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I Missed The Boat Big Time On This Trade

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by Gavin in Blog
April 5, 2018 4 comments

Missed Trade Opportunity

Earlier in March, Ophir Gottlieb from CML Viz did a webinar for my readers demonstrating his Trade Machine backtesting and option scanning software.

It was pretty cool, you should definitely check out the replay:

The password is CML12345

https://vimeo.com/258429940

One of the strategies he demonstrated was called a Bull Mammoth, which you can read about here:

https://tm4.cmlviz.com/faq/mamo_technicals.php

When I was looking through the scanner recently, I noticed that a trade had been triggered on March 26th in UNH.

Here you can see the results on UNH when the Bull Mammoth scan gets triggered.

Pretty impressive with 8 wins and 3 losses over the past few years, but the wins resulted in +$15,770 and the losses resulted in -$3,455.

I was tempted to enter the trade, but I was a little wary given that I am new to the software and we were also in pretty full on correction mode at the time. So I decided to sit and watch it which was unfortunate because the trade has done really well.

The strategy called for buying a 14 day to expiry, 70 delta call which was the April 6th, $215 call. At the close of play on March 26th, that call was trading at $6.00 and UNH was at $219.05.

As of April 4th, UNH has risen to $228.79 and that April 6th call has risen to $13.75 for a gain of 129%, so I really did miss the boat on this one.

If you want to try out the software at a discounted rate, you can do so here:

https://cmlviz.com/register/cml-trademachine-pro-options-trading-iq/

I’ll keep you posted on any further testing and examples that I do with the software.

CMLViz Trade Machine Review

Market and individual stock dynamics change over time, reacting to news, sentiment, business performance and macroeconomic factors. These changes create distortions in the value of an option, presenting opportunities for profit.

Knowing when an opportunity for profit has arisen is one of the key requirements for being a successful options trader. Option traders identify these sort of opportunities by having a well researched playbook of trade setups and ideas.

Trade setups dictate entry and exit criteria for a position and can be based on a wide variety of factors such as volatility, time to expiration, underlying fundamentals and technical analysis. Identifying these trade setups comes from a combination of experience, analysis and backtesting, which is the process of testing a predictive model on historical data.

As computer power increases and traders have access to more data, specialised software for backtesting and idea generation is becoming increasingly available. CMLViz Trade Machine is one such program, which this article will review.

What Is CMLViz Trade Machine?

CMLViz Trade Machine is a platform for options traders to be able to quickly and easily backtest trade setups with just a few clicks, as well as access proprietary trade analysis and ideas.

In the past, traders would have to manually test their ideas, which was incredibly time consuming and labour intensive. Now, by simply selecting a handful of stock tickers, a backtesting timeframe and an option expiration date, they can have the software quickly analyse the trade setup and provide vital statistics on how it would have performed historically.

Further, by combining their backtesting analysis with the platform’s proprietary trade analysis and ideas, users can let the software do the heavy lifting to narrow down the setups and trades to only the most profitable and consistently performing ones.

The software is delivered through a subscription based platform entirely via a web browser, making it very fast, always up to date and accessible from any desktop or mobile device. Users can cancel anytime which is a great benefit, as often trading software can be quite expensive to buy outright. This way users can get a feel for the software at very little cost and avoid being locked into expensive software purchases or contracts.

How Do You Use CML Viz Trade Machine?

There are four main features of the platform:

  • Today
  • Scan
  • Backtest
  • Alerts

Today

The ‘Today’ tab shows trades ideas that have triggered. These trade ideas are from the experts behind CMLViz Trade Machine. As passionate and experienced option traders themselves, they provide you with access to their researched and back-tested ideas as part of your subscription.

For example, a single day may see “Buy the Dip”, “Long Strangle Technical” and “Pre Earnings: 14-Day Diagonal” strategies trigger. The ‘Today’ tab will show all of these opportunities in one place, allowing the user to select the trades that are most appealing to them.

Scan

The CMLViz team provides users with dozens of options trading strategies, which the platform runs daily against all of the stocks in the market. Users can also conduct their own scan in a matter of minutes with just a few clicks.

For example, say you were interested in identifying the best opportunities for using the “Buying the Dip” strategy. The “Buying the Dip” strategy is one of the strategies created by the CMLViz team and available to Trade Machine subscribers. To develop this strategy, the team conducted tens of thousands of backtests across the Nasdaq 100 and came up with three technical settings that consistently identified a “Buying the Dip” opportunity.

In the ‘Scan’ tab, users select the ‘By Strategy’ page, choose a Ticker Group (e.g. Nasdaq 100, S&P 500, etc) and then select the strategy (‘Buy the Dip Technical’ is found under the ‘Never Trade Earnings’ section). The system then generates a table with all the best performers for this strategy. The system lists the Ticker (e.g. AMD, APPL, etc.), the number of times this strategy generated winning and losing trades, win rate (%), average trade return (%), total backtest return (%), backtest length and the next earnings date.

If you find a performer you’re happy with, e.g. Apples (ticker: APPL), but want to test it against other stocks, you can do that through the ‘Backtesting’ tab.

Backtesting

By clicking on a stock (from the scan screen) it conveniently loads it into the backtest screen for you. From there you can add any other stocks you would like to compare and execute the backtest, which will run the strategy against historical data. The backtest will provide you with a detailed table of results for key data points such as average % return, gross gains, commissions, etc. The data can also be exported into Microsoft Excel with a single click.

While the dedicated CMLViz team provide a number of strategies for you, you’ll likely want to create and test your own as well. This is when the backtesting tool is most powerful and luckily, it’s very easy to use.

You start by selecting a test length using one of the preset buttons, such as six months, one year, two years, etc. or you can select a custom period. The next step is to select a trade type, such as a call, put, straddle, iron condor, etc followed by whether you are going long or short and when you want the trade to open (e.g. on a technical signal) or on a custom earnings setup (e.g. select open position X days before or after earnings and close the position X days before or after earnings, where X can be any number of days you choose).

That’s all there is to it. The software will do all the heavy lifting and generate detailed results which you can then analyse to see if it’s a strategy worth deploying. If the strategy doesn’t seem to be performing well, you can always add more elements to it.

For example, after analysing your results you may see that your custom “Buy the Dip” strategy has too many losing trades. The winning trades all seem to happen when the market trends upward with strong momentum so you think about a way to capture that requirement in your strategy.

A simple way to do that might be to add a technical indicator such that the trade is only triggered when the price is above the 50 day moving average. Once again, with a couple of mouse clicks you can quickly add this requirement in and generate a new backtested report in seconds.

Alerts

There’s no point in having a great strategy if you don’t use it, but you can’t always be watching the market 24/7. The platform helps you with this through custom text and/or email alerts.

To set up an alert, once you’re satisfied with your backtest results click the alert button in the backtest screen or select the “Alerts” tab from the main menu. From there, add one or more stock tickers, set the type of alert you’re interested in (e.g. “Buy the Dip”), as well as your contact details. You also have the option to add notes such as a useful description or reminder about the strategy.

Now, every time your strategy gets triggered you’ll receive an alert and never miss a trade again.

Conclusion

Achieving consistently profitable trades requires preparation. It’s important to have well researched, backtested setups and a range of strategies you can employ for different market conditions.

CMLViz Trade Machine helps you leverage expert setups and trade ideas as well as quickly and easily develop your own. With the ability to access it anywhere from any device with a web browser, coupled with alerts to your phone and/or email, you’ll never miss an opportunity again. Powerful scan and backtesting features mean you can trade with confidence, knowing you have a proven and researched strategy.

Don’t forget, if you want to try out the software at a discounted rate, you can do so here:

https://cmlviz.com/register/cml-trademachine-pro-options-trading-iq/

Trade safe!

Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.

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4 Comments
  1. Bill Ray says:

    Gavin, I notice this article was written a few years ago. Are you still feeling positive regarding CML Viz Trade Machine? I watched their video and it is very intriguing. I’m interested in pursuing Pre-Earnings Call Diagonal Spreads, which you teach about in another article. Do you think CML Viz Trade Machine is a good resource for helping me find those and similar trades? – Bill

    1. Gavin says:

      Yes, myself and a few trader friends still use it and it’s great. The pre-earnings diagonals are still my favorite.

  2. Anonymous says:

    Thanks, Gavin. Also thanks for what you taught me in your Tail Risk article about the VIX Call Ladder. I made about $800 the day after Thanksgiving on that, which for my $12,000 account is significant.

    1. Gavin says:

      That’s awesome. Glad to hear it!

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Options Trading 101 - The Ultimate Beginners Guide To Options

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