Hedged ES System

Introduction :

Many traders and systems fail because they represent a single simple idea , like for example buy if MA cross , or keep shorting Vix OTM calls , or keep buying the market and double down … etc .

A system shouldnt just trade a simple idea , otherwise it will become an etf , and etfs fluctuate with the market and many have deep drawdowns and even fail , case in point long Vix etfs . So its not surprising if trading systems long vix fail eventually as well , because technically they are just a form of ETF in a way . Bear in mind this is just an example , and just shorting Vix isnt necessarily profitable either .

Stop Loss dilemma :

Where to place your stop loss ? Thats the one million $ question . Do you use stops , where you place them , do you re-enter after a stop is triggered and you are out ? These are age old questions . If you place the stop very tight you get many losses but they are small , though they add up eventually . If you place it very far you get infrequent losses and a high win rate , but your losses are huge .

What to do ? Well there is no accurate answer for this question , but our choice is to use another method to control losses beside stops , and here comes our system “Hedged ES”

Options instead of stops :

Thats what we are doing with our system , we will use SPX options to offset and control losses in ES futures , preferably we may use ES futures options but at the moment they arent supported in collective2 .

So SPX options should do the trick , hence they are options for the cash underlying and very liquid with many available expirations during the week : Monday Wednesday and Friday . We will use these short term expirations to avoid over paying for time decay .

Add to that SPX options are 1256 contracts which make them treated like futures for tax purposes - unlike stocks options - .

Another benefit for using options as protection is they protect against black swans unlike stops . As in case of stops price may gap and skip the stop level causing a huge slippage , this can happen even in ES futures in a case of black swans . However options should provide a more reliable protection .

Criteria for entering/exiting/hedging :

We use a blend of proprietary methods with unbiased direction to trade ES futures , however we are going to use options instead of stops , and there shouldn’t be a time to hold an ES position without an option hedge already in place .
In general the methods consist of 2 simple ones : buy the dip , fade the news whipsaw , and two advanced ones using level II and market delta .

Scaling :

We started this system with $50K , however subscribers may choose to follow with less money but the minimum scaling is 50% . Bear in mind that the SPX contract is $100 per point and the ES contract is $50 per point , so the ES:SPX ratio is 2:1 , in another words 2 ES contracts = 1 SPX contract .


Note : I couldn’t add this description into my system’s page hence its “too long” . But i would link to here .

1 Like

Good idea with a hedging policy, but at least 6 month worth of history should be collected before I would even consider subscribing.
And even then, probably not due to the subscription price of USD 400

I assume this is not an arbitrage. So this strategy can not make more profit, it only reduce variance.
For example, you made $568 by shorting 4 ES, and lost $292 on 2 spx calls. So you made roughly half of what you could make when you bet on the right side. If you bet on the wrong side, you would lose half of what you could lose.
So why you don’t just short 2 ES? What is difference between shorting half size and shorting full size with hedged options?

Dear Golder

SPX contract is $100 per point and the ES contract is $50 per point , so the ES:SPX ratio is 2:1 , in another words 2 ES contracts = 1 SPX contract . Was going to add that to the description .

I like the thought of hedging. No body is doing this trading ES. However the price of $400 with out a proven track record is going to be hard to get on C2. You might consider a lower price more in line with some very successful strategy’s here ( Antares SP 500 and Red Crest etc) on C2 and then after 6 months or a year up the price. I have no problem paying a higher price with proven history. You have to understand a lot of people come into the site making a lot of claims on there new strategy and then 3-6 months later they are no place to be found. Also do you have some back testing trading this way that you could post here to review? Also can you tell is about yourself and background?
hanks

Also I see you have created 12 strategy’s that can not be seen. What is up with those? Why so many? Were any of those failed strategy’s that you sold subscriptions? Are you going to be TOS since you believe in your strategy? I hope you are very successful in your new strategy but we will have many questions for you.

Good luck to you sir. A note of caution - don’t be one of those guys posting about how great their system is after a week or a month, etc. It does no good and won’t get you subscribers.

6 months to a year of solid performance will get you subscribers. Although like others said, at $400 a month you’re charging subscribers with 50k almost 10% a year. That’s a pretty high bar so you’re going to have to really kill it.

:popcorn:

The rule is if a system cannot survive past 6 months its not even worth looking at. Charging $400/month without even 1 month of trading pretty much shows the intention of the developer.

Looks like he is done. At least the strategy is already private.

Now that was over very quick!

I was actually hoping he had come up with a good idea! Too bad…

1 Like

Same strategy , but made some crucial changes .

You really need to lower your subscription price! There’s most likely not going to be any subscribers when you have no track record!

He should increase the price like Nathan, $500 per month. Many clients love it with high flyers model. Why do we have to pay attention with a strategy very young n also high price? We know what will happen next :blush: n don’t complain if suddenly the strategy become private. It happens over n over.

We don’t want subscribers at the moment .

Reduced price to $200/month .

Nice write up. Too bad you can’t do what you wrote. Private now?

Maybe don’t talk about your system so much and just outperform instead…

Or maybe try testing it with out of sample data. Or dare I say running it “live” for a while before coming here?

Whatever. Another flameout to come. Love that the name was “Hedged ES” and it got smoked.
eatin :popcorn: and watching these trainwrecks…

Whats the point running it live before coming here? This does not make subscribers to subscribe.

You have to pay to list your system on C2. If your system doesn’t work live, you’ve just wasted money trying to find out. You could just run it yourself in a mock account at one of many brokerages to test.

I doubt many people do this.