How Often Do SHORT OPTION STRANGLES Profit? | Stock Market Research
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- เผยแพร่เมื่อ 25 พ.ค. 2021
- The short strangle is my favorite option trading strategy. It provides a very high probability of profit and effectively takes advantage of high implied volatility. But how often do these strategies turn a profit? Well, I've done the research by analyzing the outcome at expiration for more than 150 short strangles over the past 10 months! In this video, I will walk you through the research and discuss its very important implications!
How To Calculate Your Probability Of Profit: • How To Calculate Your ...
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Hope yall enjoy the research! Much more to come! :)
thx for sharing
What script did you use to export data from think or swim into a format you can import to database, also did you create your own database schema or used some templates?
Hey Andrew! I don't export anything from ThinkOrSwim. I log everything manually in the spreadsheet I created. I then export that spreadsheet to a .csv file and then run my Go program to import the trades in that file to my Postgres database. And as for my Postgres setup, it's all custom...I made my own schemas and tables. But it was all very easy to set up...perhaps it might be something you would want to look into given your background as a software developer!
What is your stop loss rules to ensure you didn't lose $5k on BILI?
Wonder why he stopped posting.
What do you do about the unlimited risk on the calls side. Im beginning to trade strangles of QQQ and SPY because not really news risk overnight but also i own shares. I would love to do them uncovered but it still freaks me out on stocks.
I thought about this too. If the stock keeps rising, your losses are, in theory, unlimited.
Buy an out of the money leg. This disadvantage of doing this is you will reduce your profit and reduce you change of success. Nothings free.
Have you found a certain duration (aka days out from when you sell the strangle) to be most effective? I know you tend to look for things 30 days out, but is there value in doing strangles for a shorter duration than that? Or do you need that 30-day time decay for the trade to work to your benefit?
I pretty much only sell strangles within a 30 to 60 day window...I'll almost never make an exception. There is nothing inherently wrong with selling options less than 30 days until expiration, it just gets more and more risky. The less time until expiration, the less credit you will receive for selling options, and the more gamma risk will become a concern.
@@scottreesetradinginvesting7936 thanks!
What is the length of the strangle that gives 87%? Can I do it on Webull?
I only short puts on stock that I am happy to take assignment on. I only short calls on stock that I am happy to hold short. I never sell more contracts than my max allowable margin for a given position (5% of account value). In that way, when things go wrong, I simply take assignment of the stock, take the paper loss + assignment fee and give the stock time to recover. Almost a 95% success rate at this.
With that stradegy you will not be doing a short strangle. The video is about doing short strangles. The stradegy is to develop a hedge.
So Iron Condors are the best alternative to strangles ?
Yes
What do you think about the tasty trade way of selling strangles ie selling 45DTE 16D strangles and closing the position on 21 DTE , any drawbacks ?
I think the TastyTrade approach is great! I've actually learned a lot from their content. That being said, I am trying to put together my own approach to options trading which is largely based on the Tasty approach, but is still different in a few key areas. While cutting losses or rolling the contracts out in time at the 21 DTE mark is great for avoiding gamma risk, I have found some issues with it.
Specifically, as you saw in this video, the VAST majority of strangles are profitable by the expiration date...and the majority of losers are very manageable. It's only the 3%-5% of the time where the losses can be catastrophic, which managing at 21 DTE can help avoid, but not eliminate. I'm trying to eliminate those huge but rare losses by either buying or shorting stock. This approach allows me to hold the trade all the way to the expiration date if need be without the worry of taking on massive losses if the stock doubles in price or gets cut in half.
I'm still in the process of fine-tuning my approach, so it still remains to be seen how effective it will be compared to the Tasty approach. But overall, I do think the content and advice that TastyTrade puts out is excellent.
@@scottreesetradinginvesting7936
Agreed man, its amazing how you converted all disastererous trades to manageable positions.
Totally appreciate the way you reach out to your subscribers to solve their queries. Hats off .
This channel totally deserves more subscribers, don’t quit making videos, eventually you will reach out to more people, not quitting is the key.
I feel a lot of Indian people can learn from your content, there is a huge derivatives market in India (largest in the world). Try advertising or covering Indian content for huge success.
Cheers.
@@saikrishnan6890 Definitely appreciate the kind words! I've only been on TH-cam for a few months, so I'm still just beginning! I intend to grow this channel for years to come and will eventually roll out private coaching and perhaps some software products too. Stay tuned!
@@scottreesetradinginvesting7936 Scott, you wrote: "It's only the 3%-5% of the time where the losses can be catastrophic, which managing at 21 DTE can help avoid, but not eliminate. I'm trying to eliminate those huge but rare losses by either buying or shorting stock". Have you proposed buying or shorting stock to reduce risk on short strangles to Tastytrade to see what their view is?
@@johndonaghyis I have not reached out to TastyTrade yet about my approach of buying or shorting stock as a hedge. I want to experiment with and fine-tune my approach more before I send an email to either Tom or Tony. That being said, I do watch the TastyTrade show every day and I've seen Tom Sosnoff use stock as a hedge many times on some of his really bad positions...so that's definitely a good sign :)
Nice stradegy. I use similar stradegy. I'm using index futures options for myself. I found it's better for taxes. In additon futures use span margin. When I adjust I don't go past 1STD. The more out of the money an option is the less greak exposure it has. By adjusting you will help keep your greak exposure up on the untested side.