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Week of February 12, 2024 - Weekly Performance by Strategy




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Notes

  1. All results above are based on 1 unit position sizes. Each strategy page specifies what constitutes 1 unit.

  2. Clients trading more than 1 unit of risk per trade (2x, 3x, etc.) realized the performance published above correspondingly to that amplified magnitude.


Summary

CPI proved to be a scorcher and came in well above consensus. As a result, the market sold of heavy on Tuesday, with small caps (IWM) taking the worst beating out of the indexes. We were positioned slightly bullish at the close on Monday in 10x and Trade Sphere, but the magnitude of the selloff allowed the hedges we had on to well exceed the losing call trades.


No trades this past week, as the signals that were there were only of modest strength. Moving on to next week.


We were in pretty good shape post CPI and up decent on the week (about 1.5 units) and we pressed a bit from there and gave some of the profits back, but still ended up being slightly up on the week. We had to pass on a few call signals on SMCI because the premiums for the strike our model indicated to purchase were almost 2k a contract and with the mandate to stick to around $500 of risk a trade we had to pass. Of course the signals were bangers, but so it goes in trading at times when you follow process and risk management rules.


There will be more in the coming weeks. Breakout on this strategy is on the immediate horizon. Likely will be implementing some gap signal trades on a new model we have that are inline with trading 0DTE options. While they are basically delta neutral trades, the directional gamma explosion on these tend to be profound. Will start incrementally with these and they will be in addition to the existing directional signals and corresponding hedges.


Per the sample scaling schedule for this strategy we are shooting to have the clients that are currently auto trading at 1x to be in the position to scale to 2x within the next 90-120 days.


Picked up just under 1.5 units of gain for the week. Had directional signals on both sides of the market at various points and while the stock ones did not pan out well, the index directional signals and index hedges did quite well on a % gain basis.

Looking to implement an overnight strategy on the some of the indexes, likely just QQQ at first. This will be in addition to the existing signals on the stocks, indexes and index hedges.


For the overnight signals they focus on the next day expiration only, so like most everything else we do the scope is to exploit gamma spikes and the mispricing of the 0DTE (technically 1DTE) options. I expect this to produce anywhere from 3-5 additional signals a week, sometimes delta neutral and other times with some directional skew. Will be starting risking less than 1 unit total of cost basis, likely closer to a half unit initially. This should produce another 3-5% of returns per month for the strategy (10-20% returns on the risk budget) over time.


We are expecting to produce enough value that clients that a currently onboard at 1x scale to be at 5x scale or greater before the end of the year, per the sample scaling schedule and how the strategy is designed.


Futures Flex

No trades.

Looking Ahead

Very quiet econ week and holiday on Monday. However, recent price action will likely continue and will present us with ample opportunities. Seems the FOMC is in a bad spot. Recent inflation data indicates not so much on the cooling off theme and one has to wonder with much more data this way would a May cut be off the table totally? This is good news for the bears, but on the other hand we have the AI/Chip stocks and anything remotely related that is still very bullish.


This is where charts and traditional themes go out the window and everything becomes about options premiums and momentum (what we do mostly). I don't really care what the market does from here. If we have decent movement week in and week out, our clients will be in great shape by the end of this year. With that, they will be in 'good' shape no matter what happens.


Keep the powder dry....










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