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Short Puts in the 2018 Correction

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 have already talked about one of the P/L volatility reduction methods for vertical spreads in a longer-time horizon, which is managing the exposure at 21 DTE. Today, we have seen more specifically that during the 2018 market correction period, this method still works to reduce P/L volatility.

The 2018 correction is an extreme market situation where the market dropped almost 20% and then completely rebounded, which can cause huge losses for bullish strategies.

In today’s show, Tom and Tony walked us through the backtesting result which shows that managing at 21 DTE can smooth the P/L and reduce P/L volatility for various bullish strategies on SPY during the 2018 market correction period.

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