How to manage risk if I am picking up coins before running trains?

[tradermaji]

Is your positive returns net of risk adjusted compared to holding the underlying?

Regards,

I don't believe so... it is just purely whether you made money on the trade or not. I just ran those backtests as a matter of curiosity on CMLviz but not really interested in trading them because of the risk.

 

[beerntrading]

• How We Trade Straddle Option Strategy

We are trying to always maintain about 20-30% exposure to those straddles. In addition to consistent money makers, they also serve as excellent black swan insurance.

That's a good article...I might have to take a look at doing some of that type of thing myself.

How does that strategy perform during low vol times...like the last three months, for example.

 

[Kim Klaiman]

That's a good article...I might have to take a look at doing some of that type of thing myself.

How does that strategy perform during low vol times...like the last three months, for example.

Last year you mean?

Take a look - https://steadyoptions.com/performance/

Search for "straddle" and you will see all trades.

 

[ironchef]

I don't believe so... it is just purely whether you made money on the trade or not. I just ran those backtests as a matter of curiosity on CMLviz but not really interested in trading them because of the risk.

Thanks for your reply.

Regards,

 

[spindr0]

Try the same test in 2011. It was a particularly bad year for premium sellers from what I've seen. The last three years are not a good sample for projecting future returns.

If you really want to see a year when you get caught with your shorts down (puts), look at 2000 or 2008

 

[spindr0]

I ran some backtests for the last three years on the FAANG stocks using 45DTE, selling short strangles and NOT trading earnings. All of them had positive returns. However, the whenever I added a stop loss, the returns deteriorated significantly. To me, one needs gonads of steel to hold on through the drawdowns and trade these, if trading unhedged and without stops.

Awareness of possible adjustments helps with risk management. If won't pull your chestnuts out of the fire if the underlying is moving against you but it might soften the blow.