ACV Options Strategy

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ACV Strategy Rules

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Parameters and Sizing

• DTE 180+
• Put credit and Call credit spreads are used
• Strikes nearest $600 credit and $200 debit ($0.60 for /CL and $6.00 for /GC)
• Technical display for daily chart
  • EMA’s – 8, 13, 21, 34 and 55 (tip: use colors of the rainbow or color shading to quickly identify the order)
• Positions held
  • Bearish momentum = 1 call credit spread
  • Bullish momentum = 1 put credit spread
  • Neutral = 1 call credit spread, 1 put credit spread

Determining direction and opening/closing positions

• When EMA’s line up bullish (8>13>21>34>55), sell 1 put spread
  • Bullish exits:
    • Profit target – close and open new put spread at 75% profit target of credit
    • Stop loss – close and open new put spread at 200% loss of credit received

• When EMA’s don’t line up in order enter 1 call spread and 1 put spread.  If you already have a put or call spread on due to precious bullish/bearish stance, keep this on and add the other side.
  • Neutral exits:
    • Close and open new call or put spread at 75% profit target of credit received
    • Close and open new call or put spread at 200% loss of credit received

• When EMA’s line up bearish (55>34>21>13>8), sell 1 call spread.
  • Bearish exits:
    • Profit target – close and open new call spread at 75% profit target of credit
    • Stop loss – close and open new call spread at 200% loss of credit received

• When moving from any of the 3 directions above (bullish, neutral, bearish), close/open appropriate spreads to get to desired position.
  • Example moving from neutral to bullish:
    • Neutral: 1 call spread + 1 put spread
    • Action: close 1 call spread

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• Traders should study these rules and back test themselves to gain an understanding of the strategy
• One’s drawdown allowance (DDA) may be divided by the MDD to get the position multiple (a.k.a. Number of units). 
• E.g. One’s drawdown allowance for a strategy might be $5,000 and the MDD might be $1,100. So they would take $5,000 DDA / $1,100 MDD  to get 4.5 Unit Multiplier. 
• The number of spreads/contracts may be multiplied by this value to get the target sizing.

Valid Ranges

Although we share and track one specific targeted trade structure, our studies show that using a range of parameters as described below provides substantially similar returns while allowing the freedom to target a specific trade that is most suitable to each individual. 

• Expiration Dates: Between 120 and 250 DTE. Nearer dated expiration cycles may provide higher returns with increased volatility. Longer dated expiration dates may reduce volatility and reduce over all returns as well. 
• Short Strikes: 8 to 12 Delta
• Long Strikes: Approximately half of the Delta as the Short Strike (e.g. if you select .12 Delta for the short strike, then the long should be the closest available to .06 Delta)

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