Balancing results through diversification of systems and asset classes...
The psychological art of focussing on what is working
The below are all of my trades to date this quarter. They include three distinct systems and asset classes: ER Trades (IV related option trades), GG (Overnight Gap System with options), and Forex/Futures.
ER Trades
I have been trading options for a long time. Generally, I have a fairly decent practical understanding of what contributes to their valuation. Obviously the main subject of this publication is trading volatility in and around earnings releases.
Here are this quarter’s ER trades:
I have been running the ER system for the better part of three years. But… this earnings season’s performance to date is somewhat lackluster. Stocks that have demonstrated very little movement post ER over the past several years are making big moves. It is what it is - there are always ups and downs in a system.
I will continue to run it until it closes out in December. I will also run it in subsequent quarters. The BEST way to deal with psychology in trading is to run a tried and true system through its ups and downs with an unwavering view of established money management rules. I don’t risk more than 2.5% of my account on each play (a $10,000 account is used for tracking purposes).
The last two posts, Owning it… and It’s a Buggy Week are unlocked for all readers. In these posts, the below plays were pre-announced to all premium members (links provided to the play summary). When I pre-announce a play, I play them as long as they fit within my rulebook, which is published in the welcome email to premium subscribers. But I do go beyond pre-announcing and playing based on those alerts - I have an audit trail of my personal trades to provide to an eventual hedge fund should I decide to go pro one day.
SPLK (still in play)
Additional plays are pre-announced in this post after the paywall for premium readers.
GG (Green Goose)
The GG Overnight Gap System, with alerts provided on my other substack GG Alerts, was developed seven years ago. I launched its original version in November 2016 in a course offered through another platform to teach novice traders about the basics of options. It is amazing that the system has morphed into what it is today. It has become so successful that others have taken its principles and claimed it as their own. (I’ve always said that being copied is the best form of flattery.) I continue to trade this system every week. GG this quarter has completely offset the performance of Fall 2022 ER season (a $10,000 account is used for tracking purposes).
This system’s performance has seen a 57.16% account growth in the last six weeks. Note that the long term performance mean of GG is 61.6% win/loss ratio and a profit factor of 2.2. Position sizing at the moment for each play is in the range of 3% of the account. I will more than likely reduce position sizes starting in mid-December in case we start getting a mean reversion.
FOREX and Futures
I have not addressed this asset class before in this publication - I plan on doing so in a separate dedicated post per week later by the end of this month. STAY TUNED!
During the pandemic, I forced myself to expand into FOREX to see if “this old dog (me)” could learn some new tricks. I spent nearly one year learning, backtesting, failing, restarting, and becoming successful, and making a significant amount of profit last spring and early summer on both FOREX and ES futures. It has been an interesting journey and I can state that I do love to trade these asset classes, but am not able to make sustained commitment to trading them as it is mostly day trading. I still have a love for swing trading options.
FOREX and Futures are another tool in my toolbox. Trading them takes a lot more patience and rules. I recently took a four month break from them but started again last week. I made the following trades (click on the link for a much more detailed summary), including charts and how I position sized based on a $10,000 account (for tracking purposes - I actually have a much larger account).
I tried to get into one ES futures trade but didn’t get filled where the risk: reward was decent and I didn’t chase.
Again - I intend on writing more on trading FOREX and Futures asset classes in a dedicated post every few weeks. This type of trading is purely technical with very stringent rules. The technical system that I developed has a win/loss ratio of roughly 63% and can be applied to stocks (and their options). So it will be interesting to make the link, which will also be heavily focused on the psychology of trading.
Future posts on this subject will be for ALL readers of this publication. However, they will not include alerts. Stay tuned…
Summary
All systems have ups and downs. All asset classes have varying performance depending on many factors - seasonality, times of economic growth or recession, volatility, etc… For me, I am finding a higher level of trading success by having three distinct types of trading in my back pocket.
GG is steady growth. It just keeps plugging away. However, historically, December, January, and August are lower performance.
ER season has a total of 8 months of trading (2 months per season).
FOREX and Futures are a great way for me to trade when my other two systems are in a lull.
Trading all three throughout the year allows cashflow and account growth.
Important - this is my personal trading journey. My hope is that readers find something in each of these systems or asset classes to take away for their own trading journey.
Here are this week’s ER plays…
ER Iron Condors
BBY - Entry Monday, November 21 EOD. 3 out of the last 4 ER’s were winners.
DE - Entry Tuesday, November 22 EOD. 3 out of the last 4 ER’s were winners.
Please do your own due diligence!
BBY strikes: 62/63/77/78.