Today’s "best of" segment reviews 3 of our top segments on making adjustments. Not every trade goes perfectly, but by making some small adjustments we can vastly improve our odds.
In this study, we sold the 1in SPY every day with the option expiration nearest 45 . If one side was tested and there were 30 DTE or less, we rolled the untested side to the new 30 strike. All trades were held until expiration. The results showed that rolling the untested side of a short strangle gave us a and average P/L, compared to making no adjustment.
Our study on why we roll tested Puts was conducted in the SPY using data from 2005 to the present. We chose the optioncycle closest to 45 . We sold a 1 and held it to expiration. This study indicated that rolling the “tested” puts to the next monthly cycle produced better results than taking no action. The average and median P/L per trade went from negative to positive and the percentage of trades profitable jumped from 53% to 82%.
Last but not least, Tom & Tony recapped a study based on defending Covered Calls. We sold the 30Calls against long stock. We tested rolling the Calls at versus rolling the Call to the next expiration cycle if the option dropped below 0.25. The results showed that rolling when (below 0.25) yielded the best returns and .
Watch this segment of Market Measures withand for an important recap of three of the best 2016 Market Measure segments on making adjustments to trades and why we manage and defend our positions.