Market Measures

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Managing Winners and Managing Earlier Comparison

Market Measures

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 know it’s important to manage our trades as opposed to hold until expiration date. This research investigates the differences in managing trades at 50% expiration cycle, or holding until expiration.

The Study:
  • Sold 1 Standard Deviation Strangles with 45 DTE from 2005 - 2017
  • Held to expiration, managed at 50% max profit, and managed halfway through the expiration cycle
  • Compared Avg. P/L, Win Ratio, and Largest Loss of the three different management styles.
Results:

Managing winners outperformed in ‘normal’ market conditions while managing halfway through the expiration cycle minimized losses in downturns. Additionally, managing halfway through the expiration cycle reduced gamma exposure when compared to managing at 50% and holding to expiration.

Tune in as Tom and Tony discuss how to incorporate this information into your trading mechanics!

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