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What To Do With Quick Winners

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.

Tom and Tony recently talked about how they might change their management expectations for a trade nearing expiration. This begged the question: what should we do if we are able to manage one of our strategies, such as the Strangle or Straddle, very early in the cycle?

The Study
  • SPY 2005 to present
  • Sold ATM Straddles and 1SD Strangle
  • If trade could be managed for 50% (Strangle) or 25% (Straddle) in first 15 days, then we compared various strategies to follow.
The Results

We found that immediately redeploying after historical quick winners was optimal. The P/L per day that was yielded from the new trade was much larger than that of the old trade that was held to expiration. Whether going to the next 45 DTE weekly or 30 or 60 DTE monthly expiration, the moral to the story was that redeploying our winnings made the most sense. Take a look at the segment above for greater insight and detail.

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