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/ES vertical spread 11.28 and SPX 3.00 RT for me. Portfolio margin account allows for more leverage but not close to futures. That's a double edge sword though, more leverage more problems.
Ron, I think your strategy is great, is well thought out, has the data to back it up especially for the last two years when IV has been low. And for someone with a substantial account that can absorb a major drawdown.
Thanks, do you have a chart for IMx2 exit? I was just basing it off your previous chart and explanation:
"at the IMx3 that was used if you entered on the worst day, 7/22/11, I'm guessing the drawdown would be about 33%.
if the IM is $500 then for IMx3 I am using $500 x 3 = $1,500 per contract to cover the position. That is equal to 33% of account for IM and 67% for cash excess.
For IMx4, if the IM is $500 then I am using $500 x 4 = $2,000 per contract. That is equal to 25% of account for IM and 75% for cash excess."
Sorry but I screwed up. I changed the IMx3 to IMx2 but forgot to change exit dates and contracts when forced out of positions by margin call. I needed to redo contracts after first margin call.
Here is the correct table for IMx2. Two margin calls.
Yes IMx2 in this study made more money than IMx3. But I wonder how much of it is due to luck and timing of the margin calls. There weren't any margin calls the first 22 months. There weren't any extended drops that would have caused the rolled positions to be on margin call too. The second margin call had an extremely quick recovery.
The first margin call was 10/13/14. Following the rules for the whole study, I immediately added new positions the day of the margin call. You could call that a roll. The account balance dropped 5% for those new positions then rose from there.
On 10/3/14, balance was $304,554, I added 219 Jan 2015 1520 puts for 3.55. IM was 694. On 10/13/14 the premium was 10.50. IM was 1235. Exiting that day caused a $78,074 loss. 26% of the $303,349 balance after the fees for these positions was taken out.
On 10/13/14, balance was $226,918, I rolled into 196 Jan 2015 1350 puts for 4.10. IM was 580.
The second margin call was 12/16/14.
On 12/2/14, balance was $279,642, I added 202 Mar 2015 1570 puts for 3.70. IM was 693. On 12/16/14 the premium was 11.00. IM was 1154. Exiting that day caused a $75,548 loss. 27% of the $278,531 balance after the fees to acquire these positions was taken out.
On 10/13/14, balance was $226,918, I rolled into 196 Jan 2015 1350 puts for 4.10. IM was 580. This is where it gets interesting. I only had to hold these positions for 2 days. ES futures went up 94 in those two days.
So IMx2 in this study made more money. It had 2 losing trades that took 26-27% losses. Took the $304,554 balance down to $204,498 after the second margin call. But then 6 months later the balance was back to $364,106.
In a flat or rising market this strategy would make more money. In a volatile market it probably will make less. I wish we had SPAN files for 2011 +2012 when things were volatile to backtest it.
Add my name to the list for pre-2013 span files. I called the CME just a couple days ago and inquired as to their availability and was told that they are looking to sell those files through their historical data department. I expect the cost to be fairly high.
