RVS Options Strategy

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RVS Strategy Rules

There are three components to this strategy including the SPX trade, RUT trade, and VXX trade.
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Put Broken Wing Butterfly – SPX

Parameters

  • DTE: 70-80
  • Deltas: +1@46/-2@30/+1@12 or debit equal $50-$150
  • Technical indicator: Donchian 20 period

Entry

  • Bullish 20 period Donchian
  • Contango 5% or > in F1-F2 VIX futures (no entry in periods of backwardation)

Exit

  • Short strike delta <20 or >50

Re-entry

  • Permitted straight after an exit to the upside providing the 20 period Donchian is still in an uptrend and has not broken to the downside of the channel.
  • If channel is broken to the downside the strategy is to stay in cash until a new upside (bullish) signal is in place.

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Put Broken Wing Butterfly – RUT 

Parameters

  • DTE: 60-80
  • Deltas: +1@67/-2@30/+1@13 or closet to 20% profit at T+0
  • Technical indicator: Donchian 10 period

Entry

  • Bearish 10 period Donchian

Exit

  • 20% Profit target
  • Short strike delta <25 or >55

Re-entry

  • No re-entry, one trade per signal.

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Long Put – VXX

Parameters

  • DTE: 45-65
  • Deltas: +1@60
  • Technical indicator: Weis Wave Volume Histogram 5 period (tradingview.com) or Donchian 5 period

The histogram indicator tends to give better signals, however the decision to enter or exit based from this indicator needs to be made towards the end of the session to avoid a potential re-paint of the histogram signal.

Entry

  • Bearish 5 period WWV or Bearish 5 period Donchian
  • Contango 5 or > in VIX futures F1-F2

Exit

  • Bullish 5 period WWV or Bullish 5 period Donchian

Re-entry

  • No re-entry, one trade per signal.

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Working out Sizing

  • 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 seen if your own back test to get the position multiple (a.k.a. Number of units).
  • E.g. One’s drawdown allowance for a strategy might be $15,000. So, $15,000 / $3,332 = 4.5 Unit Multiplier.
  • The number of spreads/contracts given may be multiplied by this value to get the correct sizing.
  • Not a recommendation. Provided for education and information purposes only. All trades are hypothetical. See other important disclosures at formafinancial.com/disclosures.

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History *

Overview

The RVS trading strategy implements the “all weather”portfolio concept using broad based index options. Bullish, bearish and market neutral conditions are all addressed using options on the S&P 500 (symbol SPX), Russell 2000 (symbol RUT) and the S&P 500 VIX S/T Futures ETN (symbol VXX).

* Please note that all trades are computer simulated. We have done our best to estimate market factors such as commissions and liquidity, however all computer simulations and even historic live trading cannot fully account for variations in commission rates, liquidity issues, and slippage. Please review other important disclosures.

Statistics

0 %
Return / Allocation
0 %
Max Drawdown
0 %
Win Rate
$ 35 K
Recommended Allocation
0 %
Return / Approximate Max Risk
2
aRet / MDD
$ 35 K
Approximate Max Risk

How The Strategy Works

  • Defined risk on every trade. There are no naked options, no short futures, or any other form of unlimited risk type of trades.
  • Momentum priority. The dominant trend and momentum of the market is always respected so that we can benefit from long lasting trends and shorter term drops in volatility, whilst avoiding being on the wrong side of market crashes.
  • Income over home runs. We seek consistency in income from a balanced combination of 1) positive Theta trades (neutral condition), 2) positive Theta trades with a directional bias (bearish condition), and 3) long premium trades for shorter term drops in volatility (bullish condition).

Strategy Team

Chris Gursansky

Funded options trader and designer of the RVS strategy.

Andrew Falde

Adviser and manager for prop firm, fund, and individual clients.

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