TVO and HG got together in 2015 and sparked a union that became a match to be reckoned with, beating the S&P 500 (dividends included) by more than 30%. Both trading systems (which are based on market volume data alone) generated signals resulting in 23 round trip trades yielding a success rate close to 60% with gains on individual options trades reaching as high as 146%.
The average gain on winning trades was just over 50%, out weighing the average loss by nearly a 2:1 payoff ratio. Higher percentage winners out numbering lower percentage losers is a key ingredient for a system to ultimately be profitable… Even with the recent -10% correction in the S&P, TVO and HG are still ahead of the game with our cumulative 2 year return at just about 100%.
Here’s an in-depth look at 6 consecutive trades that we made in September through November, with an explanation of how we use the signals of both indicators to enter and exit trades.
1. After being in cash since 6/2 (thus avoiding the huge August drop), TVO at -5.8 gets a long signal on 9/3 and we buy SPY Dec15 193 calls at the close on 9/4.
2. What looked like a possible breakaway gap on 9/9, turned south on heavy volume. HG picked up the heat (+72) and at the open on 9/10 we buy more SPY calls, this time Oct15 194 strike for a short-term swing.
3. HG cools down to -11 on 9/16 so the next day we sell the short-term calls for a 30% gain. The session after, HG gets another long signal and we go long on 9/21… and then we add to our position on 9/23. The bears start growling on the stream about this one, but we stick it out.
4. On 9/28 we sell the HG calls for an average loss of 70%. That same day, however, turns out to be as hot as they come (+92 on HG) so we buy SPY Oct15 188 calls at the next day’s open.
5. With HG, very often the hotter they come the further they fly, and on 10/5 we sell the calls for a 146% gain. At the same time, TVO (our longer term oscillator) slips down to -2.3 and starts to reverse. For this reason we overlook the frigid -22 day on HG and take the opportunity on 10/7 to add shares of SSO (2x leveraged ETF of the S&P 500) to our long position from September.
6. 10/22 to 10/29 is just another swing trade for HG, yielding a sizable 115% gain. A few days later, HG gets a sudden chill at -10, a warning sign that the rally is coming to a close.
7. We sell SSO and our SPY 193 calls for a 34% gain. As we can see so far, TVO and HG don’t always agree (like any average couple), so we miss getting out before the plunge back to SPY 202. Looks like it’s no hard feelings, though, as HG manages to catch the bottom of yet another swing. A week later we exit on 11/19 for a 48% gain.
How will TVO and HG guide us through this current turbulent market? To find out and start following more trades like these, sign up for your Free trial today!
Above post contains results from actual trades. 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.