TVO 2014 – Year in Review Part 3

The TVO System signals generated 6 trades in 2014 achieving an 83% win rate (5 out of 6). As a result our options account nearly doubled (73%), and no more than 10% of capital was put at risk at any given time. How did we do it? Here’s part 3 of our in-depth analysis including a long and a short trade (over 100% gain) back to back.

SPY TVO 9-25-14b

1. After SPY bounces around in a 3 point range for most of the month, the Oscillator reverses to -3.0 and on 7/23/14 we buy SPY 199 Nov-14 calls at 3.26. It looks like we’re buying the breakout, but price triggers and targets are never a factor with our entries and exits.

2. Shortly after going long the breakout gets sold (it’s shakeout time), but notice that as the market goes down TVO continues to climb indicating markets are still in an accumulation phase. Yes, big institutions do continue to buy on the way down.

3. After a horrifying drop (only to those who look), we finally get a bounce, but as the market reverses, TVO starts to fall. After a brief period of distribution at the bottom, volume dries up and the market starts to climb. All the stops are swept and we’re running out of sellers.

4. The oscillator turns again showing that more institutional buyers are beginning to step back in, putting us back into accumulation mode. TVO at -1.7 gives us a 2nd long signal and on 8/20/14 we buy more SPY 199 calls close to the same price as before.

5. On 9/5/14 we exit our long position, but alas… even though SPY showed a 2 point gain from our entry, the impact of time decay and volatility on our calls results in a loss of -8% (Our only loss in 2014). So we move on and go short, buying SPY 202 Dec-14 puts at 3.14.

6. Soon after the market drops, just so you don’t get too much of a sense of security, there’s another breakout forcing many shorts to cover. TVO is still going towards the negative (and we don’t use stops), so we stay in the trade.

7. The breakout fails (bull trap anyone?) and the market drops again. The oscillator reverses at -5.4 we sell our puts at 6.35 on 9/25/14 for a 102% profit, making up for the previous trade and then some. -MD

Read about more 2014 TVO trades in Part 1 and Part 2.

For more on market volume, The TVO System, or how to trade options follow me on Twitter (@TradingLicks) and StockTwits!


Performance results on this website dated prior to September 2014 for TVO (prior to May 2015 for HG), including backtesting and trade history, are simulated. Please read our full disclaimer.