Managing winning trades at a percentage of max potential profit and managing trades after a certain number of days are both effective management strategies with their unique pros and cons. Today’s study investigates how each management strategy performed during varying historical market periods.Study:
- SPY 16 delta Strangles Closest to 45 DTE
- Holding to expiration
- Managing Winners at 50% of the Max Profit
- Managing Earlier at 21 DTE
- Bull: 2005 – 2007, 2007 – 2018
- Bear: August 2007 (Top) – April 2009 (Bottom)
Volatility control is one of the most important aspects of trading and although managing at 50% of the max profit provides the highest P/L, managing earlier provides great P/L and better volatility control, especially in market downturns.