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Yowster

2017 Year End Performance by Trade Type

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@Yowster Thank you for the excellent analysis as usual. And big thank you to our great community that continues to feed us with great trading ideas.

Straddles definitely took a central stage this year, thanks to hedged straddle idea from @Yowster. Not only it improved the average return per trade, but did it with less risk and allowed us to take much more of those trades.

Trading VIX spike was ugly in 2017 (we are not alone, see How To Lose $197 Million Trading VIX article), but it also provided us a nice hedge.

Big thank you for other mentors for their great ideas @SBatch and others, and of course our partners from Lorintine @cwelshand @Jessefor their great contribution.

We had an amazing year, and I'm looking forward to have a great 2018!

Happy New year everyone!

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Thanks for taking the time do put this together @Yowster.

The community here on SO really is pretty awesome.  We are fortunate to be able brainstorm, innovate,argue,and ultimately trade almost every day.

2017 was good for me personally from a profitability standpoint but it was amazing educationally.  There is always something to learn regardless of our skill level

Edited by RapperT

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12 minutes ago, jr1221 said:

Really nice analysis.  I'm curious about the hedged straddles...if the average gain is only about 1.5% better overall, wouldn't the additional commissions be offsetting all of the upside?

@jr1221No, not the case.  The commission effect of the short strangles is much less than 1.5% (less shorts than longs and closing options for a few cents is usually much lower commissions).  In fact, for these hedged straddle trades my average commissions effect is right around 1% for each trade - which includes opening and closing both longs and shorts.   Also, don't lose sight of the fact that the short strangles allow us to enter these trades earlier and have them in play for longer periods of time, thereby giving more time for the stock to move and produce gamma gains.

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Thank you @Yowster!. 

I was just double checking because I am mainly interested in knowing the percentage of Vega + trades.

Anyway, could you please tell me how you calculate the Average Gain per trade type?. I might be doing something wrong, but according to my calculations, Pre-earnings Straddles/Strangles provided 6720$ profit last year and taking into account that there were 78 of these trades, 5,02% seems a bit low. 

Thank you again!

 

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4 hours ago, Fran said:

 

Thank you @Yowster!. 

I was just double checking because I am mainly interested in knowing the percentage of Vega + trades.

Anyway, could you please tell me how you calculate the Average Gain per trade type?. I might be doing something wrong, but according to my calculations, Pre-earnings Straddles/Strangles provided 6720$ profit last year and taking into account that there were 78 of these trades, 5,02% seems a bit low. 

Thank you again!

 

@Fran the gain/loss% percentage numbers for individual trades were taken directly from Kim's Performance Page.

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8 hours ago, Fran said:

 

Thank you @Yowster!. 

I was just double checking because I am mainly interested in knowing the percentage of Vega + trades.

Anyway, could you please tell me how you calculate the Average Gain per trade type?. I might be doing something wrong, but according to my calculations, Pre-earnings Straddles/Strangles provided 6720$ profit last year and taking into account that there were 78 of these trades, 5,02% seems a bit low. 

Thank you again!

 

Remember that, even though the trade alerts are all based on a the same $1000 per trade, the results by trade on the performance page are compounded, so as the year goes on and profits grow, the amount per trade increases. Also, they're normalized in the sense that the trade amount is assumed to have been 10% of the portfolio at the point the trade was made, even though it may not have been possible to construct a trade that was exactly for that amount.

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On 19/3/2018 at 2:46 AM, greenspan76 said:

Remember that, even though the trade alerts are all based on a the same $1000 per trade, the results by trade on the performance page are compounded, so as the year goes on and profits grow, the amount per trade increases. Also, they're normalized in the sense that the trade amount is assumed to have been 10% of the portfolio at the point the trade was made, even though it may not have been possible to construct a trade that was exactly for that amount.

I see. That may explain it. Thank you!.

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Hi Yowster,

This was a great post that was helpful to see the return profile of each strategy.  

I know official SO trades are based on $1000 position size equally weighted for each position regardless of strategy type but if the straddles have lower risk than the calendars, would it make sense for someone to scale up the number of contracts used when it is a straddle trade vs. a calendar trade?  Essentially like a "risk parity" type strategy where you try to make the risk level equal between each of the strategies?   


Thanks.  

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10 minutes ago, FrankTheTank said:

Hi Yowster,

This was a great post that was helpful to see the return profile of each strategy.  

I know official SO trades are based on $1000 position size equally weighted for each position regardless of strategy type but if the straddles have lower risk than the calendars, would it make sense for someone to scale up the number of contracts used when it is a straddle trade vs. a calendar trade?  Essentially like a "risk parity" type strategy where you try to make the risk level equal between each of the strategies?   


Thanks.  

The hedged straddles are indeed far less riskier trades, assuming that trade entry was at decent prices based on prior history.   But on the flip-side, gains over +10% are very good for straddles but are just ok for calendars which are bit riskier - not high risk by any means, but riskier than hedged straddles.   Given that background, it makes sense that you can use a larger allocation for a less risky trade type.   However, with the model portfolio, we can run into sizing issues if we have a lot of trades active and some are at larger allocations.  So, the 10% (or close to $1000) allocation size for official trades will remain intact - I think people use a wide variety of trade allocation sizes anyway, so I think users can elect to use larger sizing for their hedged straddle trades if they want to (I tend to do this with my own trades) .    Also, I try to put in the trade discussions to use different ratios, with their corresponding larger allocation sizes, where I think they will work and perform better when the stock price has a significant move.

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@FrankTheTankYou are absolutely right, and in fact, we now allocate half position to most calendars, to spread the risk. We also trade position larger than $1,000 for many hedged straddles if they don't fit into $1,000 allocation. But officially we still consider it 10%.

SO Strategies and Allocation Guidelines offers some more insights.

 

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