -1965.20, -12.99% (< -30% goal).
    Grade is 7 out of 7!
    ------------------------------------------------------------------------------------------

    ***** PASSED ALL TESTS *****
    2: Evaluating a (50/80) +5 SPX170421P2230/-10 SPX170421P2180 /+5 SPX170421P2100, price 0.04, Risk: 15000
    BUY +5 BUTTERFLY SPX 100 21 APR 17 2230/2180/2100 PUT @0.05 LMT
    + Short Strike (-0.275 DELTA) distance from market (3.5% goal) 4.01%
    + PnL at 3.50% Down (2182.79) at 15 DTE is 5021.05 (25% goal) 33.47%
    + PnL at T+10 is -230.25 (-3% goal) -1.53%
    + Upside PnL limit (with no adjustments) =-20 Upper Loss % of margin (-5% goal) -0.13%
    + Initial Theta= 21.45, Theta % of margin (0.13% goal) 0.1430%
    + PnL at point up 1.5% {2305.19} from trade launch @ 15DTE = 954.70 (5.0% goal), ROR% 6.36%!
    + Confluence occurs at Price= 2116.00, PnL of 15 DTE @ Confluence point is -2193.70, -14.62% (< -30% goal).
    Grade is 7 out of 7!
    ------------------------------------------------------------------------------------------

    Number of BWB permutations graded = 127 of 1360 examined.
    Test Results follow
    4 of 7: 3
    5 of 7: 40
    6 of 7: 6
    7 of 7: 2
    Discarded:
    0 Open Interest failures
    0 Short strike DELTA target failures
    1233 BWB Wing ratio failures
    0 Insufficient 25 strike failures
    76 Min Lot size failures
    ---------------------------------------------
     
  7. stevegee58

    stevegee58 Well-Known Member

    Hey gary is that a custom tool you're using?
     
  8. garyw

    garyw Well-Known Member

    stevegee58:
    Yes!
    Some background: I do not handle repetitive tasks well, so to address my flaws, I automate as much as possible (practical?) as a crutch.
    I also don't do subjective <-- I really suck at subjective.

    BTW: After the Alert this AM, I relaxed the critera of my tool to also list the 6 of 7 passing tests, which produced the following:
    Qualifying BWB's with DTE=80, last price of SPX=2272.46, on Date = 01/30/2017, Time = 08:37:49
    Criteria filter prior to evaluation (user configurable):
    DTE range from 70 to 85.
    Maximum Risk permitted on open: 17000.
    Minimum Lot size: 5.
    Minimum Open Interest: 0.
    Lower wing width divided by Upper wing width Minimum value: 1.25.
    Lower wing width divided by Upper wing width Maximum value: 1.60.
    Number of Strikes required to be multiples of 25: 0.
    Short Strike Delta minimum: -0.35.
    Short Strike Delta maximum -0.20.
    Minimum number of passing tests to permit display: 6.
    RTT Entry Planning Tool Critera below: {Note: ROR is Return on Risk}
    Short Strike Distance from Market Goal: 0.035.
    P&L @ 15DTE with market down 3.50% (ROR Goal): 0.25
    P&L @ T+10 with market down 3.50% (ROR Goal): -0.03
    P&L @ upper expiry max loss (ROR Goal): -0.05
    Theta percent of Risk Goal: 0.0013
    P&L at 1.5% market move up @ 15 DTE (ROR Goal): 0.05
    P&L at confluence point (ROR Goal): -0.30
    *** Begin Road Trip Trade Entry Planning Evaluation now! ***
    1: Evaluating a (50/75) +6 SPX170421P2250/-12 SPX170421P2200 /+6 SPX170421P2125, price 1.09, Risk: 15630
    BUY +6 BUTTERFLY SPX 100 21 APR 17 2250/2200/2125 PUT @1.10 LMT
    - Short Strike (-0.310 DELTA) distance from market (3.5% goal) 3.19%
    + PnL at 3.50% Down (2184.35) at 15 DTE is 5594.94 (25% goal) 35.80%
    + PnL at T+10 is -117.36 (-3% goal) -0.75%
    + Upside PnL limit (with no adjustments) =-654 Upper Loss % of margin (-5% goal) -4.18%
    + Initial Theta= 25.14, Theta % of margin (0.13% goal) 0.1608%
    + PnL at point up 1.5% {2306.55} from trade launch @ 15DTE = 1189.86 (5.0% goal), ROR% 7.61%!
    + Confluence occurs at Price= 2137.00, PnL of 15 DTE @ Confluence point is -1725.78, -11.04% (< -30% goal).
    Grade is 6 out of 7!
    2: Evaluating a (50/80) +5 SPX170421P2250/-10 SPX170421P2200 /+5 SPX170421P2120, price 0.54, Risk: 15250
    BUY +5 BUTTERFLY SPX 100 21 APR 17 2250/2200/2120 PUT @0.55 LMT
    - Short Strike (-0.310 DELTA) distance from market (3.5% goal) 3.19%
    + PnL at 3.50% Down (2184.35) at 15 DTE is 4556.45 (25% goal) 29.88%
    + PnL at T+10 is -357.20 (-3% goal) -2.34%
    + Upside PnL limit (with no adjustments) =-270 Upper Loss % of margin (-5% goal) -1.77%
    + Initial Theta= 22.40, Theta % of margin (0.13% goal) 0.1469%
    + PnL at point up 1.5% {2306.55} from trade launch @ 15DTE = 1254.50 (5.0% goal), ROR% 8.23%!
    + Confluence occurs at Price= 2139.00, PnL of 15 DTE @ Confluence point is -1851.65, -12.14% (< -30% goal).
    Grade is 6 out of 7!
    ***** PASSED ALL TESTS *****
    3: Evaluating a (50/80) +5 SPX170421P2240/-10 SPX170421P2190 /+5 SPX170421P2110, price 0.24, Risk: 15100
    BUY +5 BUTTERFLY SPX 100 21 APR 17 2240/2190/2110 PUT @0.25 LMT
    + Short Strike (-0.289 DELTA) distance from market (3.5% goal) 3.63%
    + PnL at 3.50% Down (2184.35) at 15 DTE is 4990.85 (25% goal) 33.05%
    + PnL at T+10 is -260.40 (-3% goal) -1.72%
    + Upside PnL limit (with no adjustments) =-120 Upper Loss % of margin (-5% goal) -0.79%
    + Initial Theta= 22.15, Theta % of margin (0.13% goal) 0.1467%
    + PnL at point up 1.5% {2306.55} from trade launch @ 15DTE = 1053.50 (5.0% goal), ROR% 6.98%!
    + Confluence occurs at Price= 2127.00, PnL of 15 DTE @ Confluence point is -2073.65, -13.73% (< -30% goal).
    Grade is 7 out of 7!
    ------------------------------------------------------------------------------------------

    Number of BWB permutations graded = 142 of 1360 examined.
    Test Results follow
    4 of 7: 4
    5 of 7: 33
    6 of 7: 2
    7 of 7: 1
    Discarded:
    0 Open Interest failures
    0 Short strike DELTA target failures
    1218 BWB Wing ratio failures
    0 Insufficient 25 strike failures
    102 Min Lot size failures
    ---------------------------------------------
     
  9. NoMoWork

    NoMoWork Member

    Wow, this is way more than I expected. Thanks for al the work and detaied explainatrions.
     
  10. garyw

    garyw Well-Known Member

    No worries. I coded this a while back, so no effort to produce. Dan and Tom provided sufficient detail to allow it to be coded. -- I just need to monitor any changes to the criteria, and add those to keep it in sync. This time I see that "Short Strike Distance from Market Goal: 0.035." where previously I think this was 0.032 (at least that's what was coded as the defaults)
     
  11. NoMoWork

    NoMoWork Member

    Did you ever compare the SPX to the RUT using this tool? Just wondered how the strikes would compare.
     
  12. garyw

    garyw Well-Known Member

    No! Since I have no reference for RUT (it is no longer part of the RTT service {which is fine by me}, it is possible the criteria for the RUT setup may not be identical to the published guidelines via the CD RTT Entry tool. -- Since RUT has a higher IV than SPX, it is likely tweaks to the criteria may be advised.

    My personal focus is on SPX, so expending my energy there currently. -
    I "may" post results of running the tool in the future when it is near new entry time, however, the results are based on the "instantaneous" prices at the time of the eval, so 5min later can provide very different results. So, while it may be interesting, I still follow Dan's lead! -- This tool merely confirms his choices!
     

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