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Yowster

2016 Year End Performance by Trade Type

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As I’ve done the past few years, I’ve broken down the Steady Options 2016 trade performance by trade type.  There are a few open trades but these may not be closed until January – I’ll update this post if any are closed before the end of 2016.   Here’s are this year’s stats along with some comments from my perspective.  Where applicable, I added totals from prior years for comparison...

 

Pre-Earnings Calendars

  • 44 Trades – 35 win, 9 loss (80% win) – Average Gain +15.07%
    • 2015:  51 trades (80% win) – Average Gain +12.67%
    • 2014:  48 trades (71% win) – Average Gain +13.80%
    • 2013:  24 trades (88% win) – Average Gain +20.60%
  • Comments:
    • Again one of our best performing trade types, as it has been for multiple years. 
    • Number of trades comparable to the last few years.
    • Win rate the same, and very high.
    • Average gain up nicely from last year
    • Note that there may be a few non-earnings calendars in here, but I included all company calendar trades in this section.

Pre-Earnings Straddles/Strangles

  • 18 Trades -  13 win, 5 loss (72% win) – Average Gain +5.19%
    • 2015:  44 trades (68% win) – Average Gain +2.61%
    • 2014:  74 trades (62% win) – Average Gain +2.54%
    • 2013:  104 trades (57% win) – Average Gain +1.35%
  • Comments:
    • Count of these trades continues to drop year over year, as we’ve gotten more selective.  Straddles on very low IV stocks have been eliminated as these were typically the worst performers.
    • Being more selective reflected positively in the average gain, basically doubling from last year.

Index trades (RUT, SPY, SPX, TLT)

  • 27 Trades - 18 win, 9 loss (67% win) – Average Gain +3.01%
    • No prior year comparisons as types of trades have changed.  But breaking down by sub-category is interesting:
    • RUT Broken Wing Condor: 5 win, 2 loss, average gain +2.81%
    • SPX and RUT Calendars: 3 win, 0 loss, average gain +19.47%
    • SPX Butterfly: 10 win, 5 loss, average gain +0.62%  (many individual trade gains in the 20%-30% range, but the average was severely dragged down by 3 big losing trades of -100%, -98% and -60%)
    • Other (SPY/TLT combo and SPX back ratio): 0 win, 2 loss, average loss -8.90%

VIX-based trades

  • 16 trades - 9 win, 7 loss (56% win) – Average Gain +1.34%
    • No prior year comparisons as types of trades have changed.  But breaking down by sub-category is interesting:
    • VXX Diagonals: 6 win, 2 loss, average gain +20.34%
    • VIX Strangle: 2 win, 4 loss, average loss -11.92% (I view this trade as primarily an overall portfolio hedge trade to protect during big market downturns so losses on these trades is not a really bad thing).
    • VIX Risk Reversal:  1 win, 0 loss, average gain +4.00% (another trade that I view primarily as an overall portfolio hedge to protect during big market downturns).
    • VIX Calendar: 0 win, 1 loss, average loss -73.70%

Individual Stock RICs 

  • 22 Trades – 9 win, 13 loss (41% win) – Average Loss -14.36%
  • Comments:
    • These were hold through earnings trades on stocks that typically have big moves during earnings using weekly options expiring the same week as earnings.
    • Some huge losses on late in the week earnings reports where stock move was uncommonly small.
    • I think we've pretty much stopped these trades.  (IMO risk/reward profile is not great as you stand to lose a lot more on minimal stock price move than you stand to gain from bigger moves beyond your strikes.   For hold through earnings trades, IMO, taking the opposite approach and using calendars on stocks that typically stay within the implied move offers a better risk/reward).

 

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2 minutes ago, Scott Rogers said:

Great work Yowster.  What exactly are you hedging with the VIX Risk Reversal and VIX Strangle?  Do you have other open long positions or is it just the VXX Diagonal trades?

thanks

 

@Scott Rogers -  Primarily hedging VXX Diagonals, as I'll typically have that trade in play every week.  However, it would also hedge SO calendars to some degree (if the downturn would cause the individual stock price to move by a large amount).

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22 minutes ago, Turtle said:

Thanks Yowster for putting this summary together. Very insightful. I guess the RIC did not make the cut!

@Turtle - good catch... I've added those stats to the main post.  It was a category that didn't exist other years so I forgot to add it to the post (although I did compute the stats prior to posting).

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14 minutes ago, Turtle said:

Just curious Yowster, how do you keep track of all the trades? Do you use a spreadsheet to manage and track your own trades?

@Turtle - for this data, I just cut & pasted from the SO Performance Page into Excel and then processed it.  However, in general, I just use spreadsheets to tracks my trades

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@Yowster Thanks for posting this. It's pretty much in line with my records. And I agree with your analysis. RICs were responsible for big chunk of our losses in 2016, without them we would have a much better year. Once we stopped them, the results were in line with previous years - our model portfolio is up 101% since April. 

 

I'm very pleased with performance of earnings calendars and straddles. We are now much more selective based on cumulative experience of the previous years. We could obviously do a better job by avoiding 3 big SPX losers, but those were very unusual market conditions. 

 

To put things in perspective, the model portfolio is up 40% in 2016 even after the worst drawdown since inception.

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3 minutes ago, ykotowitz said:

Thank you for the analysis. I assume these are the official trades only, so exclude VXX weekly diagonals?

@ykotowitz - Yes, this data is based solely on the Official SO trades as documented in SO's Performance page.    The VXX weekly diagonals are not official SO trades, as was stated when Kim started placing SO VXX diagonal trades using longer duration options.   I believe quite a few SO members are doing the weekly VXX diagonals along with me, and I plan on doing a year-end summary and lessons learned post in that thread sometime next week.

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Very interesting analysis. Please don't forget 2016 has been a very low IV year, clearly favoring calendars vs straddles and some other low IV strategies as Vxx contango ones. 

Maybe be a so calm year will not repeat ever and We need to be ready to switch.

Just to finish, I was not with SO at 2015 YE, but I greatly appreciate a kind of "lessons learnt in 2016" from the leader. I would encourage Kim, il He and other members agree, to do an overall analysis and a little more detailed strategy by strategy one, or as He cosiders more suitable.

Merry Christmas to You all.

Edited by Javier
Typo

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    • By Yowster
      As I’ve done the past few years, I’ve broken down the Steady Options 2017 trade performance by trade type.  Here’s are this year’s stats along with some comments from my perspective.  Where applicable, I added totals from prior years for comparison...
       
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      2017: 31 Trades – 26 win, 5 loss (84% win) – Average Gain +13.81% 2016:  44 trades (80% win) -  Average Gain +15.07% 2015:  51 trades (80% win) – Average Gain +12.67% 2014:  48 trades (71% win) – Average Gain +13.80% 2013:  24 trades (88% win) – Average Gain +20.60% Comments: Again one of our best performing trade types, as it has been for multiple years.  Number of trades down a bit from last year, seemed a bit tougher to find good entry prices overall this year. Win rate comparable to prior years, and very high. Pre-Earnings Straddles/Strangles
      2017: 77 Trades -  61 win, 16 loss (79% win) – Average Gain +5.02% Breaking down further by hedged and non-hedged:
                  Hedged – 28 win, 6 loss (82% win), average gain +6.01%
                  Non-Hedged – 33 win, 10 loss (77% win), average gain +4.24%
      2016: 18 trades (72% win) – Average Gain +5.19% 2015:  44 trades (68% win) – Average Gain +2.61% 2014:  74 trades (62% win) – Average Gain +2.54% 2013:  104 trades (57% win) – Average Gain +1.35% Comments: Trade count spiked up significantly this year as hedged straddle trades (beginning in 2nd half of year) gave a lot more trade opportunities. Highest percentage of winning trades ever. Very low risk trades as it takes RV levels going much lower than prior cycles for these trades to be significant losers (only 4 of 77 trades has losses over -10%). No reason to limit the number of these trades that you have on at the same time as big market upturns/downturns will help these trades but they can also be winners during normal market times. Initially, there was some fear that the short hedges may hurt overall performance but thankfully this was not the case as the win% and average gain were both higher than the non-hedged trades. Index trades (RUT, SPY, SPX, TLT)
      9 Trades – 8 win, 1 loss (89% win) – Average Gain +19.72%. 2016: 27 Trades (67% win) – Average Gain +3.01% Comments: RUT Broken Wing Condor: 3 win, 1 loss, average gain +6.10% TLT Iron Butterflies: 5 win, 0 loss, average gain +30.62%.   Great trade idea on this one.  Kudos to @SBatch on this idea, I believe. Longer duration trades, typically open for 30-60 days. VIX-based trades
      16 trades – 12 win, 4 loss (75% win) – Average Gain +9.25% Breaking down further by trades for contango and those playing for VIX spikes:
                  Contango (VXX/SVXY) – 10 win, 0 loss (100% win), average gain +29.70%
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      2016:  16 trades  (56% win) – Average Gain +1.34% Comments: Those trades playing for the continued low volatility were some our best performing trades with 100% wins and average gain near +30%. Those trades playing for VIX spikes were our worst performers – low win% and average loss of near -25%.   I view these trades primarily as portfolio hedges, so in that respect the losses are kind of acceptable to me.   Other may not view these trades as hedges – but after multiple years of a flat/declining VIX will a small number of upward spikes (and spikes to VIX levels still below 20) saying we are due for a larger VIX spike and opening trades for it sounds foolish to me.  I’m sure such a spike will happen at some point in time, but many people have lost a lot of money over the past few years playing for such a large and prolonged spike.  
       
       
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      A few post-earnings Iron Condors on FB were both successful at around +30% gains.   These trades played for stock price to stay relatively stable after earnings.  I’d like to see more of these trades in the future as there appear to be quite a few stocks that have a tendency to stay calm after earnings.   The one caveat being that we can’t go overboard and have too many of these open at the same time because large overall market moves can really hurt these trades (unlike straddle trades where such overall market moves will help).
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