Humble

Trying to backtest SXVY, with 90 days rollover. getting 12 trades for 3 years backtest (as expected) BUT: when changing to "Gains above 50%" and -And Open Next Trade Immediately , the number of trades goes down to 2. Any idea why this is happening?

https://seekingalpha.com/instablog/354402-steadyoptions/4995881-steadyoptions-will-close-new-members-june-18-2017

They are not apples to apples comparison. ONE is options analytics software, it allows you to build positions, see the Greeks, the P/L profile etc. and also do backtesting. CML does backtesting only, but it makes it much easier and more automatic. In my opinion, ONE is a must for any serious trader, CML is "nice to have".

Seems correct.

You should be able to see it at your broker platform. It depends on the stock price and options prices - for example, on cheap stocks few hundred contracts of OI might be not liquid enough, but on a stock like GOOG or AMZN it might be fine. It's all relative.

The setup is correct. When to open depends on prices. If the prices are especially cheap, we might open even 2-3 weeks before earnings. On average, it is around 7-10 days before.

We sell options expiring the same week as earnings (after earnings) and buy options 1-3 weeks out, depending on liquidity. For most stocks, the long will be the next monthly expiration due to better liquidity, but there are exceptions.

It might be that opening 8 might potentially cause a margin call, so you will be forced to close them the same day. this is the only scenario I can see - unless it's a software bug.

Did you buy the 13 puts previously?

Yes, you can do it. Go to Setting/Create account. Then create all trades under that account, and you can track it as a portfolio.

$5.50 on a $960 stock is only 0.5% - it does look cheap based on AMZN volatility. I will try to do some backtesting. It is definitely an interesting idea. While I don't think those prices will last for prolonged periods of time, it could be interesting to look at it while low volatility lasts.

I'm using ONE software which has a lot of options including increase and decrease in IV. I'm not sure if IB has that option, but I never really checked it.

Well, theoretically, the more data points, the better. The question is how relevant is the data from 8-10 years ago, and how much effort will it require to analyze such large amounts of data. In our earnings trades we look at the last 4 cycles. is it perfect? No, but it worked pretty well for us. Call it data curve fitting or whatever you want, but numbers don't lie. Our calendars produces average return of over 20% in the last 5 years, and we based on entry and exit targets on 4 last cycles of data. This is what I call probability trading. So again, I'm not dismissing other methods, and I'm not saying that looking at 10-15 data points is wrong. It all comes to time and effort, and to me, this is 80/20 principle.

I don't see how this is curve fitting. When we do our earnings trades, don't we do the same? We look at Dustin charts and select the best day to enter. For example, HD straddle historically produced the best results if entered 2-3 trading days before earnings. And it worked for us very well most of the time. I think the tool provided a starting point to do the research. It does not guarantee results, it shows probabilities. To me, the ability to play with parameters in terms of when to enter, which deltas to use etc. is very powerful, and I stand behind my endorsement.

You might want to read this review - https://www.tradingschools.org/reviews/dr-singh-options/

Great advice.

Yes!!

This is why I feel that holding through earnings is so unpredictable. AAPL is an example where in my opinion, there is no clear edge because there is no clear pattern. Some stocks move more (or less) than the IM 70-80% of the time, but not AAPL.

It is true that last 4 cycles AAPL moved more than expected 3 out of 4 times, but if you extend the period to 2-3 years, the results would be not so good.

Depends on the broker. But in any case, you are fully covered by the long options, so you can close the stock and the option positions.

New members, please read more about pre-earnings calendars here. "Many members are concerned about early assignment if one of the short legs becomes ITM. Since there are upcoming earnings, there always will be a lot of time value on both options, so it doesn't make sense for the holder of those options to exercise them. So there is no early assignment risk - in fact, early assignment would be a blessing for us. " I highly recommend, once again, that all new members read the relevant links.

Very good point. It doesn't happen with many underlyings (we all know that VXX is a very special animal) but some stocks do move over period of 2-3 years.

I don't see any problem. Calculating returns based on maximum risk (or margin) is the only correct way to do it. Many options gurus abuse the ignorance of the general public to inflate their returns. In the above example, if they get $1 credit on $5 spread and it expires worthless, they present it as 100% gain. In fact, it is 25% gain, not 100%. At wthe same time, if they lose $4 they would present it as 100% loss. Which is correct, just not consistent. I believe the software presents the P/L correctly - the only issue is as discussed with stop losses.

Yes, those numbers are very helpful. But to me, the most important number in any strategy is "average % return". So yes, you can easily calculate it by dividing 40.9% by 26 (# of trades), but having it presented would definitely help to save time. Also, Avg win and Avg. loss would be more relevant to present as % rather than $. $467 return on 9k risk is not the same as $467 return on 5k risk. To me, what really matters is percentages, not dollar amounts. It's like when someone telling you that he is making 10k per month in trading. Does it mean anything? Is it 10k on 100k account? Amazing! 10k on 10M account? Not so much..

That makes sense. As I said, maybe it's worth to mention it somehow in the software when using stop losses (this would apply to credit spreads only where margin is required). But P/L is calculated correctly, this is the most important thing. One thing worth considering is adding average P/L per trade. When you see 200% cumulative return, it is a big difference if it's based on 10 trades or 50 trades. I understand that number of trades is part of the statistics, so average return can be easily calculated, but still it would be helpful to see it along with the cumulative return.