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Best Practices

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Constructing a Trade Plan

Best Practices

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

We have a lot of choices to make when we are placing our orders. Today we will talk about tastytrade’s recommendations based on the results of our study, which can help us to improve the performance of our portfolio.

At tastytrade, we usually recommend collecting premium rather than implementing debit spreads. For example, we can see that selling 16 delta 45 DTE put on SPY gives us much higher P/L with moderate increase in its volatility compared to buying 16 delta 45 DTE call on SPY.

When selling premium, we like to place trades in a high IV rank environment to collect a larger credit, as higher IV rank gives us higher P/L and higher potential ROC.

Finally, we like to manage trades early instead of holding to expiration. As our studies have shown, managing our trades at 21 DTE gives us higher P/L and lower volatility compared with holding to expiration.

Tune in as Tom and Tony walk through these behaviors in depth!

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