From: fundtimer Replying To : scamman (post 9409) Apr 25 2003 4:28PM
Title: Scam's R3/R4 Dissected
Hi Scam. - You and me both in one respect and that's when it comes to 'trying' to give away the house and what's in it. Seems most have their own trading agenda and tend to purposely trivialize other methods either directly or by way of the nature in which questions are ask - and they aren't doing so in jest such as the little caveats we occasionally toss back and forth - these folks are serious. I vividly remember the 'same' people asking over and over again, "what is R3?" Goodness, I never traded nor was I interested in an R3, but I certainly knew what it was from having read at least one of your 500 post explaining the concept!. Any way, I for one am tired of seeing the continuous cyclical references, so perhaps this string of post between us will satisfy even the worse of the uninitiated.
What I've done with the R3 concept is this:
1. At The CBOE, I chose the EOD P/C data on the INX, SPX, DJX, OEX and NDX Index Options
2. AT CME I chose The EOD P/C data on the SPX Options On Futures.
3. When any of the products exhibited a P/C greater than 3.0 I shorted the SPY at the close
4. I covered the short based upon any one of the following optimization criteria:
1. A 7-10% Draw Down (Stop Loss) hit.
2. A Profit of 7-10%.
3. 90 Days in the trade.
That it! Those criteria were chosen base upon a number of concerns, the more important of which was to tune the systems performance upward until losing trades began to appear (stop loss kicking in) and a few days in the trade starting hitting the max while at the same time, total days in all trades minimized.
The trades were executed over a period of 3-8 years, depending upon the availability of the data (for ex, I only had 3-years of CME SPX data.) It should also be noted, where data was available, ie, back to 1995, the concept worked equally well as it did during the extreme bear between 2000-2003. There were fewer trade during the bull years but the drawdowns and average profit was for the most part identical to the bear, so the concept was not bear dependent and it does work!
The following are the stats during the 2000+ bear where a buy and hold on SPY saw a loss of -35.72% and these stats precede the individual trades I will list in 5 follow-on posts (I limited the stats and posts to the 2000+ bear since that's where the most interest lies and because the length of the list is at the upper limit of what's postable on CS). Again, remember the Exit criteria - which ever came first:
Index Max Profit/ Max Loss/ Max Days/ Overall
Product Trade Exit Trade Exit Trade Exit Profit
-------- ---------- ---------- ---------- --------
CBOE INX No R3's
CBOE SPX 10% 15% 90 86.76%
CBOE DJX 7% 15% 90 768.28%
CBOE OEX 10% 15% 90 12.64%
CBOE NDX 9% 15% 90 1086.81%
CME SPX 7% 15% 90 774.21%
Those overall profit results are very much self explanatory! Enough said.
Scam, if you would like to see the result using other parameters, R4, R5, etc, say the word. This stuff is all automated and requires very little of my time. (This post was the exception!)
fundtimer
Replies to this Post:
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From: scamman Replying To : fundtimer (post 9463) Apr 25 2003 4:55PM
Title: Thanks, Fund...
...I need to take off right now, but I really appreciate your detailed work. I will get back to you next week to tweak things if needed. If nothing else, future queries abour R3 can simply be referred to this set of posts! Thanks again.
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from fundtimer on Apr 25 2003 4:59PM
9473 Once more
from fundtimer on Apr 25 2003 5:03PM
9474 Hi fund, re R3
from Juker on Apr 25 2003 6:19PM
9505 R3 Dissected
from patelcg on Apr 27 2003 12:51PM
9523 Fund
from twodoorhardtop on Apr 28 2003 11:42AM
