The Mini-Me trade is a bull put spread with a term of 7 days.
The entry is based on a trend following indicator.
The return/risk ratio is very positive.
It is a modified version of the James Bond Trade which can also be traded with the 20k loss offset limitation.
Past performance results are no guarantee of future results.
MAR Ratio and Profitability
For the trade we plan a capital of €4,000
The win rate of over 70% is very good.
Psychologically important is the maximum drawdown.
This is a very good 5.5%
The annual return (CAGR) for 2 years is a good 33%.
The MAR ratio indicates the relationship between drawdown and return.
Values above 1 are considered good, this strategy has a value above 6.
Winners and losers
The ratio of average winner ($51) to average loser ($72) is great.
On average, you are only in the trade for 3 days.
Entry
The trade is only opened when the indicator gives a signal.
The indicator is included in the bot, but can also be deactivated.
The indicator is composed of various sub-indicators.
The indicator is a trend following indicator.
Exit
Take Profit: 80% on the Bull Put Spread
Stop Loss: 150% on the short leg.
One day before expiration 30 minutes after the stock market opens.
When the S&P 500 loses 1% compared to its entry value.
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By setting the take profit on the spread, you stay in the market longer if you are sure that the trade will develop positively.
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The stop loss (-150%) is only calculated on the short leg, so you exit the market earlier.
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This fits with the stock market wisdom: “Let profits run, limit losses.”
The Greek Delta
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The initial delta is approximately 11
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In a rising market, the delta decreases.
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In a falling market, the delta increases. Since the trade then becomes bullish and no longer matches our market opinion when entering, we have built in a stop loss at -1% of the underlying.
The Greek Theta
The initial theta is about 10
In a rising market, theta slowly decreases and we continue to earn the delta through theta.
In a falling market, theta quickly decreases. The long option now increases in value significantly. At around -2.5% of the S&P 500, theta even becomes negative.
To avoid this, we have built in a stop loss at -1% of the S&P 500.
The Mini-Me Trade vs. Investing in the S&P 500
Configuration options
On the right you can see the setting options.
Entry Price Order Offset
Here you can define how much you want to give up from the mid-price in order to be executed faster.
0.01 means 1 cent
Margin
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One trade in my demo account required about €1,700 in margin.
Order types Exit
The stop loss exit is defined as a REL order on the short leg.
The advantage of the REL order on a single leg is that it is executed faster and with less slippage.
The offset amount is $0.25
The Stop Loss Exit Order is linked to the Take Profit Order via OCA group.
In addition, the sale of the long put hedge is attached via a hedging order / pair trade.
Thus, after the stop loss has been executed, the hedge is also sold. Also via REL order. (Offset: $0.10)
Order types Entry
The bull put spread is purchased via a buy limit order.
The limit price is calculated from the midprice of the short put and long put.