Are you ready to take on the stock market? It’s time to dive into the ins and outs of the trading system. Picture this: it’s January, and the trading strategy is to short the NASDAQ 100 Index at the end of the 8th trading day of the month. Then, cover the short at the close of the 18th trading day of January. Sounds simple, right? Well, let’s break it down.
In theory, the system enters its position by buying QQQ QQQ puts at the close of the 8th trading day of January, which was Jan. 11th. But hold on, things are not always as straightforward as they seem. The best entry point has varied over the years, so the strategy now involves entering in stages. The median gain from entering on the 12th trading day has been 0.8%. So, it’s time to shake things up.
Fast forward to today, the 12th trading day of January. It’s time to add to our position at today’s close. We’re not stopping there, though. The plan is to buy the second put at the close of trading on Thursday, January 18th. This means your total position will be two long QQQ puts, each with potentially different striking prices. Are you still with me? Good, because now it’s time to talk about selling.
Let’s fast forward again to the 18th trading day of January – Friday, Jan. 26. It’s time to sell all the remaining puts at the close of trading. But wait, we’re not done yet. We are using a “Standard” rolling procedure for our SPY spreads. Basically, if the underlying hits the short strike in any vertical bull or bear spread, then the entire spread is rolled up in the case of a call bull spread or rolled down in the case of a bear put spread. Remember, stay in the same expiration and keep the distance between the strikes the same unless otherwise instructed.
So, there you have it. The trading system decoded. Are you ready to dive into the world of stocks and strategies? It’s a wild ride, but with the right knowledge and a bit of savvy, you might just come out on top.
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