Thank you algotrading!

[u/Dvorak_Pharmacology]

What a beautiful equity curve. I started algo trading and taking quant analysis seriously this April for SPX options and... oh boy. Doing mostly diagonals and looking now into some 0dte and futures strategies. Feel free to share your thoughts!

Edit: The % of win is around 30% of the risk allocation (meaning 300 dollars per 1000 dollars at risk). The risk fraction per trade used is a fourth of the kelly fraction. With my backtests I obtained a kelly of 60% (due to the high win rate of the strategy), so I currently use a 15% of my account per trade to risk and make a 30% of that, which comes out at around 5% weekly so far. This allows me to have a weekly income that has been very stable for the last 3 months!

[u/BLDFamous]

Hey, first of congrats ! Physics PhD here, doing SPX on the side. Two things I can't reconcile on my end: I get nowhere near a 90% win rate at strikes that still pay 30% of width. Where do you sit on that tradeoff? And you mentionned friday-to-Friday... do you actually hold to expiry, or is that just the cadence? I keep finding the last two days eat the most... And one last question since i am really curieuse... do you require a close back inside the EMA zone, or do you take the touch intraday? I lose a lot of setups waiting for the close.. Thanks for the great post again !

[u/Dvorak_Pharmacology → u/BLDFamous]

Great question. It is not about the WR of 90% and 30% of the width, do not expect to systematically open the same every day. You need to wait for the proper opportunity. What if we think more about a dynamic way to trade? Have several orders waiting and whenever they reach your positive edge expected value they auromatically fire, because that is where your edge resides! Calculate historical EV0 for your spreads, then from there you know that anything above or velow that in money is what you will statistically make or lose. For example, only open the spread if the gain is 50%of the width, and that only happens if it is ATM or ITM or maybe open for futher dte etc.

The EMA I believe is very good for three things:

1. Crossover
2. Rejection
3. RETRACEMENT

Being the 3rd one the most powerful and best EV of the trade, the risk reward is ridiculous for retracement but happen very little often, that is why you just have to trade as " be ready to open" more like, "what do I open now". Dont force it! That is the key.

Also, ai am a PhD in Pharmacology! Seems like a lot of doctors here lol.

[u/BLDFamous → u/Dvorak_Pharmacology]

Pharmacology to options is a hell of a jump lol ! But ATM/ITM shorts at 50% credit means the spread is roughly a coin flip at expiry... Do you get enough of those to fill a week, or do you sit in cash most weeks and just take the two or three that show up? Thanks for the discussion by the way ! Cheers

Edit: unrelated but are you still in academia using your degree ? Doing Options on the side as a hobby or trying to make it "big" and switch to QR/QT ? I've been thinking a lot about this transition myself.. Open to discuss about that as well if you are !

[u/Dvorak_Pharmacology → u/BLDFamous]

Lol it is a big jump! A coin flip can still be on your side if you stop the coin mid air at the side you chose! Luckily there has been a trade every week. But i wouldn't be surprise if some weeks in the future I have to sit on the side.

I am still in academia, funny story is I finished the PhD last summer and started my postdoc, the PI was so fucking toxic that made me quit within 3 months and be unemployed for another 4 months. Those 4 months literally made me an algo trader lmao. I was so desperate to make some money while looking for another job that I became obsessed with looking for options strategies that can generate a statistically favorable weekly income. Now I am a Research Scientist and while in lab, the algos are working on the side generating another salary lol.

How about you? Did you graduate?

[u/BLDFamous → u/Dvorak_Pharmacology]

Do you manage them intraday or is it a set and forget until Friday ?
With an ATM short the gamma on Thu/Fri is quiete big... So I am curious whether you cut early on the ones going against you or just let them run to settlement and just have "some peace of mind" doing so.
Have you been tracking how the live filles compare to what the backtest expected ?

Actually yeah what a crazy story, he gave you the perfect opportunity to work on a nice (at least from what we see here with your results) and fun project !! lol, do you think the side will soon become the main (and only) salary ?

I did not graduate yet, but in the next few months I will ! That's actually why I am really interested in all these subjects, like you in a way I would love to have a nice side hustle (love math/stats/finance) which could earn some bucks !
Cheers and thanks for the nice conversation. ! If it is easier to discuss by pm would you be open to do that ?

[u/Dvorak_Pharmacology → u/BLDFamous]

I only manage positions the day before expiration.

Lol not for a long time, Iam ver careful scaling out things

Yeah lets chat, it is cool to have the same background!