2022 Year End Performance By Trade Type

[Yowster]

 

As has become my end of year tradition, I’ve broken down the Steady Options 2022 trade performance by trade type.  Numbers were taken directly from the data in the Performance screen.  Here’s are this year’s stats along with some comments from my perspective.  Where applicable, I added totals from prior years for comparison.

 

While 2021 appeared to be the start of a return to a more normal market behavior, volatility was back again in 2022 with the VIX staying above 20 for almost the entire year.   This meant RV’s for both calendars and straddles were elevated, so the year was dominated by shorter-term straddle trades as a way to keep downside risk lower, very few calendars and a new combo trade using indexes such as SPY and QQQ.

 

Pre-Earnings Calendars

• 11 Trades – 7 win, 4 loss (64% win) – Average Loss -9.55%
  • 2021:  110 trades (79% win) – Average Gain +12.82%
  • 2020:  33 trades (85% win) – Average Gain +21.97%
  • 2019:  54 trades (65% win) – Average Gain +9.27%
  • 2018:  40 trades (78% win) – Average Gain +9.61%
  • 2017:  31 trades (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:
  • Lowest number of calendar trades we’ve had since we started using the strategy.  This is due to much higher RV levels and stocks moving more with the higher market volatility.
  • Although there were more winning trades than losing trades, several outsized losses caused the combined return to be negative.
  • This is still a core SO strategy, and we’ll do more of them once market volatility returns to more normal levels.

 

Straddles/Strangles

• 148 Trades -  103 win, 40 loss, 5 break-even (71% win) – Average Gain +4.89%

Breaking down further by hedged and non-hedged:

            Non-Hedged – 97 win, 36 loss, 5 break-even (72% win), average gain +5.24%
            Hedged – 6 win, 4 loss (60% win), average gain +0.14%

• • 2021: 129 trades (68% win) – Average Gain +3.27%
  • 2020: 118 trades (67% win) – Average Gain +2.80%
  • 2019: 106 trades (68% win) – Average Gain +3.58%
  • 2018: 72 trades (83% win) – Average Gain +5.40%
  • 2017: 77 trades (79% win) – Average Gain +5.02%
  • 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:
  • Highest ever number of straddle/strangle trades.
  • The vast majority of these trades were short-term, one or two day straddles or tight strangles using stocks identified by RV charting tools as being good candidates.   The short-term trades were used with the goal of keeping downside risk lower – and this is exactly what happened as only 8 of the 148 trades had losses above 10% (and none more than 15%).   On the winning side, 50 trades had gains above 10%.
  • Both the win rate and average gain per trade were very good given the short durations of most trades.
  • Only a few hedged straddles were used this year.   Since RV was higher, we wanted to avoid giving trades more time for RV to decline.
  • Very low risk trades as it takes RV dropping much more than their prior cycle tendencies to be significant losers.

  

Index trades (SPY, QQQ, IWM)

• 50 Trades -  37 win, 13 loss (74% win) – Average Gain +2.07%

Breaking down further:

           Combo New (Friday/NextFriday) – 9 win, 1 loss (90% win), Avg gain +5.24%
           Combo Old (Friday/Monday) – 24 win, 9 loss (73% win), Avg gain +2.07%

            Friday Flys – 4 win, 3 loss (57% win), Avg Loss -3.19%

• • 2021: None
  • 2020: 19 trades (63% win) – Average Gain 9.54%
  • 2019: 20 trades (60% win) – Average Loss -7.71%
  • 2018: 22 trades (86% win) – Average Gain +15.35%
  • 2017:  9 Trades (89% win) – Average Gain +19.72%
  • 2016: 27 Trades (67% win) – Average Gain +3.01%
• Comments:
  • We started using a combo trade on indexes, initially a 5-leg trade held for 3-5 days using Friday/Monday expirations.   Trade initially performed well, but when market volatility started dropping we saw losses above 10% becoming too common.
  • So, we then began to use a new combo setup, a 4-leg trade held for 3-5 using Friday/NextFriday expirations.   The goal was to keep losses smaller because having the long expiration a week after the shorts would allow it to retain more of its value.   To date, it has played out that way with only 1 smaller losing trade out of 10 (compared to 6 losses above 10% of the 33 trades using the Friday/Monday expiration).   We plan on continuing to use the Friday/NextFriday combo going forward.
  • The Friday Flys were designed to be opened and closed on the same day.  They back-tested very well, but turned out to be volatile to manage so we stopped using them.

 

Other Trades

• A handful of some miscellaneous trades, most of which turned out to be losing trades.

 

Summary

2022 Steady Options model portfolio was up around +90% for the year.   This result was below some years, but note that we didn’t use calendar trades this year due to the volatile market climate – and calendars have historically always been our highest average gain per trade.   Going with mostly lower risk, short-term straddles and tight strangles kept us away from trades with bigger losses, but also kept us away from trades with larger gains – so that 90% yearly gain is good based on the more conservative trades we primarily used this year.

  

As always, I’d like to highlight and thank the SO community.   We continue to have a group of very smart people that seems to grow each year who share their ideas and knowledge – this is what makes SO great.  

 

Looking forward to 2023.

 

2021 Year End Performance by Trade Type

2020 Year End Performance by Trade Type

2019 Year End Performance by Trade Type
2018 Year End Performance by trade type.
2017 Year End Performance by Trade Type
2016 Year End Performance by Trade Type
2015 Year End Performance by Trade Type

 

[Kim]

Thank you @Yowster for the excellent summary!

 

To put things in perspective, we had 215 trades in 2022, lower than our long term average, and average holding period was just 3 days, due to higher IV and higher risk. It means that we utilized only around 20-30% of the portfolio on average, with the rest in cash. 90% return that we reported was on the whole portfolio - if we reported return on invested capital (like other services do), we would be reporting over 300% return.

Thank you again to everyone for their support, and of course special thanks to our contributors @Yowster @krisbee @cwelsh @Jesse and @SBatch

We would like to wish everyone Happy Holidays, Happy New Year and healthy and prosperous 2023!

[Kim]

2022 Performance By Strategy

Many thanks to @krisbee for compiling the report!

[project]

Hi, I just received the email promoting Simple Spreads portfolio:

"I believe 2022 provided a very convincing answer.

While S&P 500 was down 20% and Nasdaq 33%, our SS model portfolio produced a 2.1% gain. Considering the bear market, and the strategy being a leveraged bullish strategy, I would consider this result beyond amazing. Thank you again @krisbee for navigating the trades through this challenging market!
I can only imagine how this strategy will perform in a bull market.."

Simple Spreads was already active in 2021 and I would consider it a bull market with S&P performing 26.89%, but  Simple Spread performend 0.4% in 2021. You might want to clarify why it would performe better in the next bull market than in the last.

[Kim]

Not sure why you are posting here. this is SO topic not SS.

Anyway, SS has a new manager since the beginning of 2022, and we revised the stock selection and the risk management. I'm sure SS will have an amazing performance when the next bull market comes, but it already saved the members tons of money during the bear market of 2022.

[project]

19 hours ago, Kim said:

Not sure why you are posting here. this is SO topic not SS.

Anyway, SS has a new manager since the beginning of 2022, and we revised the stock selection and the risk management. I'm sure SS will have an amazing performance when the next bull market comes, but it already saved the members tons of money during the bear market of 2022.

 

Thanks for your response. So the Lorintine Capital who were managing the SS before in 2021 (and offer Managed Accounts) were not qualified for performing in bull market and your new manager is more experienced in stock picking. In this case, let the bull market come.

 

[Kim]

1 hour ago, project said:

 

Thanks for your response. So the Lorintine Capital who were managing the SS before in 2021 (and offer Managed Accounts) were not qualified for performing in bull market and your new manager is more experienced in stock picking. In this case, let the bull market come.

 

This is your interpretation..