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is not indicative of future performance or success.
There is a substantial risk of loss in trading. You should therefore carefully consider
whether such trading is suitable for you in light of your financial condition. You should read,
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just a quick heads up, a new discretional strategy is avaliable. I decided to offer my personal trading skills in form of a strategy because the more I went into developing and trading mechanical strategies the more I noticed the short falls of them. For example my mechanical volatility strategy´s performance (110612319) remained under expectations during the last year because it can´t adapt to new market regimes as good as a human can. It still earned money with low risk so it´s not bad and I will continue to trade it but I understand that most investors on this plattform look for more actively managed systems. In this regard the following strategy may be interesting for you.
If you´re interested in discretional swing trading feel free to add the strategy to your watchlist or subscribe.
Just a heads up, the recent 20% performance spike was due to a miscalculation on C2´s end. It´s because of a reverse split of BOIL. I´m in contact with the support already and the error will be fixed this week.
My strategy will never produce such extreme volatility - in either direction - because I handle position size with care.
I decided to make this strategy IRA compatible.
That means I stop selling options (still trading long options) and I will use inverse ETFs if I want to go short instead of shorting.
However, since I´m not from the US I´m not 100% familiar with all the rules for IRA. I´ve done research about that but If you have any advice I´d be happy to know.
I´m aware of:
no short selling of stocks
no naked short selling of options
no use of margin
3 days settlement of cash after selling a position (IB circumvents this by granting minimal margin)
BOIL is 2X Natural Gas while DGAZ is 3X inverse. BOIL has very low volume, not sure
you took spread and liquidity in consideration. Better would be to pick UGAZ, which is 3X long Natural gas.
Also, those are very volatile instruments, and a lot of move happens outside of NYSE trading time. Trading 3X ETFs is very risky, and there is a decay.
Only reasonable thing is to short them, since then you have decay working for you.
Thank you Matej for the valuable feedback. I´ll change to UGAZ then because of liquidity.
Yes, I noticed it too that most moves happen over night in the gas market. However, that´s not so much of a problem because my signals are usually valid for a couple days or weeks. I´m analysing the futures market to get a pure chart without decay due to contango in the underlying futures.
Going long against the contango is difficult and needs good timing that´s true. However I wouldn´t agree that going short a 3x lev. instrument is the only reasonable way to trade it. In case of a spike you will suffer large losses and since most moves happen during the night a SL won´t do the trick.
I´m handling the risk by scaling the position size accordingly.
Not it is seasonally slow period, but wait when it enters volatile period.
5-10 % days are not strange to happen. Even in premarket. If being on wrong side of trade
that is 3X the loss.
About decay.
This is chart of last 3 years.
UGAZ never traded at 20 K levels, it is adjusted for stock splits.
And UGAZ is ETN; issuer is Credit Suisse.
Think, if looking for safety, and still willing to trade Natural gas, UNG; which is 1X is much safer.
Also there are certain brokers that don’t allow short naked options selling but there are a few that do. There are no regulations against it in IRA just ERISA plans. However it is common for brokers not to allow it on their specific platforms. I can’t remember all the brokerages but I know tastyworks allows short naked options/straddles/strangles in IRA.
Another option is to use futures - I know tasty trade allows you to go short futures.
In case of a spike you will suffer large losses and since most moves happen during the night a SL won´t do the trick.
