Hi all,
So I've been talking to a friend of mine and we came up with this question and have no idea how to test our hypothesis. Can someone help us back test this?!
Here is the premise: You own 500 shares of SPY. Each morning you randomly either purchase or sell one contract of the /ES. At the end of the day you close out your contract.
Based on information for the SPY provided by Seeking Alpha, "if you take the 90% of days in the middle, the extremes of daily change were -1.42% and +1.44%.". Meaning that we would set a conservative stop loss order of maybe roughly .7% on the /ES contract.
Our thought process is this: If you buy a contract and the SPY goes up, you double your earnings. If you buy a contract and the SPY goes down, you don't double your losses. If you sell a contract and the SPY goes up, net more than zero. And finally if you sell a contract and the SPY goes down, you net zero.
Does this in fact tip the odds to the investor's favor? If so, by how much?
Thanks!
Submitted December 10, 2018 at 09:56PM by derpintine https://ift.tt/2L9Z8Gq
