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Best of 2016: Exiting

Market Measures

As we approach the end of the year we see many “best of” lists. We are doing the same for Market Measures this week. Today’s segment reviews 3 of our top segments on exiting trades.

Managing Strangles - Performance on August 5, 2016 featured our study which was conducted in the SPY (S&P 500 ETF) using data from 2005 to the present. We chose the option expiration cycle closest to 45 days to expiration (DTE). We sold a 1 Standard Deviation (SD) Strangle. We managed winners at 50% of max profit (if possible) or held the trade to expiration. The study showed that managing increased our win ratio to 90% and increased the profit per day. A graph of each strategy with 1 contract on at a time showed the Managed Strangle had nearly double the profit.

Managing Strangles in Something Other Than SPY on 6/13/16 was designed to make sure that managing winners isn’t just for the S&P 500. Our study was in TLT, GLD, SLV, IWM, QQQ and SPY. We chose the option expiration cycle closest to 45 days to expiration (DTE). We sold the 1 Standard Deviation (SD) Strangle. We managed winners at 50% of the initial credit received (if possible). The results compared the percentage profitable, average days in the trade and P/L per day on each underlying. They showed that the P/L per day were 3-4 times greater than holding the Strangles to expiration and the win rate was higher in each underlying.

Managing Losers in Risk-Defined Strategies on 10/24/16 involved Iron Condors. Our study was in the SPY using data from 2005 to the present. We chose the option expiration cycle closest to 45 days to expiration (DTE). We sold 5/16/16/5 Delta Iron Condors. Using a regular margin account with 25% capital allocation, we opened the new position only after closing the old one. Then we compared managing losers at 1x, 2x, 3x, 4x and 5x of the initial credit received or held to expiration. When utilizing this defined risk strategy we found that holding to expiration resulted in the highest P/L.

Watch this segment of Market Measures with Tom Sosnoff and Tony Battista for an important recap of three of the best 2016 Market Measure segments on exiting trades.

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