Tom and Tony invite James into the studio to run through a complex Options Jive, looking at Average P/L.
They walk through why the team sees this as a cornerstone metric of any backtesting study. Combined with Success Rate, Average P/L is the definitive metric of whether a historical strategy was profitable or not.
James uses a small hypothetical data sample to explain Average P/L and Success Rate. Average P/L demonstrates whether the winning trades, combined with a high success rate, are enough to offset the losses. This would indicate a net profitable strategy historically.
The final point the guys discuss regards using a median metric. Medians are an imperative statistical metric, however, in this case a median skews the P/L.
Tune in for the full discussion!