The goal of my current study is to produce a modest month to month risk-controlled revenue stream using straddle, strangle and/or butterfly positions. The system focuses on non-directional tactics and is as much concerned about risk management as profit potential. For comparison purposes I'll look at both the Qs and the IWM using weekly bars . . . with the pivots defined for the coming week based on the stated date. This two prong pivot approach will also be used for a future pairs trade study.
Basically, the study uses the weekly bars' fringe pivots to manage the risk of selling OTM puts and calls, and riding the positions to expiration. This is a risky trading strategy, as losses are theoretically unlimited, and you need specific broker approval to trade this way.
I'm not encouraging anyone to trade this way. I'm counting on you to develop your own trading variations to capitalize on market probabilities the system may present.
Over the next few weeks, I'll post portions of the system, as a "Kit of Parts". . . a concept I mentioned in the 3 Finger study. All components are exploratory, so they may or may not end up in the "final" version of the system.
You, gentle readers, are always encouraged to tweak the code, assumptions, parameters, time frames, etc. to accommodate your own trading focus and bias. Suggestions and comments are always welcome, and those that have come in over the past 2 weeks have been particularly insightful, reflecting a spirit of teamwork learning. And that's really what this blog is all about.
You can access a full version of the pivot calculator on line here, a site I have no affiliation with. I've changed the format a bit and saved as an EXCEL worksheet for use in other applications. There are several different ways to calculate the pivots, and you can view the calculations on the above site. The above values reflect the "Classic" model.