Transcription
Everyone, we're back again today with Connor after a little summer hiatus. However, no rest for the wicked. Connor kept trading even while on vacation and now he's up uh close to 70% year to date. 66.39. Yeah, he he came out of his minus, you know, 18% draw down for uh you know, it only took him about three and a half weeks. Probably not the best thing, but we're giving Connor more tools in his tool belt. So he bring a new trade today which is popular all around and that is the opening range breakout.
Um, just initially if you kind of want to explain Connor how you heard of the opening range breakout. Um, what is your understanding around it? Um, and then you know, what you've done to learn about it this far. I mean, I'm going to give credit where credit's due. I learned it from Mark. Like, we kind of have a little uh little trader chat on our discord with Jordy and a couple of the other guys and Mark brought this to our attention and I honestly never heard of opening range breakout before. Um, so looking at the trade, it was performing really well when he, the trade that Mark showed me, but I couldn't explain it whatsoever. So I wanted to kind of do a deep dive. Mark sent me over to this option omega boot camp. And basically, what I learned from the open range breakout is, let's just say that you have a breakout of um 11:00 a.m. to 1:00 p.m. Just keeping it simple. Um, if your price breaks out during that time, then let's say your action is buying a call, then the action you put in there will happen. You will buy that call and um, you have filters of high um and filters of high and low. And that's just a that's just um the price if the price is high during that time, that's when the breakout will happen or it's low during that time. That's like what I've seen. Uh, the kind of the one that I was playing with um that I was just trying to learn on was just a simple one that the O I got from Mrums Omega and it was a 4530 45 delta 30 wide, but I kind of made some changes to it and I I did different differently than what he did. Um, I know I'm kind of going on a tangent here, but um, if you want me to dive into it, Mark, or do you want Um, first, I'll kind of explain a little more.
So, you know, Connor, this is one of his, uh, favorite trades. So, before we start this, we'll do like any proper meeting. Say, hi, my name is Connor Trolley and I'm an oraholic. So, if you want to, you know, if you want to introduce yourself first before we go into this in more depth. Hello, my name is Connor and I'm an overhaulic. Oraholic. There you go, baby.
Um, so the first thing, and this is what I really want to bring up to not all the back testing people, like everyone always gives me grief because I I never show myself live trading, but this is like the exact like classic uh discretionary trader thing. So yeah, how the opening range breakout occurred is it's basically a classic futures trade where people will go through basically the open until 10:30 and they'll say what is the high point or what they would call resistance and what is the low point of price or what they would call support over that period of time. And they basically say if we break the high, you know, resistance, we're going to sell a put. If we break the low support, we're going to sell a call. So this is just showing all these people that have these rules and discretion that we're literally back testing this exact rules and then we're automating it and we're not using any discretion on it or size and we're trading basically a fixed lot. So that's essentially um what we're doing.
So to kind of like explain what this trade is with Connor um is basically he has marked the high of the opening range. So basically what this would mean is the market opens at 9:30, the end of his opening range is at 10:30. So he's saying, let's say if the market opened at 6,000, we reached a high of 6,030 and we reached a low of 6 of 5,995. This is basically saying anytime after 10:30 or between 11 and 1 p.m. for basically, you know, is a half hour cool off period. So if it breaks that high between 10:30 and 11, he's not going to take it. If it breaks the high after 11 and between 1 p.m., he's going to sell that put. So, this is basically a signal that we've broken out from the price action. Like, this is your classic Discord person saying thing. And then we're going to mechanically manage this with stop-loss. So, we're basically taking this as a full bullish thing. You can see that Connor is taking a 55 delta. Connor, a 55 delta is close to the money or far out of the money? Like, getting closer to the money. Exactly. So Connor is basically selling at the current price of the market. So if we break it at 6030, we're basically selling at 6035. So we're selling right in the money. And he is using a low stop-loss here. So it is, you know, you can see not a very high win rate. Oftent times with a low stop loss, we're going to have a uh low win rate and that's going to lend to a higher MAR ratio.
A few things here. If what what would you say the biggest red flag on this entire back test is Connor? For me, I was having a really and I'll just I don't know if I'm right or wrong on this, but I'm just going to tell you my um my personal opinion. I was having a really hard time. I didn't like a 45% win rate. I wanted to get a higher win rate than 45%. Um, I would I was really trying to break into the 50s, but when I was breaking into the 50s, my capture was completely like dying. So, I was like, I wanted to try to be at least above a 10% capture on this one. Um, and I mean, we all know 10% capture not the best, but I wanted to at least be higher than that. And then, okay, around a 50% win rate.
So, do you know why your capture is low? Or if you if you could hallucinate why you think the capture was low, what would you think it would be? I I'll give you a hint. This is a pretty squiggly line. There's some big draw downs. What do you think could have caused that? Is it being too uh too clo is it clo am I too close to the money on this one? So you're thinking of a little differently. So what I would kind of So do you remember when we talked about sequence risk? Do you remember what sequence risk is? I can't remember off the top of my head. Okay. So sequence risk basically means you're taking on the risk of several sequences being like losses. And what we've done here is by choosing a 55 delta, you can see that the premiums can be a little wacky. So you're selling $7 here, you're selling $9 here. Watch what happens when we go to really volatile time uh like let's call it April or March. So, you're taking $12 here. You're taking $13 here. So, that means on Friday, March 14th, you took a $13 one contract. And then today, you're only taking or on Monday, you took one that was one-third the size. Yeah. So, your sizing each day is dramatically off. Makes sense. So, I was wondering if my sizing was right on. Yeah. Since you're managing with a stop-loss, one day you're risking 400 bucks and another day, and we and we can do this too in option Omega where it's like if we go to losers and we can go to ascending. So you can see like $1,100 losers here. Um, and you know, they're very high. So you're taking $11 hit, $1,100 hit here. And then you can see, you know, on other days you're taking a $400 hit. Yeah. So that sequence of returns we're taking the so it's like you have a strategy that works and you're using back testing but your sizing is as random as the people that are just looking at a chart and never back testing. So when we're back and this is where I see most people make the mistake in back testing it's obvious because they don't have the knowledge. It's like they're doing all the back testing right but garbage in garbage out their input makes sense.
The other thing that comes out to me is it's like, so you draw the range at 10:30 and then you're basically saying that the trend doesn't exist between 10:30 and 11. So I mean, I'm quickly just going to change this to kind of like, you know, show you what I think we could do to improve it. Yeah. But basically, if we start the range at 10:30, we'll use the same mechanics to simplify it. And then also like let's just say we're selling a $ five dollar option at that same um fixed return. We'll see. So I think this will I don't think it's going to improve our win I think this will improve our win rate to about 50% and then it may decrease our MAR because we may have won more in better times. So So you could see our win rate actually went down. Oh, let me marry these then, I think. Oh, $5 25 wide. [Music] Oh, so you were buy. So, you're Yeah. So, this other thing too was it's like we're going long. Okay. This was a long one. This is just because the video So, I just realized that. So, let me let me flip this around then. So, this is a good signal. I know it's weird. We usually don't go long with us, but like uh um but now sequence risk rise. So 11% 25 wide. So this gave us 438. This gave us another 38 occurrences and we ended up making the same amount of money. So not terrible, but I I would say that's a little curve fitty. Yeah. So I don't love that. But the signal still looks good.
So, what I'm going to propose is okay. So, that buy call 25. Oops. Let me sell. Where's this head? Okay. Let's sell a $5 call. Okay. So, what I'm going to propose here is we do a Super Bowl. You ever heard of that? Okay. So, basically Yeah. Basically a Super Bowl would be like you are gonna buy a call and sell a put simultaneously. So when we go here, we'll see how this test and I'll make a duplicate here and see if this improves our return. go to portfolio theory behind the buy the call and sell a put on that because I usually understand like when we stack the buy call sell call uh the buying power but um oh yeah I've been doing this wrong I've been accidentally selling a call which obviously wouldn't be profitable so this would be selling a put instead and this needs to be minus okay I guess that'll take a second to go then OB practice this. Okay. So, I Yeah, let's run this. This is super capital efficient. We're already kind of constrained with our uh buying power a little bit. So, I'm a big fan of this. Um require two hits for a stop loss. I'm not as concerned with that on a uh long trade. Um I would just say that yeah, we have exit slippage. So, I don't really care about the two hits for stop loss. So, we have exit slippage. So this is didn't make much of a difference when I took it off and when I put put it back on. So I was just doing it for for So surprisingly this doesn't work super well. What if we go $4 buy a put minus 100 or minus 50. So we'll try to find a bullish one here. Go 10:30 open high only. Let's go cap stop loss. So I would love to find a bullish one to kind of so so like the the kind of reason I'm trying to make a bullish one here is okay. So like 45% win rate but like cap is really good. So we could see that like the the average cost of one of these is roughly like seven bucks. Maybe a little more, eight, nine bucks. So, like if we could cover half that cost with selling a putt. Okay, here we go. We can sell a put. We We can And we got 66% win rate. So, like on the days on the 50% of the days we lose, we're only going to use half as much. I love that. And then this under Connor portfolio videos. Yep. Okay. Now, quick thing, and this is just off the top of my head. I don't know if it's going to work. So, like if we go to new portfolio, I'm just going to slap both of them in there. See what it looks like. Yeah, we'll go SPX dailies, we will go Conor portfolio videos. Go OB um OB practice. When I say I may have not refreshed OB practice 2. Let me go to here. Go to new portfolio. $100,000 account since sends Xpx dies Connor portfolio practice RB. Okay. So, we'll do a one lot of this one and then we'll do a two lot of this one. Let's see how that goes. What which one did you uh one lot? I one loted the long and I two laotted the practice. So basically it's like if the market doesn't move at all we should break even. If it reverses we'll lose twice as much and if it trends in the same direction we'll make you know more. And then we can also try this at a ratio of one one. Yeah. And see how that looks. I mean it makes sense. Our puts usually always do so much better than the calls in the market as well. Yeah. So, and then this one will go one to one. Okay.
So, quick look at how we do. So, this is your original trade 2.7 MAR. Yep. Um, and then our result now is a 3.1 MAR. Obviously, our premium capture, uh, you know, this is kind of weird because, yeah, it's like a calendarized structure type thing. It looks a little weirder, but you can see that this was able to improve our returns. So, we have a little bit different. So, like on this one, we're losing one. On this one, we're losing one and a halfx. On this one, we'll take it at 10:30. Um, this one we won't take till 11. So, we have a little bit difference in here. This one's very bullish. This one's semibullish. We get decay on this one. We lose from decay on this one. So basically what I want you to understand here is like we've taken a position where we have a lot of upside. Yeah. But we're not really paying decay. So decay is that theta. Remember that. So like we're we're losing and we're decaying the value of our option because we bought an option here and we're making money on theta from here. So we've basically neutral out that theta burn basically. Yeah, that makes sense. So it doesn't have a or a fancy finance term is called the the cost to carry like this doesn't really have much of a carry cost and then if it reverses on us we can only lose you know half as much as we lose in this one and then the one to one ratio is actually better slightly better mar and judging by our capital performance I'd say we go with this one even in the age of Donald Trump 12% return three 3% draw down this is looking pretty good so yeah Connor continue to impress me. He's printing money. Um, landed. So, we're going to get to 100% now with this.
So, next question here. You know, you've just added another trade to your overleveraged $100,000 portfolio. Um, what what size do you think we should run this at knowing this is a one lot on a $100,000 account? Um, are you talking about like what mechanics on the sizing? Are you talking about the 55 delta or you just talking about the lot? Like should we just run keep it at the one lot or you saying Yeah. Do you want to do the one one or the two to one? You make more money. I mean, let's just start out with the We know they both work. So, let's just start out with the one one and then a That's pretty off brandand of you, Connor. I'm learning from our last. He said forward. People want to see roll the dice. Dude, you just came out of that draw that 20% draw down like it was no big deal. You told me to forward test, man. that we're trying to board this to. But no. Yeah. I mean, I'll rip it if you want me to, but no, I think it's better if we start this small. I think what we'll do now is uh we will show everyone how we make this in Trading View, how we link it to a web hook via one of the trading softwares, and then how we're automating, you know, this type of discretionary trade basically.
Love it. Love it. Yeah, I'm excited to see that as well. Um, do you have any more questions or if you could quickly state three things that you kind of learned um from this call, what would they be? Um, I would say that I'm continuing to learn the importance of balancing out your trades by having a bearish one and a bullish one as well. Um, and the the benefits of that. I think that was the number one takeaway that I have because sometimes I just think, oh, I'm just gonna do this long one and I forget you need it'd be good to you're missing out on an opportunity to capitalize on either or if you're doing a bullish one, you need to have a bearish one because you can capitalize on that as well. Um, two, just understanding the price action on that one. Like if it's on the high versus the low like hey if this breaks that that high price point before your time that's when you're going to take that action. I think that's when I was kind of missing the concept on the orb trade. And then um three, just understanding, you know, again, just still understanding the size of it because I look at this and I'm like, "Oh, let's rip it. We can continue to level the contract, but we still need to take our emotional discretion out of it and just remember like do this are the baby steps with the one because that's how I see traders die on here all the time." Yeah. And I mean in all honesty like if we die I'll just add more money to the account and we need to make content so we might as well rip it. Not saying that other people should do this. Um talking to the guys that took like 20% draw in a month but it's like the only way like our learnings surpassed our account growth so we just have to keep ripping it. Yeah. Um so yeah we'll do that. I think that was good. Um I think combining them as a Super Bowl um makes sense. It's called a bull because in bull markets the market goes up, bulls buck up. In bare markets the market goes down, bears slash down when they attack. So, uh, quick history level with that. But we will get this out. If there's anything else you want to see Connor cover or if you're interested in maybe Connor running a little boot camp on all this stuff, put some comments down and we can see maybe if we can organize something for, you know, Connor throwing a Saturday meetup or something. Um, and then if the option Omega guys are watching, let's get Connor on uh, you know, the morning round table uh, someday here. I I'll I'll I'll get out to him and we'll have you make a celebrity appearance on