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Kim

CMLviz Trade Machine

727 posts in this topic

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58 minutes ago, Yowster said:

quick observation for anyone else plugging scenarios like the MS post above into the tool and getting different results.   Note that by default the setting for Execution Fill Type is halfway between mid and market (and I think that is what is used in these samples), but I had changed my setting to mid market because the vast majority of SO trades I am able to open/close within a few cents of mid-point pricing.   This had a huge effect on the %return when compared to what was in the article (mine was much higher).   I would expect a bit higher but the result was much higher.   This got me thinking Why such the big difference???  I came up with 2 thoughts:

  1. The tool is currently using end-of-day data, and I have noticed that bid/ask spreads at market close tend to be a little wider than what they are during market hours.
  2. When closing winning trades, the options with bigger gains are ITM by quite a bit and the bid/ask spreads for deeper ITM options tend to be quite a bit wider than those near ATM (especially at market close).

 

What setting is best to use???   That is up to the user.   But after many years of options trading I can safely say that the vast majority of my trades are filled within a few cents of the bid/ask mid-point (if I have to chase too far from the mid-point to open a trade, I typically don't open it).

 

So, you are asking some very good questions, rarely does someone go this deep.

 

This is what I do:

(1) I check everything, by default, as half way to mid and market -- I do consider this slightly conservative based on the names I trade.

(2) Then I check the exact same strategy, just flip my settings, and got to mid-market (I love that it's this easy to check, and it's one of the advantages of being the creator --I get to build the features I use to trade lol)

(3) If the difference is large, I look at the trades and see if there is liquidity -- I literally look at my option screen / broker / analysis tools and see if the fills are near the NBBO or better.

If I truly feel that in the size I want to trade,that mid market is more realistic, I switch to that setting and move forward.

If the difference is small, I just go with the more conservative setting.

 

 

 

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1 hour ago, Ophir Gottlieb said:

 

So, you are asking some very good questions, rarely does someone go this deep.

 

This is what I do:

(1) I check everything, by default, as half way to mid and market -- I do consider this slightly conservative based on the names I trade.

(2) Then I check the exact same strategy, just flip my settings, and got to mid-market (I love that it's this easy to check, and it's one of the advantages of being the creator --I get to build the features I use to trade lol)

(3) If the difference is large, I look at the trades and see if there is liquidity -- I literally look at my option screen / broker / analysis tools and see if the fills are near the NBBO or better.

If I truly feel that in the size I want to trade,that mid market is more realistic, I switch to that setting and move forward.

If the difference is small, I just go with the more conservative setting.

 

 

 

This is all good,and, as you have seen, there is a lot of finessing , and feel.

But, with the everyday type of trades that we do here, it becomes even more tricky, because we always have at least 2 legs, and sometimes 4.

Just think of all the bid/ask's on a 4 piece position.

Lately it has become even more complicated, because, there is one way to route a 1 leg trade, and depending on what broker you use, there are different routing systems for the multi-legged trades..I can't tell you how many times, both myself, and many others here, have had GTC orders, with a bid at 1.15, for example, and we get a partial fill at 1.05.

I still can't figure out why this is happening.  The only common thing I can see, is that these things tend to happen right at the open and close.

But they, to a lesser degree, happen at all times.

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PREFACE
You spoke, we listened.

We have released upgrades to the Trade Machine, and they are substantial.


We have also listed the next upgrades that are coming at the end.

I .Big News (this is an enormous upgraded feature)
Custom timing of re-entry into positions after a stop loss. This is so big, we made a movie demo for it:
Stop Losses - With a Brain

II. Big News
Excel Downloads are available in the trade details
Copying to the clipboard is also available in the trade details

Here is a snapshot:
0edfa5b9-25f6-4ec1-8d24-611fc7b0db74.png

III. Commission Centric
We have added the total commissions paid per back-test into the summary tile. Here is a snapshot:
c4493328-a3a2-4293-a5e9-7f0256849c09.png

IV. Improved responsiveness and speed

V. Trade details now page up and down and Stock Price is now in the details
Here is a snapshot
3f74bc40-c0b9-4de6-b812-d70fb80cfb9e.png


What's Coming Next
In the next month we will be making an even larger upgrade:

1. Intra-day prices for stop losses and limits
We will use intraday prices to see if stops and limits are triggered

2. Custom strategies
Create and save your own custom strategies (up to 4 legs)
This enables calendars, butterflies, ratios, and more

3. Dollar denominated spreads
If you don't like deltas, use dollar spreads (e.g.: test a $5 wide call spread in Apple)

4. More history
We will be adding a fourth and fifth year of history to the back-tester

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9 minutes ago, RapperT said:

Thanks, signed up last night.  Im really looking forward to custom spread function

 

Yeah, the custom strategy is by far our most desired new feature. We will have it out by May 15th (ish). I am pretty excited about too, tbh. 

 

Once we release that (and two more years of history and some other stuff), the price will likely increase for members that join after  (but not for current members). 

 

Edited by Ophir Gottlieb

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This should be a home run for you.  Im surprised there arent more players  in the space.

 

The more options you can add for open and close dates the better.  It would be nice to automate our earnings calendars. 

Edited by RapperT

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36 minutes ago, RapperT said:

This should be a home run for you.  Im surprised there arent more players  in the space.

 

The more options you can add for open and close dates the better.  It would be nice to automate our earnings calendars. 

 

Yep. All will be 100% customizable soon.

 

Already very flexible. Price will likely rise once we add the custom strategies,which includes custom dates around earnings and then stock technicals as well. 

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On 4/21/2017 at 2:56 PM, cuegis said:

What do you think of the quality of iVolatility.com?

1- the actual data itself and

2- their tools, such as the scanners and screeners?

A major issue of iVolatility.com is their reliance on Java plug-ins.  Their P&L calculator will not work without the plug-in and as of March no modern browser supports it any longer due to security issues.  Otherwise, I like iVolatility but the plug-in issue was a deal breaker for me so I cancelled my membership.

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22 hours ago, SBatch said:

A major issue of iVolatility.com is their reliance on Java plug-ins.  Their P&L calculator will not work without the plug-in and as of March no modern browser supports it any longer due to security issues.  Otherwise, I like iVolatility but the plug-in issue was a deal breaker for me so I cancelled my membership.

I have never had any issues with them at all.

But, I also am using IB which relies on Java so I always have the latest Java version.

I don't know if there are other Java plug-ins that are required.

 

 

 

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47 minutes ago, cuegis said:

I have never had any issues with them at all.

But, I also am using IB which relies on Java so I always have the latest Java version.

I don't know if there are other Java plug-ins that are required.

 

 

 

Not Java, but the Java plug-in.  My guess is you are using Internet Explorer or Firefox on a PC that is not running Windows 10.  If you have Windows 10 you are out of luck with iVolatility.com.

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@Ophir Gottlieb  i saw you retweet regarding this MSFT trade:  http://tm.cmlviz.com/index.php?share_key=f1w7zAmRyKgbSTHd

 

 

I ran this test with exact same parameters (including contract size and commissions) but started one day later, that is there was a 24 hour disparity between the start date of the 2 year look back period in the tweet above and the one in my backtest.  In my test, the returns on the 50 delta trade were lower by 50% and max risk increased by 40%.  I cant reconcile this no matter what conditions I apply or explanations i think of.  Can you help me understand how this would be possible?

 

run it yourself today and you will see what i mean

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How to Trade Volatility in Apple Inc Options

 
AAPL_logo_building.jpg


Date Published:  
Written by Ophir Gottlieb 

LEDE 
Owning Apple Inc options, without taking a position on stock direction, has been a winner over the last three-, two-, and one-year, but only with a deft hand and a proper understanding of the stock volatility. 

PREFACE 
Apple Inc (NASDAQ:AAPL) has unique stock volatility, and from those dynamics (or, in English, "patterns"), we can show how an option strategy that owns option premium has been a winner. Here is the two-year stock chart: 
 
AAPLcharts_417_2yrs.PNG


What we see, above all else, irrespective of stock direction, is that the price tends to move with momentum. Said a little bit more like English, the stock doesn't have many "quiet periods," rather when it rises, it tends to keep rising or when it falls, it tends to keep falling. 

This means there are three critical steps to trading options in Apple Inc we need to address. 

STEP I: EARNINGS HANDLING 
Let's start with a comparison of owning an at the money iron condor and trading it every 30 days. The left side is this strategy done only during earnings, and the right side is done at all times (including earnings): 
 
AAPLic_2yrs_e_exe_nolimit.png


Owning option premium during earnings has been a net loser, returning -9.4% over the last two-years. But, owning option premium during all-times has been a net winner, with a 11.9% return. It's clear that step one of our strategy is to avoid earnings. 

Here are the results of owning that same iron condor, but this time, always avoiding earnings. 
 
AAPLic_2yrs_all_exe_nolimit.png


As expected given our first test, avoiding earnings takes the option premium owning strategy up to a 33.8% return over the last two-years. Now, on to step two: 

STEP II: STOP LOSS 
It turns out that closing a losing iron condor when it hits a certain level has actually helped returns. That is, a risk mitigation strategy does both: reduce risk and improve returns. Here is the simple setting in our test: 
 
setup_stop_50_normal.png


We note that the setting "At Normal Trading" is short hand for this implementation: If the stop loss is hit, close the position, and wait the rest of the month before entering a new iron condor. And here are the return differences: 
 
AAPLic_2yrs_exe_limitandnolimit.png


By adding a risk protection that effectively cuts the risk in half, from a possible 100% loss in any month down to 50%, the actual return rose from 33.8% to 39.7%. This is step two, and now we will make use of that stock chart from the top of the article, and implement step 3. 

STEP III: STOP LOSS AND STOCK DYNAMICS 
We noted that Apple Inc stock does tend to move with momentum. That phenomenon gives us reason to believe that if a stop loss is triggered, which would happen if Apple stock is in a rather low volatility stretch, we might expect that this "quiet period" will end quickly and getting back into owning options sooner rather than later, could be a good idea. 

Here is the simple setting in our test: 
 
setup_stop_50_immediate.png


Notice that this time the "Immediately" setting has been chosen rather than "At Normal Time." This setting is short hand for: "If a stop loss is triggered, close the original position out, and immediately (the same day) open a new iron condor using the next month's options." And here are those return differences: 
 
AAPLic_2yrs_exe_bothstops.png


All of a sudden the return nearly doubles, from 39.7% to 64.8%, and this time the only difference in our strategy was the timing of the re-entry into the option position after a stop loss was triggered. 

We did a lot here, so let's just take a step back and see it all in one summary: 
 
AAPLic_2yrs_summary.png


Our three-step process revealed a 64.8% winner, up from a 9.4% loser, and reduced risk twice buy eliminating earnings and using a stop loss. Apple stock is up 12% over this two-year period, so the option strategy returned about five-fold the stock. Even better, it took less time to figure this out with the right tools than it did to read this article. Tap a few buttons -- that's pretty much it. 

CONSISTENCY 
This approach also worked well over an one-year time period. 
 
AAPLic_1yrs_exe_50stop_imm.PNG


That's a 110% return by owning the iron condor and (i) avoiding earnings, (ii) using a stop loss, and (iii) re-entering a new position immediately following a stop. Apple stock is up 38% over this one-year period. 

WHAT JUST HAPPENED 
This is how people profit from the option market - it's preparation, not luck. Even further, the CMLviz option back-tester is the conduit to finding these results. 

To see how to do this for any stock, index or ETF and for any strategy, with just the click of a few buttons, we welcome you to watch this 4-minute demonstration video: 
Tap Here to See the Tools at Work 

Thanks for reading. 

Risk Disclosure 
You should read the Characteristics and Risks of Standardized Options. 

Past performance is not an indication of future results. 

Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment. 

Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition. 

The author is long shares of Apple Inc (NASDAQ:AAPL) as of this writing. 

Back-test link.

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59 minutes ago, RapperT said:

@Ophir Gottlieb  i saw you retweet regarding this MSFT trade:  http://tm.cmlviz.com/index.php?share_key=f1w7zAmRyKgbSTHd

 

 

I ran this test with exact same parameters (including contract size and commissions) but started one day later, that is there was a 24 hour disparity between the start date of the 2 year look back period in the tweet above and the one in my backtest.  In my test, the returns on the 50 delta trade were lower by 50% and max risk increased by 40%.  I cant reconcile this no matter what conditions I apply or explanations i think of.  Can you help me understand how this would be possible?

 

run it yourself today and you will see what i mean

 

Actually.. I'm looking...

 

OK, here's what happened:

 

Original test

Return 11,952

Risked 5,836

 

New test

Return 9,447

Risked 8,255

 

 

So, the one that swapped into the options that expire one week later from the original saw more losses pile up, which of course increases the amount that was risked over the two-years. That ~$2,600 increase in losses made the return much lower as the denominator rose.

 

Pretty weird situation, really, but, it happens.

Edited by Ophir Gottlieb

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interesting...i guess if anything it shows the need to really test one's system and try to break it before going live, like many of the best CTA or systematized trading guys do.

 

The difference is drastic

Edited by RapperT

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3 minutes ago, RapperT said:

interesting...i guess if anything it shows the need to really test one's system and try to break it before going live, like many of the best CTA or systematized trading guys do.

 

The difference is drastic

 

Yeah, I mean this is obviously really odd, but still, it's noteworthy. I would also caution against weird timing of rolls (like 50 days) and try to stick with 7, 14, 30, 60, etc. 

Edited by Ophir Gottlieb

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On 4/18/2017 at 11:50 AM, Yowster said:

@Ophir Gottlieb- I get what you are saying, but the terminology will confuse SO members.  When dealing with credit spreads, Kim (correctly IMO) bases his gain/loss percentage on the margin required and not the credit received.   For example if you sell a spread of width 10 for 2.00, then your margin requirement is $800 per spread and that is what gains and losses should be based on.   For what you are talking about, you mean get out of the credit spread when its value is 2x the credit you received for opening the trade.  

It's just a terminology thing - but it does bring an important question to mind.  When you are using the tool for selling a spread - is the gain/loss percentage calculated by the tool based on the up-front credit received???   Or on the margin requirement (width of spread minus credit received)???

 

The risk that is used for the PnL of the back-test is done exactly how Kim does it -- as everyone should do it. The limit/stop section is the spot where we give users more flexibility. 

Edited by Ophir Gottlieb

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How Trading Options in Starbucks Corporation (NASDAQ:SBUX) Has Outperformed

 
SBUX_building_logo.jpg


Date Published:  
Written by Ophir Gottlieb 

LEDE 
There is edge in Starbucks Corporation options, and it has led to nearly 200% returns over the last 3-years while the stock was up just 80%. 

PREFACE 
WHAT IS EDGE? One of the great beauties of option trading is that the market prices the 'greeks,' which serve as a measure of probability. 
 
If a trade wins more often than the probability that is priced in, it has edge.


Here is that same thought process, but in English: A 30 delta (out of the money) put should end up in-the-money about 30% of the time (delta is roughly a measure of probability). In other words, if we sold a 30 delta put, we would expect that we could have a winner 70% of the time. 

EDGE 
Now, back to our idea of edge. If we can find an option strategy that has a 30 delta, but if selling it wins more than 70% of the time, then we have edge. Even further, even if it wins 'just' 70% of the time, if the net profit is positive, then that's another measure of edge. 
 
When we have both, we have a great trading result, and that is exactly what we find with Starbucks Corporation.


Starbucks Corporation (NASDAQ:SBUX) 
If we test selling a 30 delta / 5 delta put spread, every 30-days, and always avoiding earnings in Starbucks over the last 3-years, this is what we find: 
 
SBUXsps_3yrs_exe.PNG


That's a 198% return, versus a stock return of 80%. Even further, and back to our discussion of edge, the strategy had 34 winning trades and 6 losing trades for a win-rate of 85% -- far above a 70% win-rate we might expect. 

For context here is how the short put spread (in red) has done relative to the stock (in gray). 
 
SBUXsps_3yrs_exe_charts.PNG


But this isn't the end of the analysis -- there is one more step we need to make. While the CMLviz Trade Machine (back-tester) allows us to identify edge quickly, it does more than that. Selling a put spread is bullish strategy in that it becomes a winning trade if the stock rises, or, if the stock "doesn't go down a lot." 

It's fair to wonder if simply buying a call spread would have been better than selling a put spread. Here is how that approach has done over the last 3-years, done every 30-days. 
 
SBUXlcs_3yrs_exe.PNG


Even though Starbucks stock has been up 8% in this time period, and even though selling a put spread returned nearly 200%, it turns out that buying the call spread was in fact a losing strategy. 

WRAPPING IT UP 
We can do these same tests over two-years as well. First, here is the return of that same short put spread over two-years and always avoiding earnings: 
 
SBUXsps_2yrs_exe.PNG


That's a 69.2% return, while the stock was up just 23%. And, even further, we see 21 winning trades versus 5 losing trades, for a 80.8% win-rate. 

Here is the strategy (in red) versus the stock (in gray): 
 
SBUXsps_2yrs_exe_charts.PNG


Options are volatile over the short-run, but as time progressed, the short put spread vastly outperformed the stock. And, for the curious, here is how the long call spread did during this time: 
 
SBUXlcs_2yrs_exe.PNG


A 67.7% losing strategy, even though the stock was up. It's not a magic bullet -- it's just easy access to objective data. 

For completeness, here are the results of the short put spread over the last year: 
 
SBUXsps_1yrs_exe.PNG


That's a 20.1% return, with a 76.9% win-rate. The stock returned 7.3% in the last year. 

WHAT JUST HAPPENED 
We don't mean to make you feel uncomfortable, but this is it -- this is how people profit from the option market -- it's preparation, not luck. 

Tap Here to See the Tools at Work 

Thanks for reading. 

Risk Disclosure 
You should read the Characteristics and Risks of Standardized Options. 

Past performance is not an indication of future results. 

Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment. 

Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition. 

The author is long shares of Starbucks Corporation (NASDAQ:SBUX) as of this writing. 

Back-test link.

 

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Just now, Kim said:

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.

Yep. With earnings trading that holds throughout the period (not exiting before), I never look more than 4 quarters -- this is another example where I feel that more data is worse.

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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.

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3 minutes ago, Kim said:

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.

 

Generally, i agree. I do not like earnings trading other than pure speculation. I do like the pre-earnings trades you do -- that has edge.

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@Kim

 

I see everyone else in the market guessing if $AMZN or $GOOGL (or whichever stock) will move more or less than the options imply.

 

I see Steady Options members winning without earnings risk -- and that's because of Kim.

 

We're here to help now. Check out these results for $AMZN and $GOOGL over three-years worth of earnings periods -- we did the same thing but we added a 10% stop loss just in case things went bad.

 

AMZN

AMZN_els_3yrs.png

GOOGL

GOOGL_els_3yrs.png

 

We are releasing this feature tomorrow. Come join us for this and everything else we can do together with the backtester

Learn More at the CMLviz Option Back-tester

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The Wonderful Secret Behind Options Earnings Trading in Alphabet Inc (NASDAQ:GOOGL)


 

GOOGL_building_logo.jpg



Date Published:  
Written by Ophir Gottlieb 

LEDE 
There is a way to trade options right before earnings announcements in Google, and all stocks, that benefits from the rising implied volatility but avoids the risk into the actual earnings release. This approach has returned nearly 90% in Alphabet Inc (NASDAQ:GOOGL) options with a total holding period of just 55-days. 

PREFACE 
Everyone knows that the day of an earnings announcement is a risky event for a stock. This can be explicitly seen in the option market, where the implied volatility (the expected stock move) rises into the earnings event. 

Here is a great illustration of that reality using Alphabet Inc and a chart of its 30-day implied volatility over the last two-years. While the implied volatility ebbs and flows, it always rises into earnings, which are denoted in the chart below with the "E" icon. We circled the rise in yellow for convenience. 

 

GOOGLvol_417.PNG



The question every option trader, whether professional or amateur, has long asked is if there is a way to profit from this known volatility rise. It turns out, that over the long-run, for stocks with certain tendencies, the answer is actually, yes. 
 

Yes, there is a systematic way to trade this repeating phenomenon, without making a bet on earnings or stock direction.



THE WONDERFUL SECRET 
What a trader wants to do is to see the results of buying an at the money straddle a few days before earnings, and then sell that straddle just before earnings. The goal, at first, appears to be to benefit from that known implied volatility rise, but as we will see soon, there is actually much more to gain from this trade

This trade is not a panacea, which is to say, we have to test it, stock by stock, to see when and why it worked. We start with Alphabet Inc (NASDAQ:GOOGL). Here is the setup: 

 

setup_6_1_earnings.PNG



We are testing opening the position 6 days before earnings and then closing the position 1 day before earnings. We are not making any earnings bet. Once we apply that simple rule to our back-test, we run it on an at-the-money straddle: 
 

GOOGL_els_3yrs_tile.png



We see a 89% return, testing this over the last 11 earnings dates in Google. That's a total of just 55 trading days (5 days for each earnings date, over 11 earnings dates). We can also see that this strategy hasn't been a winner all the time, rather it has won 8 times and lost 3 times, for a 72.7% win-rate and again, that staggering 89% return in less than two-full months of trading. 

This approach as also been a large winner over the last two-years: 

 

GOOGL_els_2yrs_tile.png



We see a 41.9% return over seven earnings releases, with 5 winning trades and 2 losing trades, or a 71.4% win-rate. 

BUT WHAT'S REALLY HAPPENING? 
While this strategy is benefiting from the implied volatility rise into earnings, what it's really doing is far more intelligent. The option prices for the at-the-money straddle will show very little time decay over this 5-day period, so what this strategy really does is buy "five free days" of potential stock movement. If that sounded weird, here it is in black and white: 

The first trade in this 2-year back-test was to purchase the 557.5 strike straddle in Google on July 10th, 2015 in anticipation of the earnings that came out on July 16th. The opening straddle was purchased for $29.20. 

But, between July 10th and July 15th (the date the straddle was closed), here's what Google stock did: 

 

GOOGLcharts_417e.PNG



While no news was released during this time with respect to earnings, the stock climbed in anticipation of the event. That rise made owning the straddle a winner -- it was sold at $35.40 which was a 21% winner in five days. 

Of course, if the stock had declined, that would have been an equally big winner. But the real moment of clarity is to understand that if the stock did nothing, the straddle was about breakeven

So, what we're really seeing here is that owning this earnings straddle just a few days before the event, and selling it right before the event, gets us a window of a sort of "very cheap bet," where the upside is enormous, and the downside is quite limited. 

As an example of the limited risk, we can turn to the earnings event the next year, on July 28th, 2016. Here's what Google's price did: 

 

GOOGLcharts_416e.PNG



The stock basically went nowhere and so did the straddle. It was opened for $41.70 and was closed for $41.75. 

The trade was a wash, but, it gave us those few days to potentially have a stock move with muted risk. Over time, having this "low risk five-day option," turned into a monster winner. There were some small losers, some small winners, some large winners, but there were no large losers

WHAT HAPPENED 
This is it -- this is how people profit from the option market -- it's preparation, not luck. 

To see how to do this for any stock and for any strategy, with just the click of a few buttons, we welcome you to watch this 4-minute demonstration video: 
Tap Here to See the Tools at Work 

Thanks for reading. 

Risk Disclosure 
You should read the Characteristics and Risks of Standardized Options

Past performance is not an indication of future results. 

Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment. 

Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition. 

The author has no position in Alphabet Inc (NASDAQ:GOOGL) stock as of this writing.

cc @Kim

 

 

 

 

 

 

 

 

 

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Hi Ophir,

I have been playing with the numbers & one quick question. I am having trouble getting to the same numbers that you are showing. I thought for the regular scenarios it would change due to the date. But I was just working on the GOOG straddle & cannot get to the same result. Any ideas? Thanks for all the help.

Richard

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I have not been able to find any profits using these constraints.

ATM straddle

buy 7 days before

sell 1 day before

6 months

1 year 

2 years

3 years

All losers from the limited amount I have ran so far.

I think that the problem is that, as I know from my own trading, I never buy straddles.

My pre -earnings trades are pretty much limited to calendars.

I'm looking forward to when you at that function.

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8 minutes ago, cuegis said:

I have not been able to find any profits using these constraints.

ATM straddle

buy 7 days before

sell 1 day before

6 months

1 year 

2 years

3 years

All losers from the limited amount I have ran so far.

I think that the problem is that, as I know from my own trading, I never buy straddles.

My pre -earnings trades are pretty much limited to calendars.

I'm looking forward to when you at that function.

 

I have found several that are winners, but in any case, we are now working on custom strategies, so calendars will be up soon.

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1 hour ago, Ophir Gottlieb said:

 

I have found several that are winners, but in any case, we are now working on custom strategies, so calendars will be up soon.

I'm sure if I looked at many more stocks I would find quite a few that are profitable.

But, I don't see any real edge that jumps out on the straddle approach.

That is why we mostly do calendars, using the rest of the parameters very similar to what you were using.

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20 minutes ago, cuegis said:

I'm sure if I looked at many more stocks I would find quite a few that are profitable.

But, I don't see any real edge that jumps out on the straddle approach.

That is why we mostly do calendars, using the rest of the parameters very similar to what you were using.

 

I found monster edge in Google.  

 

Watch the video here

 

 

 

 

 

 

 

 

Edited by Ophir Gottlieb

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1 hour ago, RapperT said:

that entry date criteria (re: earnings) plus custom spreads will make this software well worth the price....anxiously awaiting the roll out :)

 

Yep, we are too!

 

Just as an FYI, at some point the $49 promotion will end, and the price will rise (for new members, not existing). While we don't know when we do know it will surround product upgrades.

 

In any case, we are all excited about the mid May release!

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@Ophir Gottlieb how do the earnings date entry and exit criteria interact with the "rollover" criterion?

 

Is it possible to have the earnings field override the rollover so that you are literally only trading earnings on a backtest?  it doesn't seem like that is happening now as changing the rollover field yields different results regardless of the look back period.

 

Forgive me if I'm missing something obvious

Edited by RapperT

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45 minutes ago, RapperT said:

@Ophir Gottlieb how do the earnings date entry and exit criteria interact with the "rollover" criterion?

 

Is it possible to have the earnings field override the rollover so that you are literally only trading earnings on a backtest?  it doesn't seem like that is happening now as changing the rollover field yields different results regardless of the look back period.

 

Forgive me if I'm missing something obvious

 

You are literally only trading earnings in a back-test if you set it right.  The rollover has a huge impact bc it implies if you are trading the 7-day, 30-day, 60-day, etc options.

 

 

The rollover defines which option expiry you are trading, not the time to earnings.

 

 

If you see differently, please email support with the link to your back-test, we will address it immediately!

Edited by Ophir Gottlieb

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hmmm.  ok let me take a look.  thanks for being so responsive.

so to ensure we are trading the near term (after earnings) expiration for say, a straddle, we would set the rollover to 7 or 8 days if the trade started 7 days out?  Obviously this wont work for all underlyings...thinking of liquid stocks with weeklies like INTC or MSFT  

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The only time I see this as a potential issue is when you introduce the ability to create calendars.

It is probably our main strategy, or close to it.

But, there are certain things about the way we construct them that is "set in stone" , and is a constant.

For example, if we are putting on a calendar in the period leading up to earnings, the front expiration, which we are selling, will ALWAYS be the 1st expiration after earnings.

Then, there are other variables that are pretty consistent, but do change from time to time depending upon the specific underlying.

Some of those considerations are,.....are there very liquid weeklies?

We will ALWAYS sell the 1st expiration post earnings.

But, beyond that, we may buy the following week (ex. GOOG) or more commonly the first monthly because of the extra liquidity.

You program is really great and on the right track but, as we move along, these are a few examples of things you might need to tweak.

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Apple Inc (NASDAQ:AAPL) Earnings Pose a Serious Opportunity


 

AAPL_logo_builing_color.jpg



Date Published:  
Written by Ophir Gottlieb 

LEDE 
While all the focus is on Apple Inc (NASDAQ:AAPL) earnings, the really serious opportunity in the option market is actually after earnings. 

APPLE INC AFTER EARNINGS 
Apple Inc (NASDAQ:AAPL) has a tendency after earnings to trail off. That is, the stock tends to move in one direction or the other for the following month, and that makes for a wonderful opportunity with options. 

We can examine this, objectively, with a custom back-test. Here is our custom earnings set-up: 

 

setup_1_30_after_custom_e.PNG



Said plainly, we will open our position one day after earnings, and close it 30 days after. We are testing using the 30-day options (monthly option) and we are buying the at-the-money (also called the "50 delta") straddle. 

Here are the results over the last three-years: 

 

AAPLls_3yrs_ce.PNG



That's not a typo -- that's 371% over the last three-years. Since we are only testing an one-month trade in the most recent 11 earnings releases, that return came after just 11-months of a holding period. We note that the straddle was a winner 6-times, and a loser 5-times. So, this is not a panacea, not a magic bullet, it is objective analysis that has been a giant wealth creator over time

The trade was a winner about half of the time -- the winners were just much (much) larger than the losers. Here are the results over the last two-years: 

 

AAPLls_2yrs_ce.PNG



Now we see a 183% return over the last seven earnings releases. The straddle was a winner 4-times, and it was a loser 3-times. Again, the trade was a winner about half of the time. This is a strategynot an one-time gamble

Finally, we examine the last-year: 

 

AAPLls_1yrs_ce.PNG



That's a 55.2% return over the last three earnings releases, with 1-winning trade and 2-losing trades. 

For the curious trader, it turns out the putting a stop loss in place actually yields better results over the last two-tears and one-year and takes 30% less risk. We tested that by simply doing this: 

 

setup_70limit.PNG



WHAT HAPPENED 
Traders that have a plan guess less. This is how people profit from the option market -- it's preparation, not luck. Take an idea, test it over several periods, note the robustness of the results, and apply lessons learned. 

To see how to do this for any stock and for any strategy with just the click of a few buttons, we welcome you to watch this quick demonstration video: 
Tap Here to See the Tools at Work

Thanks for reading. 

Risk Disclosure 
You should read the Characteristics and Risks of Standardized Options

Past performance is not an indication of future results. 

Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment. 

Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition. 

The author is long shares of Apple Inc (NASDAQ:AAPL) stock as of this writing. 

Back-test Link

 

 

 

 

 

 

Edited by Ophir Gottlieb

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I'm doing the same backtest and, while the returns are nearly identical to yours, the win% is 33% -49%, and a few in between (6 months, 1, 2, 3 years), never reaches 50%

This is for the ATM straddle with 30 day rollover.

Enter 1 day after, exit 30 days after.

But, I have a more important question....the premise of your post was that , particularly in the case of AAPL, the day after earnings are released, the stock chooses it's direction, and then continues on in that same direction for about the following month.

I'm not doubting this at all but, if this is the case, then why are you buying straddles?

Wouldn't it be better to let the market tell you which direction it has chosen, and then put on a directional trade to follow that trend?

I just have to think about how to setup a backtest for this because we can't pick a direction until after the earnings have occurred in every case.

Any ideas?

 

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I have not figured out the best way to setup the most optimal backtest for this.

But, I wanted to follow up on the idea you presented about AAPL choosing it's direction, for the month, AFTER earnings are released.

If true, there is no need to waste time with a straddle.

So, just to start, I chose "BUY", "Call Spread", 1 day after earnings, exit 30 days after earnings, with a 30 day rollover......

Check this out.......

http://tm.cmlviz.com/index.php?share_key=USS6wRysjVwNUM8B

700% returns over the past 3 years!!!!!

And I have not yet figured out the ideal parameters to use to make this a much better backtest.

I wonder if, in order to decide which direction to go with, you could add some kind of filter that is an "if/then" sort of thing.

Whereas the "if" is where the stock goes immediately after earnings are released.

"if" up, "then" buy call spread ( or any other positive delta position, and vice versa if Down)

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Just now, cuegis said:

I have not figured out the best way to setup the most optimal backtest for this.

But, I wanted to follow up on the idea you presented about AAPL choosing it's direction, for the month, AFTER earnings are released.

If true, there is no need to waste time with a straddle.

So, just to start, I chose "BUY", "Call Spread", 1 day after earnings, exit 30 days after earnings, with a 30 day rollover......

Check this out.......

http://tm.cmlviz.com/index.php?share_key=USS6wRysjVwNUM8B

700% returns over the past 3 years!!!!!

And I have not yet figured out the ideal parameters to use to make this a much better backtest.

I wonder if, in order to decide which direction to go with, you could add some kind of filter that is an "if/then" sort of thing.

Whereas the "if" is where the stock goes immediately after earnings are released.

"if" up, "then" buy call spread ( or any other positive delta position, and vice versa if Down)

 

So, it's a riskier trade. You do have the benefit of watching the stock pot earnings and using "human intervention," but still... it's a riskier trade.

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2 minutes ago, cuegis said:

So, just to start, I chose "BUY", "Call Spread", 1 day after earnings, exit 30 days after earnings, with a 30 day rollover......

Check this out.......

http://tm.cmlviz.com/index.php?share_key=USS6wRysjVwNUM8B

Note to others trying to duplicate this with the link.  Apparently the *Custom* earnings handling does not get included in the link.  You need to change it manually.

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Just now, ChadK said:

Note to others trying to duplicate this with the link.  Apparently the *Custom* earnings handling does not get included in the link.  You need to change it manually.

Correct. We released it as fast as possible, so the URL tagging isn't up yet. Very good note to all.

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4 minutes ago, Ophir Gottlieb said:

 

So, it's a riskier trade. You do have the benefit of watching the stock pot earnings and using "human intervention," but still... it's a riskier trade.

Well, it is a straight out directional trade, so of course you are working in a riskier arena.

But, these results, on a not so ideal, backtest, speaks for itself.

Yes. human intervention has to be involved, at some point, but I think there is something to this.

How did you arrive only at AAPL as something that has historical consistency to following a trend that follows the post earnings move?

Was it just by chance?

Or, do you have some other way of screening for this sort of thing?

There are many viable stocks that behave this way.

Now it is time to scan out a list of candidates.

 

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  • Similar Content

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      LEDE 
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      Risk Disclosure 
      You should read the Characteristics and Risks of Standardized Options. 

      Past performance is not an indication of future results. 

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