S&P trading system

Pancho Sanza · 05-09-2002, 12:01 AM

I don't trade S & P futures much anymore but for you guys who do, here is a system I came up with way back when and traded successfully for about 3 years.

I haven't used it in about 2 years, but i just went to yahoo, downloaded the SPX closing prices for the last few years, ran the prices against the trading criteria and what do you know, It even works in a down market! Thats amazing considering it is a bullish oriented strategy.

The system can be yours for $499 US dollars! Just kidding, its free, here is how it works.

If the S & P has three consecutive down days AND and the sum of the 3 day decline is greater than -3.0 %, buy the S&P on the open the next morning and hold it until the closing of the second day after you go long, which is when you should liquidate.

The annualized return for this system is about 90 %.

So once again, buy the S&P 500 if the S&P closes down 3 straight days and the cumulative decline is greater than -3 %. Hold your position for 3 days, liquidating at the end of the third day, ie, if you buy on Tuesday morning, liquidate on the Thursday close.

From January 2001 to the present, this system would have given you 20 trade signals, 16 of which were profitable.

The biggest winning trade (assuming 1 "big" S&P future) is $16,147 before commission. Total profit for all 20 trades would be just over $79,000.

This system is super easy to trade and doesn't require you to stay glued to your computer, like most day trading systems.

Incidentally, this system flashed buy signals for Yesterday and today, which means if you had been trading it, you would have caught the 39 point move in the S&P today.

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jjgold · 05-09-2002, 12:05 AM

Pancho why did you post this. I bet enough stuff already. Now I am actually going to print your post and keep track (paper trade for a while) Sounds interesting Good Luck

Pancho Sanza · 05-09-2002, 12:09 AM

JJ,

You can backtest it with prices from yahoo finance.

I discovered it in the fall of 1997, traded it for about 3 years with outstanding results.

It works with the NDX as well but you need to substitute the -3.0 % decline with -5.0 %.

Bucky · 05-09-2002, 12:31 AM

Thanks - I'll study it. Been trying to convert from gambling to investing. Hope I can handle the increased risk tolerance the stock market requires. But, seriously, I love reading the sports pages but would rather comb my hair with barbed wire and chew on tin foil than read the business section.

Maybe, I could change the terminology to betting on the stock market and it would work for me. Hey, Bucky - "how much did you bet on the S & P Bears today?" Did they win?

Fatl · 05-09-2002, 02:37 AM

Where can I get the data on this from yahoo? All I could find is this: http://finance.yahoo.com/q?s=mdy&d=t but that's for SP 400 traded on AMEX, I doubt that is the one you're talking about.

Pancho Sanza · 05-09-2002, 02:51 AM

Click here

Then go to the bottom of the page, select download spreadsheet format.

Then save as an excel file.

Fatl · 05-09-2002, 03:13 AM

Okay, now I'm confused. So if the system play comes up, what would I be investing in? Is their a ticker symbol for it? How would I do it?

Pancho Sanza · 05-09-2002, 03:28 AM

If you trade options, you could trade the system using $SPX options, which are options on the S&P 500. $OEX and OEF options are options on the S&P 100, which moves at half the rate of the S&P 500. OEF = 1/10 $OEX.

If you trade futures, you would trade the S&P 500 futures contract. The margin (what you need in your account to go long 1 contract) is about $23,000 for the normal contract and $4,600 for the E mini S & P. You will gain/Lose $250 for each point the S&P 500 moves with the normal contract and $50 with the e mini.

If you don't trade futures or options, then you would use spiders, ticker is spy.
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Fatl · 05-09-2002, 04:49 AM

Where can you get more info on the options?

JC · 05-09-2002, 06:50 AM

the SPY spiders would be the simplest method for most people.

jjgold · 05-09-2002, 10:17 AM

What is Spy spiders

Pancho Sanza · 05-09-2002, 01:46 PM

Fatl,

Try www.cboe.com for info on options.

Spyders are shares that mirror the movement of the S&P 500.

They trade just like stock.

Fishhead · 05-09-2002, 04:11 PM

SPY trades on the AMEX i believe. What stock on the the NYSE mirrors the SP500? Thanks...i am sure that there is one.

Pancho Sanza · 05-09-2002, 05:15 PM

Your broker should have access to amex.

I don't know of any NYSE instrument that would exectly mirror the S&P 500. You can trade this strategy with a no load S&P 500 index fund as well.

Your best bet is to use the futures to trade this strategy as you get the most bang for your buck this way.

If you want to replicate a long futures contract using listed options, then you would buy a call and sell a put at the same strike and expiration. In these "replication" strategies, though, your broker will most likely ask for naked margin, which would be substantially higher than the comparable margin for trading the futures contract.

jjgold · 05-09-2002, 05:25 PM

Pancho you can trade future contracts tax free at the link I am putting on the page. No taxes!!!! I have an account there and it is 300% rock solid British firm. There is a spread on the different contracts though but if you win nice amounts you do not have to pay taxes.

Finspreads

Pancho Sanza · 05-09-2002, 05:40 PM

Tax free?

Why would you say it is tax free?

Not in Canada it ain't.

I'm sure it's the same in the USA.

jjgold · 05-09-2002, 08:34 PM

Tax Free yes, because this firm takes the trade as a wager not a trade which makes it tax free. You could win 40,000 and not have to pay a dime of tax on it. Check the website out Pancho

bazanster2 · 05-09-2002, 08:40 PM

Pancho Sanza,

Thanks for the S&P system, will check it out.

baz
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chestrockwells · 05-09-2002, 11:23 PM

Pancho,
First, let me thank you for posting this. Pls. don't interpret my following remarks as me trying to be a dick about this
Am I correct in estimating that during the 3 yr. period you referred to.........that this approach gave you somewhere in the neighborhood of 40-50 signals total? If that's approximately correct, I'm curious how you concluded that this wasn't just an aberration.........given the small sample.
Dan