G-Tool proposed change

G

garyw

Active member
Gold Member
The G-Tool currently reports Monthly Expirations over that of the Weeklies expiring on the same date (3rd Friday of each month).
Beginning January 2nd, TDA will begin passing the Exchange Fees on to customers, where they have not been doing that for many of us thus far.
The Exchange fees for the Monthly expiration's are 11 cents greater than that of the Weeklies. (I expect IB has already been passing this fee on to clients)
I propose switching from the Monthlies to only the Weeklies after January, to reduce the option Fees.

Please inform me, by response here (or privately), if you prefer this not be done, else If no response I will omit Monthlies beginning in January 2020.
This will impact all G-Tool reports (Entries, Add-Ons, and Risk Reversals). The qty reports will not change, only a shift to the Weeklies only.

Regards,
Gary
 
FYI: Today's "late session" reports (Risk Reversals & Entries) should include both (monthlies and weeklies for 3rd Friday expirys)! -- If I don't encounter issues with this, I may leave this configuration, allowing phase out of the Monthlies later.
Also, for the users interested in the details. This weekend's updates to the Reporting incorporates an "IV Surface Lookup" for each strike's IV (at spot price) within the "STATIC POSITION ASSESSMENT" section of the Entry reports. This is expected to provide a slight improvement (more accurate) to the Expected value computations. (For recent market conditions, this results in a slightly lower Expected Value than using the current IV of each strike).
 
I should also point out that I added an additional value to entry reports in the STATIC position assessment section: Shown in RED below (will not be red in the reports)
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1: Evaluating a (45/60 {lower div upper->1.33}) +16 SPXW200221P3145/-32 SPXW200221P3100 /+16 SPXW200221P3040, price -0.05 (40.05/31.50/22.90), Risk: 23920
BUY +16 BUTTERFLY SPX 100 (Weeklys) 21 FEB 20 3145/3100/3040 PUT @-0.05 LMT
+ Short Strike (-0.255 DELTA) distance from market (minimum 3.30% goal) 3.79%
+ PnL at 3.50% Down (3103.57) at 15 DTE is 6015.68 (25% goal) 25.15%
+ PnL at T+10 is 20.96 (-3.0% goal) 0.09%
+ Upside PnL limit (with no adjustments) =80.00 Upper Loss % of margin (-5.00% goal) 0.33%
+ Initial Theta= 54.56, Theta % of margin (0.13% goal) 0.2281%
+ PnL at point up 1.5% {3270.36} from trade launch @ 15DTE = 1546.08 (5.0% goal), ROR% 6.46%!
+ Lower side loss threshold for 15DTE with move down occurs at Price= 3028.71, PnL of 15 DTE @ UnderlyingPrice point is -236.32, -0.99% (< -15% goal).
Deprecated-> Confluence occurs at Price= 3011.00, PnL of 15 DTE @ Confluence point is -3492.80, -14.60% (< -30% goal).
+ STATIC POSITION ASSESSMENT Entry Cost ($-80.00) {Exp ROR 7.41% (71%)}
PnL Mean (Expected value) 1772.51, Probability of Profit: 95.2%
10.0_Percentile value: 79, 50_Percentile value: 1168.80, 60_Percentile value: 2115.04
lower inflection-point @ 4.978 with PnL-> 78.08
Grade: 8 of 8

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1: Evaluating a (45/60 {lower div upper->1.33}) +16 SPX200221P3120/-32 SPX200221P3075 /+16 SPX200221P3015, price -0.15 (34.50/27.15/19.65), Risk: 23760
BUY +16 BUTTERFLY SPX 100 21 FEB 20 3120/3075/3015 PUT @-0.15 LMT
+ Short Strike (-0.222 DELTA) distance from market (minimum 3.30% goal) 4.58%
+ PnL at 3.50% Down (3103.91) at 15 DTE is 5992.64 (25% goal) 25.22%
+ PnL at T+10 is 210.72 (-3.0% goal) 0.89%
+ Upside PnL limit (with no adjustments) =240.00 Upper Loss % of margin (-5.00% goal) 1.01%
+ Initial Theta= 50.88, Theta % of margin (0.13% goal) 0.2141%
+ PnL at point up 1.5% {3270.78} from trade launch @ 15DTE = 1232.00 (5.0% goal), ROR% 5.19%!
+ Lower side loss threshold for 15DTE with move down occurs at Price= 3029.09, PnL of 15 DTE @ UnderlyingPrice point is 2449.44, 10.31% (< -15% goal).
Deprecated-> Confluence occurs at Price= 2985.00, PnL of 15 DTE @ Confluence point is -3754.56, -15.80% (< -30% goal).
+ STATIC POSITION ASSESSMENT Entry Cost ($-240.00) {Exp ROR 7.38% (71%)}
PnL Mean (Expected value) 1754.61, Probability of Profit: 96.8%
10.0_Percentile value: 240, 50_Percentile value: 1103.36, 60_Percentile value: 1833.12
lower inflection-point @ 3.397 with PnL-> 239.20
Grade: 8 of 8
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Above I merely pasted the top sorted candidates from the Monthly and (new) Weekly.
Perhaps it is wise to check both before abandoning the SPX monthlies, especially if we find more competitive SPX commissions :-)
 
Update:
The G-Tool reporting was recently (this week) updated to include the 3rd Friday Weeklies of SPX in addition to the Monthlies. Previously the reports suppressed reporting of the 3rd Friday Weeklies (previously referred to as the SPXPMs). Subscribers can now chose either or both if they wish. I HAD planed to discontinue the Monthlies for the new year, but now plan to leave them until it becomes more clear they have no value.
Also, I welcome any questions, and would like to hear any suggestions that could make the reports more valuable.
 
Since the G-Tool reporting started, the impact of Commissions and Fees have been omitted from the analysis.
A few changes have been introduced in the past few months that allow some narrower wing BWBs to be considered, which are associated with much larger lot sizes.
With the changes introduced by TDA in 2020 which greatly increase the trading cost, I think it wise to now adjust the tool to reflect a more accurate evaluation. While different vendors have different costs for trading, I plan to use TDA's costs to now more accurately reflect trading costs if you are using TDA or similar. This change will help to better evaluate larger lot sizes, by including transaction costs (using TDA as the reference). While this is not precise, it should be more accurate than before.
The report will reference this a "Commission", even though it is really Commission + Fees.
For SPX, a Commission of 1.30 will be used, and for SPXW a Commission of 1.19 will be used.
The impact of including the transaction costs should have minimal impact of the results of the tool, except the higher lot sized candidates will now be less attractive, due to increased transaction costs.
BTW: The impact of including transaction costs will be reflected in the "STATIC POSITION ASSESSMENT" section, as that section reflects a round trip transaction (enter now, exit 15-DTE)
I plan to introduce this change beginning next week.
 
Within the Entry report Criteria section, the following is now included: Note the Commission line addition (this was an SPX (AM) expiry, so commision of 1.30 is reflected. (Revised info is shown below in Bold type)
___________________________________________________________________________________________________
Criteria used for Report
STATIC POSITION ANALYSIS: Annual Volatility of 11.99%, Annual Interest of 1.90%
Selection of Short Strike 2.50% to 10.00% below LAST price!
Criteria filter prior to evaluation:
DTE range from 68 to 91 (Will examine lowest DTE Match).
Commission: No ticket charge, 1.30 per contract.
Maximum Risk permitted on open: 25000.
Maximum Risk permitted per Lot: 3000.
Minimum Lot size: 4.
Lower wing width divided by Upper wing width Minimum value: 1.25.
Lower wing width divided by Upper wing width Maximum value: 2.00.
Maximum BWB Price is 1.60.
Maximum Lower wing width: 100.
-----------------------------------
I also now include as the 2nd line of each Entry Candidate, the total position greeks, so I don't require additional steps to determine. An example below for a Hybrid.
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Road Trip Trade Entry BWB's for 20MAR20 (70), last price of SPX=3272.58, on Date = 01/09/2020, Time = 12:05:00 :Not Real-Time (Pacific)
Reporting 25 sorted top ranked SPX RTT Entry candidates of 98 passing grade threshold for deeper analysis!
1: Evaluating a Hybrid (50/70 {lower div upper->1.40}) +12 SPX200320P3170/-24 SPX200320P3120 /+12 SPX200320P3050, price -0.35 (40.40/31.70/22.65), Risk: 24385
Position Greeks: Delta/Vega/Gamma/Theta 4.89 -290.06 -0.130 34.59
Followed by selling the Vertical -1 SPX200320P3170 +1 SPX200320P3160 (40.40/38.45) for a Credit of 1.95
BUY +12 BUTTERFLY SPX 100 20 MAR 20 3170/3120/3050 PUT @-0.35 LMT
SELL -1 VERTICAL SPX 100 20 MAR 20 3170/3160 PUT @1.95 LMT
Effective Entry price of -0.46!
 
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