New Highs with an established track record

100% TOS on over 500 trades and hitting all-time highs. The strategies hold the bulk of assets in a low volatility asset mix of equities and bonds and have achieved better than market returns by layer in long stock and option trades on ETFs.

Swing Index Options I – Historic Performance

I originally started trading this account at Interactive Brokers in June, 2017 and started tracking the trades on Collective2 via broker transmit in May 2018. The following image shows the Interactive Brokers Benchmark Comparison, since I first started trading the strategy with its initial capital allocation of $10,000. I am pleased to say that the Collective2 reported results and actual account results have shown a good match over the 16 months the system has been actively tracked by Collective2. The account hit a new high of $17,800 today, or a 70% gain for the initial investment.

The following chart shows a 5-year hypothetical back test.

Swing Diversified Trader

This strategy is designed to be more conservative than Swing Index Options I and will trade at lower leverage levels. The following chart shows a 5-year hypothetical back test.

Strategy Development Methodology

The strategies are developed following a layered approach. I start by designing a low volatility asset allocation of equity indexes, bond ETFs, and other instruments to establish an expected base portfolio return of 4-7%. I then layer in individually developed and back tested strategies that trade various ETF and Long Call or Put Option positions to achieve elevated returns. Each of the individual strategies is allocated a small portion of the total portfolio to manage. The individual strategies are back tested on data going back to 2000 and are tested for robustness via both walk-forward analysis and k-fold tests. The exact mix of individual strategies is monitored on an ongoing basis and changes to the individual strategy mix are made periodically as performance dictates.

Disclaimer: Remember that trading is always speculative and involves substantial risk that you will lose money. Past performance does not guarantee future success.

Six months since this initial post, and I am pleased to say both strategies have continued to show positive results and recently established new equity highs. I am gradually introducing improvements to the automated system and later this week will be rolling out a significant enhancement related to optimization of the option instrument selection for individual trades.

As a part of this upgrade, I will begin including vertical debit spread trades into the strategy mix of trades. The goal of this change is to increase the overall profitability of the strategy by improving the individual trade risk/reward profile without increasing the overall capital requirements. Backtesting and recent live trading results indicate this change should yield a 10-40% improvement in individual strategy annual results.

For Calls this means some of the Call trades will be composed of two parts.

  1. Long x number of Call options at or near the money
  2. Short x number of Call options at a higher strike price than the Long Call options

For Puts this means some of the Put trades will be composed of two parts.

  1. Long x number of Put options at or near the money
  2. Short x number of Put options at a lower strike price than the Long Put options

Note that vertical debit spreads of this type are considered fixed risk trades in that the system is not exposed to a loss greater than the debit incurred to put on the trade.

The exact strike prices are determined by an offline optimizer I recently completed that selects the best historic option and strike combinations for a given trading systems trade profile.

Since Collective2 does not yet natively support spread trades, the system will be legging into and out of these trades one leg at a time.

When opening a position the system will do the following:

  1. Open the Long position
  2. Open the Short position

When closing a position the system will do the following:

  1. Close the Short position
  2. Close the Long position