S&P Short Signals Generated from New System

No new trades in the paper-folio options portfolio yet since I went into all cash July 31.

Been working on some systematic program trading stuff in my spare time lately trying to develop directional trading systems that trade index options as well as index futures. These options trading systems are somewhat difficult to backtest on historical market data because I don't have access to historical options prices since they aren't available for free. I think I've figured a way to work around this by intuitively approximating the shape/curvature of the reverse volatility skew (found consistently in index options) depending on how many days are left to expiration of the backtested option trade, and figuring out the out-of-the-money strike implied volatility from inputting historical VIX quotes into my approximated volatility skew curve model. It was a bit of work, but at least now I can attempt to backtest some algorithmic trading systems that exclusively trade options. My rough approximation seems to be pretty accurate and valid enough for short-term trading systems that trade near-the-money options which are held for less than 10 days, so I'm gonna stick with it until I find a reason to believe it's not accurate enough...

I'll post the backtest results shortly. From what it looks like this one long/short S&P system that I just put together should complement the current trading strategy on this website very well because the current website strategy is fairly directional-neutral, while this new purely algortithmic system is aggresively directional. So, in theory, the purely algorithmic system should do a great job of making good profits when the more directional-neutral core portfolio is losing money or just languishing. But, I going to wait to see how they trade in the market a few times before actually throwing them into the current paper-folio portfolio.

Currently, this new algorthmic model is on 2 short signals. One was generated last Wednesday, and another one signaled on Thursday. The max holding period of each is 5 days, so I guess we'll see how it turns out--after today's down day these positions are about breakeven. I'm actually wondering whether to tweak the max holding period an extra 2 days because the trades' holding period is occurring over an expiration Friday, and too much "unnatural" trading usually occurs the Thursday before expiration Friday all the way through the Monday directly following the Friday expiration.