With an idea in hand, and a powerful back-tester to test it, we came across a fascinating 1x2x1x2 put spread that has been a beauty over the last 2-,3-, and 5-years.
First, the Custom Strategy:
The test, in English:
* Buy a two-week (or whatever is closest) 40 delta put
* Sell 2 30 delta puts (same expiration)
* Sell a 22 delta put (same expiration)
* Buy a 15 delta put (same expiration)
This is a covered trade as it is long 3 options and short 3 options.
Results
Here are the results over the last 3-years
Something to Think About
While it's easy to dismiss this as working only because we are in a bull market, that's not quite true. This trade, at the top, is in fact a bearish position for a credit.
(It's a 1x2 put spread).
The bull market isn't the drive, but what has been is the lack of massive "black swan" drops. Having said that, no matter how bad the stock gap, this is a fully hedged position that does have a maximum loss.
What Happened
There's a lot less luck to successful option trading than many people realize. So...
1) Take a reasonable idea or hypothesis, test it, and apply lessons learned.
2) Identify profitable patterns that have repeated over and over again for years.
This back-tester is from us (Capital Market Laboratories). You can se my footer to learn more about who we are."
You can see this in actual action, here: http://bit.ly/elite_options
(video in the middle of the page)
First, the Custom Strategy:
The test, in English:
* Buy a two-week (or whatever is closest) 40 delta put
* Sell 2 30 delta puts (same expiration)
* Sell a 22 delta put (same expiration)
* Buy a 15 delta put (same expiration)
This is a covered trade as it is long 3 options and short 3 options.
Results
Here are the results over the last 3-years
Something to Think About
While it's easy to dismiss this as working only because we are in a bull market, that's not quite true. This trade, at the top, is in fact a bearish position for a credit.
(It's a 1x2 put spread).
The bull market isn't the drive, but what has been is the lack of massive "black swan" drops. Having said that, no matter how bad the stock gap, this is a fully hedged position that does have a maximum loss.
What Happened
There's a lot less luck to successful option trading than many people realize. So...
1) Take a reasonable idea or hypothesis, test it, and apply lessons learned.
2) Identify profitable patterns that have repeated over and over again for years.
This back-tester is from us (Capital Market Laboratories). You can se my footer to learn more about who we are."
You can see this in actual action, here: http://bit.ly/elite_options
(video in the middle of the page)
