Best Practices

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Deciphering tastytrade Studies

Best Practices

For today’s segments of Best Practices, Tom and Tony help us decipher tastytrade’s Research Team studies. They break down our typical study setup and analysis metrics.

Study Setup:
  • An Underlying (Ex: S&P 500 ETF)
  • A time frame (Ex: 2005-Present)
  • DTE (Targeted days to expiration for every trade)- we typically use 45 days
  • Simulated Daily (Our data is from every day from start to finish)
  • Delta (EX: short 16 Delta Strangles= a short 16 delta call and short 16 Delta put)
  • Management (Usually managed at 50% of max profit or held to expiration)
Results:
  • Success Rate (% of trades that end with a positive P/L
  • Average P/L (Average value of all winning and losing P/Ls)
  • Average Days (Average number of days the trade was held before hitting the profit target or expiration)
  • Average P/L per day (Average P/L divided by Average days- allows us to compare efficiency of management)
  • Max Loss
  • ROC (Average % return on capital)

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