In Friday’s chat room we wondered if the POMO schedule offered any trading edge. Over the weekend the Illustrious Grand Master and myself independently tested out a few ideas with the following results:
We looked at 2 scenarios: C to C in which we enter the EOD close of the day prior to the POMO day and then exit at the close of the POMO day. In O to Cwe simply enter at the POMO day open and exit at the close. I used TBT instead of TLT since TBT is a 2x ultra ETF and the capital requirements are only 1/3 that of TLT. I also looked at VXX as a tradable volatility entity and SSO as the ultra 2x SPY, with the same arguments at SSO.
TBT and VXX are entered short and SSO is entered long. We looked back the last 22 POMO days and noted the # of winners in each case and the $ returns for 1 share of the underlying (TBT, VXX or SSO). Just in case there was a change is behavior we then just looked at the last 10 POMO days and noted the # of + return trades. Clearly the hands down winner is VXX, the only problem being that Schwab and some other brokers have VXX as HTB (hard to borrow) which essentially throws a wet blanket on the strategy for some of us.
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