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Monday, May 20, 2019

SPX Strangle - 2019 Q1 Review

We looked at the performance of a few of the better performing SPX strangles in a prior article (here). In this post, we'll revisit those strangle variations and see how they performed in the first quarter of this year. Their performance will be compared to their historical performance from January 2007 through December 2018.

These are the variations we'll review:
  1. 59 DTE - 16 Delta Short Strikes (100:50) / 2 DTE - exit if the trade has a loss of 100% of its initial credit OR if the trade has a profit of 50% of its initial credit OR at 2 DTE.
  2. 59 DTE - 16 Delta Short Strikes (100:50) / 29 DTE - exit if the trade has a loss of 100% of its initial credit OR if the trade has a profit of 50% of its initial credit OR at 2 DTE.
  3. 59 DTE - 16 Delta Short Strikes (200:50) / 2 DTE - exit if the trade has a loss of 200% of its initial credit OR if the trade has a profit of 50% of its initial credit OR at 2 DTE.
  4. 59 DTE - 16 Delta Short Strikes (200:50) / 29 DTE - exit if the trade has a loss of 200% of its initial credit OR if the trade has a profit of 50% of its initial credit OR at 2 DTE.
  5. 45 DTE - 16 Delta Short Strikes (200:50) / 2 DTE - exit if the trade has a loss of 200% of its initial credit OR if the trade has a profit of 50% of its initial credit OR at 2 DTE.
  6. 45 DTE - 16 Delta Short Strikes (200:50) / 22 DTE - exit if the trade has a loss of 200% of its initial credit OR if the trade has a profit of 50% of its initial credit OR at 2 DTE.

The 45 DTE variations follow the entry and exit criteria popularized by TastyTrade here:

For each variation, I show one table and two charts. The table shows the percent return on portfolio margin. The first chart shows these same return numbers, but compared to their historical returns (max, min, average, and quartiles).The second chart shows the DIT numbers for each variation compared to the average for this variation.

Let's get right to the results for each of these variations.


59 DTE - 16 Delta Short Strikes (100:50) / 2 DTE

The average monthly return for Q1 was -12%, versus the 2007 to 2018 monthly average of +3%. Total return for the quarter was -37%. Pretty bad return numbers. The average DIT for Q1 was 23, which was below the 2007 to 2018 average of 27 DIT.

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59 DTE - 16 Delta Short Strikes (100:50) / 29 DTE

The average monthly return for Q1 was -7%, versus the 2007 to 2018 monthly average of +2%. Total return for the quarter was -22%. Again, pretty bad return numbers. The average DIT for Q1 was 20, which was below the 2007 to 2018 average of 24 DIT.

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59 DTE - 16 Delta Short Strikes (200:50) / 2 DTE

The average monthly return for Q1 was +1%, versus the 2007 to 2018 monthly average of +3%. Total return for the quarter was +3%. Pretty bad return numbers, but at least we have positive returns overall. The average DIT for Q1 was 32, which was above the 2007 to 2018 average of 29 DIT.

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59 DTE - 16 Delta Short Strikes (200:50) / 29 DTE

The average monthly return for Q1 was +7%, versus the 2007 to 2018 monthly average of +3%. Total return for the quarter was +20%. Finally some good return numbers. The average DIT for Q1 was 23, which was below the 2007 to 2018 average of 25 DIT.

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45 DTE - 16 Delta Short Strikes (200:50) / 2 DTE

The average monthly return for Q1 was -26%, versus the 2007 to 2018 monthly average of +1%. Total return for the quarter was -73%. Horrible return numbers for the quarter. The average DIT for Q1 was 32, which was above the 2007 to 2018 average of 23 DIT.

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45 DTE - 16 Delta Short Strikes (200:50) / 22 DTE

The average monthly return for Q1 was -19%, versus the 2007 to 2018 monthly average of +1%. Total return for the quarter was -57%. Again, horrible return numbers for the 45 DTE variations. The average DIT for Q1 was 21, which was above the 2007 to 2018 average of 19 DIT.

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In the next post, we'll review the Q1 returns for the SPX straddle variations.


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Monday, May 13, 2019

SPX Iron Condor - 2018 Review

In this post we'll look at how the SPX iron condor has been performing since I last analyzed its results back in 2016 (here). For this article, we'll just look at the following variations and how they performed from January 2007 through December 2018:
  1. 66 DTE - 25 pt wings, 12 Delta (200:50) / 2 DTE - exit if the trade has a loss of 200% of its initial credit OR if the trade has a profit of 50% of its initial credit OR at 2 DTE.
  2. 66 DTE - 25 pt wings, 12 Delta (200:50) / 33 DTE - exit if the trade has a loss of 200% of its initial credit OR if the trade has a profit of 50% of its initial credit OR at 33 DTE.
  3. 73 DTE - 25 pt wings, 12 Delta (200:50) / 2 DTE - exit if the trade has a loss of 200% of its initial credit OR if the trade has a profit of 50% of its initial credit OR at 2 DTE.
  4. 73 DTE - 25 pt wings, 12 Delta (200:50) / 37 DTE - exit if the trade has a loss of 200% of its initial credit OR if the trade has a profit of 50% of its initial credit OR at 37 DTE.
  5. 45 DTE - 25 pt wings, 16 Delta (200:50) / 2 DTE - exit if the trade has a loss of 200% of its initial credit OR if the trade has a profit of 50% of its initial credit OR at 2 DTE.
  6. 45 DTE - 25 pt wings, 16 Delta (200:50) / 22 DTE - exit if the trade has a loss of 200% of its initial credit OR if the trade has a profit of 50% of its initial credit OR at 22 DTE.
For these backtests, I used the maximum margin requirement generated in a backtest run for each of the six strategy variations above. The maximum possible without any credit would have been $2.5K for an IC with 25 point wings. The performance of these variations in 2015 is shown in the tables below.
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Now let's look at the metrics again, but adding in the results through December 2018. The tables below show the same metrics, but highlight which metrics have increased, which metrics have decreased, and which metric are unchanged.
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The metrics in both tables above have mostly either worsened or stayed the same across all variations.

The corresponding equity curves for these variations are shown in the chart below, along with the chart of the SPX during this same time period.

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In case you're interested, I've included the updated return percentages for each variation below.

(average return per year: 41.7%)

(average return per year: 43.9%)

(average return per year: 17.4%)

(average return per year: 16.9%)

(average return per year: 32.2%)

(average return per year: 20.6%)

2018 had some of the lowest returns for these iron condors, with all the returns lower than their average annual returns.


If you don't want to miss my new blog posts, follow my blog either by email, RSS feed or by Twitter.  All options are free, and are available on the top of the right hand navigation column under the headings "Subscribe To RSS Feed", "Follow By Email", and "Twitter".  I follow blogs by RSS using Feedly, but any RSS reader will work.

Monday, May 6, 2019

SPX Straddle - 2018 Review

In this post we'll look at how the SPX straddle has been performing since I last analyzed its results back in 2015 (here). For this article, we'll just look at the following variations and how they performed from January 2007 through December 2018:

  1. 59 DTE - (25:10) / 2 DTE - exit if the trade has a loss of 25% of its initial credit OR if the trade has a profit of 10% of its initial credit OR at 2 DTE.
  2. 59 DTE - (25:10) / 41 DTE - exit if the trade has a loss of 25% of its initial credit OR if the trade has a profit of 10% of its initial credit OR at 41 DTE.
  3. 59 DTE - (50:25) / 2 DTE - exit if the trade has a loss of 50% of its initial credit OR if the trade has a profit of 25% of its initial credit OR at 2 DTE.
  4. 59 DTE - (50:25) / 24 DTE - exit if the trade has a loss of 50% of its initial credit OR if the trade has a profit of 25% of its initial credit OR at 24 DTE.
  5. 45 DTE - (150:25) / 2 DTE - exit if the trade has a loss of 150% of its initial credit OR if the trade has a profit of 25% of its initial credit OR at 2 DTE.
  6. 45 DTE - (150:25) / 31 DTE - exit if the trade has a loss of 150% of its initial credit OR if the trade has a profit of 25% of its initial credit OR at 31 DTE.

For these backtests, I used the Portfolio Margin (PM) requirements for straddles from TD/ThinkOrSwim from 13-Apr-2019. These numbers were $24K for 59 DTE straddles, and $25.5K for 45 DTE straddles. The performance of these variations in 2015 is shown in the tables below.

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Now let's look at the metrics again, but adding in the results through December 2018. The tables below show the same metrics, but highlight which metrics have increased, which metrics have decreased, and which metric are unchanged.

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The return metrics (top table) are a mixed bag across all variations. The 59 DTE - 25:10 variations showed performance improvements, the 59 DTE - 50:25 variations were flat/down, and the 45 DTE show performance deterioration. The 59 DTE - 25:10 variation also had improved metrics in the second table.

The corresponding equity curves for these variations are shown in the chart below, along with the chart of the SPX during this same time period.

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In case you're interested, I've included the updated return percentages for each variation below.

(average return per year: 21.8%)

(average return per year: 15.6%)

(average return per year: 47.5%)

(average return per year: 45.4%)

(average return per year: 28.1%)

(average return per year: 14.1%)

2018 had some of the lowest returns for these straddles, with all the returns lower than their average annual returns.


If you don't want to miss my new blog posts, follow my blog either by email, RSS feed or by Twitter.  All options are free, and are available on the top of the right hand navigation column under the headings "Subscribe To RSS Feed", "Follow By Email", and "Twitter".  I follow blogs by RSS using Feedly, but any RSS reader will work.