How Much Can You Improve A Strategy's Returns With Adjustments?

[smallfil]

Anyone that has done much backtesting will know it is extremely hard to find a strategy that outperforms just buy and hold. Markets are on the whole are reasonably priced with the caveat generally IV slightly overpriced (historically) but even then for the most part you're not going to make much more than just buying SPX and holding.

But a lot of backtests (at least those that im capable of running) are things like "what would happen if i just sold 15 delta put spreads every week for 10 years". Not very sophisticated. But can we improve returns much by adjusting? So for example when a 15 delta becomes a 40 delta rollout out and down if you can for a credit etc. In theory you're then getting 2 bites of the apple to be right and should decrease the amount of losses.

With put spreads for example just eliminating 2 losses out of 100 trades can drastically improve returns as the risk:reward ratio is so bad on them.

But this is all hypothetical to me at the moment as i'm relatively new to the options side of things. Do any traders that have been in the market for a long time have a view on this?

Buy and hold works only if you have 50 years left in your life. Maybe? Take CSCO which was $120 a share during the dotcom boom, 1999? Now, 05/28/21, CSCO is at $52.92. Twenty two years later and still looking to breakeven? Anyone remember WCOM, LU, ENRN and others? Lucent Technologies was eventually, sold real cheap when it was only worth $2 a share. Hell, you would not even make it 50 years. The trouble with buy and hold is you keep holding as your profitable positions all turn into losers. Or buying outright losing stocks that keep dropping in value. "Trend following works and far, far superior to buy and hold."

 

[movingaverage]

your ass makes 5 dollars inside a year talk to me

 

[jharmon]

Buy and hold works only if you have 50 years left in your life. Maybe? Take CSCO which was $120 a share during the dotcom boom, 1999? Now, 05/28/21, CSCO is at $52.92.

Well there was a 2:1 stock split and it also started paying dividends, so those numbers don't stack up, but even so you're not quite back to breakeven if you bought at the peak of the dotcom boom.

I use a combination of systems to smooth out drawdowns (trend following, mean reversion, momentum etc. across different universes within a given market and other uncorrelated markets/commodities).

 

[smallfil]

Well there was a 2:1 stock split and it also started paying dividends, so those numbers don't stack up, but even so you're not quite back to breakeven if you bought at the peak of the dotcom boom.

I use a combination of systems to smooth out drawdowns (trend following, mean reversion, momentum etc. across different universes within a given market and other uncorrelated markets/commodities).

That is precisely, the point. You have not even broke even after like 22 years? That is a huge waste of time, monies and trading opportunities to sit on losing stocks. If you bought Enron, you lost all your monies. I started as an investor in the stockmarket and that is when I suffered huge losses with the buy and hold strategy. Hoping for the stock to recover which it never did. Now, as a trader, I know better. Just pointing out that buy and hold does not work.

 

[7out]

Buy and hold works only if you have 50 years left in your life. Maybe? Take CSCO which was $120 a share during the dotcom boom, 1999? Now, 05/28/21, CSCO is at $52.92. Twenty two years later and still looking to breakeven? Anyone remember WCOM, LU, ENRN and others? Lucent Technologies was eventually, sold real cheap when it was only worth $2 a share. Hell, you would not even make it 50 years. The trouble with buy and hold is you keep holding as your profitable positions all turn into losers. Or buying outright losing stocks that keep dropping in value. "Trend following works and far, far superior to buy and hold."

Buy and hold on certain stocks obviously didn't work out well. However, I doubt anyone would not diversify if investing long term as you suggest. Buy and hold any index and you'll do just fine because it's well diversified.