Considering the suggestions from the different reviews, OEX Trading System Revised will finally accomplish a proper risk management. For that purpose, the system will not invest more than 1/10 of cash available in any single trade. To illustrate this point, allocating $ 1,000 per trade (from a total cash of $10,000) would be sufficient to make profits.

There will be no stop loss. This new version of the system has been tested back to 2/1/1978 and has yielded +70% of winning trades. In some of the trades, the total investment may be lost, but this high winning percentage, coupled with the fact that -when going long with calls and puts- losses are limited to 100%, while profits are unlimited, will prove fruitful. Over the last 28 years, the system has produced an average return of 2780% annually (in one of the most conservative approaches to performance calculation; please, see statistics for the system best-case scenario below). Hence, for a minimum investment of $ 1,000 per trade, the gain would have been $27,800 per year. On the one hand, supressing the stop loss seems to maximize returns and, on the other hand, the conservative 1/10 trade allocation will act as a "buffer" for the effects of any possible drawdown.

This system works and will prove it. It is true that, after being in the top ten C2 systems for a long time, there were important drawdowns due to oversizing. But the system does not set position size, so the wrong asset allocation was my own responsability. I will keep "OEX T. S. Revised" running, although have also launched its "twin" version, "Trade4Freedom" so as to supress the noise from my own past shortcomings. One must not deny or hide them, but learn from them and reduce previous errors to "history".

"OEX Trading System R." Statistics (since 2/01/1978 to date) (1)

No. of trades: 4,533
% winning trades: 72.1%
Average profit per + trade: 48.5% SD: 46,9
Average loss per - trade: 50.7% SD: 32
Total gain: 94,251.8%
Annual average gain: 3,366.1 %
Max. no. of consecutive + trades: 26
Max. no. of consecutive - trades: 7
Best trade: +581.5 %
Worst trade: -100%

(1) Statistics for the 4 subsystems combined, and taking different lots of trades within one particular option as separate trades (please look for reference to "lots trading" in the following paragraphs).


6/01/2006

____________________________________________________________________


OEX T. S. Revised delivers limit orders only, generally at market open and close. This means that you will only have to check its C2 page during 15 minutes before the close or up to 15 minutes after the open -therefore, you just need to commit 30 minutes of your time daily to follow the system. First a BTO (buy to open) limit order will be issued, followed eventually by a STC (sell to close) one at a limit price too.

Do not rely on e-mails to follow the system, they are not fast enough for many of the trades recommended. Open instead the ITM (instant trade messenger) window by clicking on the corresponding icon you will find on the left side of OEX T. S. page. This way signals will be received in real time.

There may be more than one trade open simultaneously -up to four. This is because the revised version comprises of four different systems
-I prefer to call them "subsystems". Sometimes, all of the positions taken are calls or puts, or they can also be opposite ones, for example, one put and one call.

The system does not average down or up. But, when there is a position open, it tends to issue signals to buy more contracts of the same option. These are really different trades or "lots" issued from different subsystems. It is more convenient to buy options at or near the money and not to spread four positions over four different options whose strike prices may be quite out/in the money. Also, it may simplify order management. For instance, it is difficult to close four positions and open another four right at the close or open. But if you put these four positions in the same option or "basket", grouping together different "lots" of contracts, the procedure becomes much easier. For this reason, sometimes, the system will buy contracts for a total amount of $10,000 or $15,000 -instead of $5,000, which is 1/10 of its total cash available at the moment. This is because two or three of the subsystems have issued the same signal and all of the trades are being clustered together in a single one. Frequently, you will also observe that only 1/3 or 2/3 of the position is closed initially. This is due to the fact that a closing signal has been issued by only one or two of the subsystems, while the remaining one/s stays long.

Obviously, it would be ideal that C2 provided for "lots trading", so that any of these "lots" transactions were recorded as a separate trade by C2 statistics. In fact, I have made this particular suggestion to its administrator.

The revised version of OEX T. S. is a 100% "mechanical" -versus "discretionary"-model and, mainly, an anti-trend system, which means that it will work most efficiently when there is no trend in the market -which happens most of the time. But it will fail when there is a clear medium trend. However, this circumstance will not affect the overall results, which have been carefully tested back and proved outstanding historically. Over the above mentioned period of 28 years, there has been a maximum of seven losing trades in a raw. It happened just once -ending on 12/01/1980-, and taking each lot of contracts separately, i.e. as different positions. For that reason, from the perspective of new subscribers, it is advised to wait for one losing trade -since different trades will be now clustered together in one single position- so as to get ready to invest their own cash when the next signal arrives.

For those wanting information on options trading would recommed the learning center of the Chicago Board Options Exchange (www.cboe.com). Also, to find out the equivalence between the option symbols -included in the signals- on the one hand, and the strike price and expiration on the other, you may find this link useful: us.etrade.com/e/t/invest/quotesandresearch.