Daily Commentary - Posted on Monday, February 13, 2012, 8:50 PM GMT +1

18 Comments


Feb Monday 13

OpEx Week and Multi-Month High

At time of writing (2:36 pm ET) the SPY (S&P 500 SPDR) is up +0.77% and on the verge of closing at a fresh traling 1 year high.

When the SPY had closed higher ≥ 0.50% at a fresh 3 (or more) months high on the first session of option expiration week (regularly a Monday) in the past, this had been indicative of limited upside potential over the next couple of sessions.

Table I below shows the SPY‘s performance (cumulative returns) over the remainder of OpEx week in the event the setup mentioned before had been triggered in the past.

The SPY had never been up 1.0%+ 1, 2 and 3 session later (up 1.0%+ on OpEx – 4 days later – on 4 occurrences), but closed lower -1.0% 3 days later on 11 out of 23 occurrences. In addition, the SPY did not manage at least 1 higher close over the remainder of the week on 10 out of 23 occurrences (means the close on Monday marked the top for the remainder of OpEx week).

(click on image to enlarge)


Table I
SPY at 3 months high on 1st session of OpEx week

__________________

Conclusion(s)

A short-term pullback over the next couple of days seems likely …

Have a profitable week,

Frank


Disclosure: No position in the securities mentioned in this post at time of writing.

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Remarks: Due to their conceptual scope – and if not explicitly stated otherwise – , all models/setups/strategies do not account for slippage, fees and transaction costs, do not account for return on cash and/or interest on margin, do not use position sizing (e.g. Kelly, optimal f) – they’re always ‘all in‘ – , do not use leverage (e.g. leveraged ETFs), do not utilize any kind of abnormal market filter (e.g. during market phases with extremely elevated volatility), do not use intraday buy/sell stops (end-of-day prices only), and models/setups/strategies are not ‘adaptive‘ (do not adjust to the ongoing changes in market conditions like bull and bear markets). Index data (e.g. S&P 500 cash index) does not account for dividend and cash payments.

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Disclaimer

The information on this site is provided for statistical and informational purposes only. Nothing herein should be interpreted or regarded as personalized investment advice or to state or imply that past results are an indication of future performance. The author of this website is not a licensed financial advisor and will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on the content of this website(s). Under no circumstances does this information represent an advice or recommendation to buy, sell or hold any security.

I may or may not hold positions for myself, my family and/or clients in the securities mentioned here. Actions may have been taken before or after information is presented, and any opinions expressed in this site are subject to change without notice.

(Data courtesy of MetaStock and Pinnacle Data Corp., and for data import, testing, surveys and statistics I use MATLAB from MathWorks)

Comments (18)

 

  1. GT says:

    SPY : 135.36 (02/13/12) Cl.(SPX 1351.77)
    SPY : 135.36 (02/09/12) Cl (SPX 1351.95).

    $SPY Failed to close at fresh 3 mo. hi today. what to do now?

    • TradingTheOdds says:

      GT,

      the SPY did close at a trailing 1 year high on Monday, if not rounded to 2 decimal places (but in fact by the 8th decimal place only). You’ve to account for dividend payments as well (net asset value instead of raw data).

      But “at a trailing 3 months high” hasn’t to be taken literally. The bearish bias remains unaffected even if you take into account those occurrences where the SPY was “close to” a multi-month high instead of “closing at” a fresh multi-month high.

      Best,
      Frank

  2. Bill says:

    Frank,
    Do you ever input the first days data, tuesday for example, to see how the second and third tracks?

    What are you looking for and exit?

    If wed drops .85 for example would you wait until thursday or close your position?

    Do you have any proven rules of thumb or is it look at news and data?

    Bill

    • TradingTheOdds says:

      Bill,

      although I spent a lot of time going going through historical precedences, looking for setups triggered and doing the necessary work for preparing stats and posting, I’am almost exclusively trading VIX futures and options, and making a directional bet on major market indices is more the exception than the rule (therefore I can’T tell anything about my personal strategy behind). In addition, I’am trading SPY and RTH as a pair if a respective opportunity is provided (simply search for pairs trading in the blog’S history).

      Best,
      Frank

  3. William says:

    Frank
    Do you every recalculate after the first day and adjust your strategy? Increase or decrease your position?

    Like if you look at Tuesday s small negative and match that to the samplings first day results does that tell you more of the second and third day?

    William

    • TradingTheOdds says:

      William,

      as I replied to Bill: although I spent a lot of time going going through historical precedences, looking for setups triggered and doing the necessary work for preparing stats and posting, I’am almost exclusively trading VIX futures and options, and making a directional bet on major market indices is more the exception than the rule (therefore I can’T tell anything about my personal strategy behind and/or any adjustments). In addition, I’am trading SPY and RTH as a pair if a respective opportunity is provided (simply search for pairs trading in the blog’s history).

      Best,
      Frank

  4. GT says:

    $SPY : 135.36 close Mon.13Feb / SPX 1351.77
    135.19 close Tue 14 Feb -0.17 or -0.13%

    $SPX 1351.77 * (1.01) = 1365.2877 = 1% higher than Mon. close that shouldn’t be exceeded.

    $SPY 135.36 * 1.01 = 136.7136 = 1% higher than Mon. close that shouldn’t be exceeded.

  5. GT says:

    With your post about virtually non-existent drawdowns (bullish), 1 week later from trigger date ends on close tomorrow, shouldn’t we wait for Wed’s session to play out on upside before getting bearish? After 1 week data from prior blog entry, maybe we can infer for the following 7 day period as well.

  6. GT says:

    SPY 135.36 Mon trigger date
    2 trading days later
    SPY 134.56 – 0.80 sum total or – 0.59%,

  7. tilson says:

    Short $SPY / Long $RTH (Pairs Trade, equal dollar amount) at a ratio of 3.42394 $$ your post

    Can you put a blog entry why you took this trade? scenario and what you are looking for?
    SPY was overbought when you took it and RTH you feel will catch up? please put reasoning.
    Plus you mentioned you trade vix options, can you discuss VIX or vxx or tvix trades as I would like to trade those according to your great advice. danke

  8. GT says:

    SPY : 135.36 (02/13/12) Cl.(SPX 1351.77)
    2 trading days later
    SPY 134.56 – 0.80 sum total or – 0.59%,

    3 trading days later ; SPX 1358.04 / SPY 136.05
    +6.27 or + 0.46%

  9. GT says:

    Every time except once in your study, after being down on day #2 and turn positive on close of trading day #3, Next time Options Exp is negative .

    One exception is election year 1988
    3 days later + 0.69%, Next time Options Exp +0.69%

  10. William says:

    Frank
    A few weeks ago you had a entry about the vix. Since the I have been tracking and studying vxx.

    Long at the time would have been a nice move.
    Do you think stochastics applies to vxx? Do you have any comments on it now?

    • TradingTheOdds says:

      William,

      I trade VIX futures and options for a living (mostly calendar spreads), and ‘reversion to the mean’ (x standard deviations above/below the n-day moving average) is one of my favorites. Therefore yes, I do think that stochastics applies to the VIX (and VXX), and I’ll check if there is something special about the VIX at the moment. Stay tuned …

      Bast,
      Frank

  11. GT says:

    Fri Feb 17:
    SPY : 136.41 + 0.36 (+0.27%)
    $RLX (Retail) 571.55 + 6.79 (+1.2%)

    Can you go into detail on your excellent trade? short $SPY/long $RLX? I want to be a money machine like you.

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