Ops Ex

Been awhile since I posted anything, I’ve been to busy watching European theater as everyone else has been. But I did find an interesting pattern worth sharing; there has been a strong tendency for the short term trend to reverse after options expiration. I don’t have a very plausible explanation for why but I’m sure one can be rationalized if need be. In any case, I applied a simple stop loss and trailing stop strategy and found over 90% probability of profit for the last 4 years:

Unfortunately prior to 2007, the performance is about the exact opposite of it’s recent performance. Without a reasonable explanation for the mechanism of why this anomaly exists, one is left with the ultimate question, will this strategy continue to work going forward? This is a constant dilemma with any tested strategy. One reasonable approach is to allocate small capital initially and allocate greater amounts as the strategy performs well. Or in other words, trend follow the equity curve. Time will tell.

 

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~ by largecaptrader on October 23, 2011.

2 Responses to “Ops Ex”

  1. option players will push the underlying in a direction so as to influence the the option settle price..

  2. […] Op-Ex indicator started off slow since I posted with 1 break-even trade, 1 stop out, but the last one has been a […]

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