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RSI Trading Strategy For SPX Bull Call Spreads (2018)

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RSI Trading Strategy For SPX Bull Call Spreads ^ Thanks for watching and here's the link to the new Option Research website. http://bit.ly/2QW2ApW If you become a member, you'll get instant acccess to the entire Options Research activity feed including the first RSI options trading video focused on long call butterflies. Here's a direct link to that video article. http://bit.ly/2LUUXko If you're interested in picking up a copy of the new Larry Connors book referenced in this video, use this link to find it on Amazon. https://go.magik.ly/ml/e7m0/ Buy the Fear, Sell the Greed: 7 Behavioral Quant Strategies For Traders by Larry Connors Video Summary: This video used a short period RSI setting as an entry signal for trading SPX bull call spreads in a bull market. This is the 2nd video in the series. The other 3 videos using the RSI in this way will cover trading SPY Butterflies, SPY single call options, and SPX put credit spreads and will only be available on the Options Research website. Thanks for watching and I'll see you at the next video. Eric PS: Want to be more consistent in your options trading and trade with confidence? Check out these other resources below. SPX Strategy PDF, Optionable stocks list, and other free reports: http://vid.us/9pf37l SPY Trading System using MOBO Bands (Momentum Bands) for buying calls and puts. http://bit.ly/2WHxgyc SPY Multi-Time Frame Trading system using MOBO Bands (Momentum Bands) for buying calls and puts. http://bit.ly/2LT8l9S Buy the Rip, Sell the Dip directional trading tutorial. http://bit.ly/2zORZql The Golden Cross PullBack Trade for trading put credit spreads in bull markets. http://bit.ly/2JaSsbW Trading Credit Spreads with moving averages. http://bit.ly/2EgZVmq Bollinger Band and RSI Strategy PDF For Weekly Option Credit Spreads: http://bit.ly/2Owynkh Options Trading Research Center on Patreon http://bit.ly/2N8LFiI Options Trading Facebook Group: http://bit.ly/2tkdPgh Options Trading Backtester and Powerful Earnings Research Tool: http://bit.ly/2yfc2fn #spy #trading #stockmarket
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Text Comments (50)
Nino Garcia (26 days ago)
Hi Sir, what about... 1. The distance between the strikes. 2. What if the short leg (short call) is exersied. 3. When and how to exit if 20% target profit is not reached. Thanks
Nino Garcia (25 days ago)
Thanks for the answer
1. The backtest tries to do 1 to 2 strike distance between. 2. There isn’t early expiration with SPX so no need to worry about getting exercised early. Also, it is cash settled so if your short call is the money, there will be an exercise fee but any gains or losses will be turned into cash. No assignment.
JB Smoov (1 month ago)
I’ve been using this, good to see the back test result but not surprise at all
Jose Garcia (6 months ago)
always blown away by the comments,i bet you're like.... WHAT?
Jose Garcia (6 months ago)
for those of you, who do not have access to probability of expiring OUT-OF-THE MONEY.you can use the DELTA of an option........(100-DELTA=PROB.OTM)
ps2ke5000 (7 months ago)
The drawdown indicates that some of the trades went negative but the perfect win ratio indicates they all recovered from this drawdown. Can you tell me how many of these trades went all the way to expiration?
Yes, in this study the draw downs did recover. Now I don't have the exact number but most if not all of them would've been closed prior to expiration as a 20% gain would be less than the full value of the spread. I'm sure there were a few which were held close to expiration but don't think many went all the way.
sbjorgy (7 months ago)
could you please tell me what is SPX, I'm on tradestation and it doesn't have just SPX, I need another letter. can't find the correct one that is the s&p500 index.
Chuck Brown (6 months ago)
Try using $SPX for Trade Station.
The SPY is an ETF that tracks the index. So a little different. SPX is cash settled whereas SPY isn’t. Also SPY is about the 10th the size as SPX so good for starting with it and then moving up to SPX to scale up.
sbjorgy (7 months ago)
isn't the SPY the same thing. is the SPX an ETF that can be traded or is it just the SP 500 index?
It is the S&P500 index. Not sure what the Tradestation ticker is.
Timothy Yen (8 months ago)
Curious, if Implied Volatility is high wouldn’t you rather sell a Bull Put Spread vs buying a Bull Call Spread?
J M (4 months ago)
It shouldn't matter whether you do a credit spread or a debit spread at the same strikes.. they are the same trade... also... what nobody pays attention to is.. VEGA flips from long to short in credit / debit spreads..
J M (4 months ago)
At the same strikes they are exactly the same trade... doesn't matter if its a credit or a debit.. if they weren't.. arbitrage would exist.. debit spreads are credits spread and vice versa at the same strikes.
In general yes, was just showing a different way since volatility has been low for 9 years or so. Its relatively the same risk though.
Mitch Zimmer (8 months ago)
This is pretty amazing
Mitch Zimmer (8 months ago)
Just joined the FB group... thank you for all the information you share!
Thank you. The age of information is allowing us retail traders to gain access to tools like this. I love it.
Francois Pareanen (9 months ago)
Very cool, but 20% is it enough gains with a small trading account? Looking forward for the next strategy.
Good question. On SPX, a 1 strike spread will cost around $400. It could even be a little less. So a 20% gain would be around $80. Although I didn’t backtest, SPY on this but if you did the same trade on SPY by stick with the same Deltas for the strikes, then trades would be even less. Hope that helps.
Crazy Canadian (9 months ago)
Love it, which tool did you use to backtest?
Option Stack
Mike Walker (9 months ago)
Eric, great video, I'm doing some back testing on this right now. Will share the video. On the same train of thought, would selling a put spread several strikes out work as well too?
Jim Presser (29 days ago)
Vertical Spread Options Trading I
mysteriouskite (8 months ago)
good point since time is on your side
Thanks Mike. Yes, selling an OTM put spread with an equivalent Deltas (delta 30 ish) should yield similar results although the profit target would need to be based on a percentage of max gain. This trade it was based on the cost of the debit spread. I’ll actually be doing a bull put spread version later this month in the research website.
Chuck Harkes (9 months ago)
I like the concept BUT...a 1:5 average reward to risk ratio is not very appealing. Why not test some sort of a stop...even if it's 40% (twice the profit target). To me, this would be much more meaningful.
I did test a 50% stop and got stopped out several times which reduces the profitability. There’s a sliding scale in spread trading where the higher the probability, the lower the risk reward. This strategy shoots for high probability 20% gains.
Arthur Thorne (9 months ago)
You should back test to 2007 so we can see what would happen when there was the market crash in 2009. Also remember we have been in a bull market for almost the last 8 years... go generally a downward dip would mean there is a recovery
Currently I can only back-test around 7 to 8 years. This is why I used the 200 sma as a filter. In theory, when the market crashed, it would’ve been trading below the 200 sma and you would not trade this strategy. If enough people join the research center, I plan on purchasing farther dated data to back test more than 7 years or so.
fox ultrafeel (9 months ago)
Oh and I guess you meant Delta 30/28 (out of the money bull call spreads) didn't you?
HB Stone (9 months ago)
https://i.imgur.com/ffwRfBQ.png I just checked current prices for a ~30 day SPX bull call spread and 72/70 had a 66% POP with 69% P50 while 31/28 had 35% POP with 69% P50 (there wasn't quite a 30/28 but 31/28 should be close enough). The P50 is the same so as long as you close under 50% (as he certainly does in the video) you will have around the same chance of success either way. HOWEVER the pricing was VERY different. Obviously the ITM max profit was around 40% of the OTM max profit, and max loss was much greater for ITM vs OTM. Admittedly, "right now" the RSI and SMA rules may or may not apply - I didn't check. But I would imagine generally the OTM prices will always always always be higher than ITM, and the POP at expiration will always always always be better OTM vs ITM. But if you close at 20% like he does in the video, you may very well get identical results. Ultimately 20% gain is 20% gain, so however you get there more power to ya =)
It's better to use SPX as these are in the money call spreads and with SPX it is cash settled with no risk of assignment. With that said, for SPY, the August monthly Delta 71/71 would be to buy the 267 and sell the 277. For SPX it would be the 2780/2785.
fox ultrafeel (9 months ago)
How about using an actual example for the SPY if possible. Which options would you use right now in the SPY. Let's assume the RSI-values and everything were according to the system rules. Which call spread would you buy right now?
I’ll politely disagree here regarding the premium. One of these debit spreads is about the same as an OTM our credit spread in terms of max loss and gain. Now you can widen the spread though like Delta 80/70 or something but selling a delta 50 call makes the trade a different probability. Hope that makes sense.
fox ultrafeel (9 months ago)
But with TTM, delta 70/72 calls, there is hardly any premium to gain at all! You mean maybe delta 70/50 or even wider spreads?
fox ultrafeel (9 months ago)
Thanks for this info! Did you also experiment with 30% or 50% profit goal for example?
HB Stone (9 months ago)
I have started closing spreads and condors at 20% or 25% just because I've been hit with a hard few losses and even with defined risk I currently prefer the increased probability over the increased profit per trade. I may try squeezing more out if IV increases or as my account size grows, but for now a winner's a winner!
fox ultrafeel Good question, so for most of these spreads, the max gain is around 25%. So this back test was getting most of the profit at 20%.
Twelve Dozen (9 months ago)
I got into the RSI 2 reading Connors
Yes good stuff. The ConnorsRSI indicator isn’t in my back-test platform. 🙁 Was interested working with that. Thanks
Matt Calay (9 months ago)
Do you know of a good service for Iron condors
Link should be in the description but it’s called Vertical Spread Options Trading
Matt Calay (9 months ago)
Vertical Spread Options Trading forgive me but what's the group called please
Matt Calay (9 months ago)
Vertical Spread Options Trading no sir but i'll get on it now
I’ll get back to you. I know 2 good guys. One guy is really good at longer term iron condors and adjustments. Are you in the FB group? If so, message me and I’ll get your the details.
Matt Calay (9 months ago)
thanks ! I'd like to get a course on longer out Iron condors.

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