Last week'sfound managing winners at 50% of max profit outperformed a buy-and-hold approach over the past 11 years. Today we ran a follow up portfolio study on managing positions 1 month before expiration. How does actively managing positions based on DTE compare?
Our study was conducted in the SPY (S&P 500 ETF) using data from 2005 to the present. We sold thestrangle using the option closest to 45 .
We then compared allocating 10%, 15%, 20%, 25%, 30% and 35% of the hypothetical 1 million portfolio toward the strategy. This was then compared to a baseline buy-and-hold strategy in the SPY (including the dividends).
The graph showed that allocating 25%+ of the portfolio beat the buy-and-hold. Additionally, it was done with less volatility of returns
For more information on Capital Allocation see: * Strategies For Your IRA from August 17, 2015:
Strategies For Your IRA from May 24, 2016:
Strategies For Your IRA from June 7, 2016:
Market Measures from July 18, 2016:
Watch this segment of Market Measures withand for the valuable takeaways and the detailed results of our study on the optimal percentage of capital to allocate to a short Strangle strategy.