4
$\begingroup$

I've been doing that manually for 2 months successfully (40% ROI) with SPX 0-1 DTE (Days To Expiration) options, both puts and calls. I might be just lucky so I purchased some data to do backtesting with 15m timeframe. I didn't complete the test yet but I can calculate probabilities of certain events happening that confirm my strategy. I am starting to think I can do this long term.

Am I onto something or is this survivor bias?

$\endgroup$
2
  • 1
    $\begingroup$ Please note that self destruction of content is not allowed. $\endgroup$
    – Bob Jansen
    May 29 '20 at 17:15
  • $\begingroup$ Perhaps some original content was amended, but I didn't get how you traded those options. Since you mention RSI, I guess something like going long when exiting from oversold and going short when exiting from overbought? Any particular RSI setting could easily lead to overfitting, how did you manage this? $\endgroup$
    – Lisa Ann
    Jun 14 '20 at 18:10
1
$\begingroup$

"Am I onto something or is this survivor bias?"

Two obvious points.

  1. two months is a very small sample even if you have a large number of trades, given that it's unlikely to be representative of conditions you can expect to see over a longer period
  2. strategy might be capital constrained. 40% ROI on a modest amount of capital might not translate to anything nearly as attractive on a more meaningful capital base

I'm skeptical, but I wish you luck.

$\endgroup$
0
$\begingroup$

I once did some research whether the momentum effect vanishes in the german stockmarket after its release in academic literatur (see Schwert, G.W. (2003) "Anomalies and market efficiency" for the american market)

Result was that it wasn't vanishing at all, but generated even more abnormal return on average over time. This might be explained because the momentum effect lives from people believing in it pushing the prices in expected direction (self-fulfilling prophecy), so imo the RSI will probably also work in future.

$\endgroup$
0
$\begingroup$

The last two months have been fairly abnormal relative to the majority of history-- in a number of ways. I agree with your inclination to look to your backtest for clues as to what you can expect to make running your strategy in other market environments.

$\endgroup$
0

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.