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As I’ve done the past few years, I’ve broken down the Steady Options 2019 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... Pre-Earnings Calendars 54 Trades – 35 win, 19 loss (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: We had both our largest number of calendar trades and the lowest percentage of winning trades, but still good as we had right around 2 winners for every 1 loser. Market had quite a few VIX spikes with corresponding larger stock price movements. This led to our overall win/loss percentage to be lower as there were a number of trades where the stock price moved too much. Contribution was very positive on overall portfolio performance. Pre-Earnings Straddles/Strangles 106 Trades - 72 win, 34 loss (68% win) – Average Gain +3.58% Breaking down further by hedged and non-hedged: Hedged – 37 win, 15 loss (71% win), average gain +4.41% Non-Hedged – 35 win, 19 loss (65% win), average gain +2.78% 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: Its a little apples vs oranges when we compare the non-hedged straddles. This year we did a lot of short-term straddle trades over the last few days prior to earnings (tools such as VolatilityHQ and ChartAffair have made the analysis of this type of trade much easier). So, the lower average gain percentage is ok given that most of the short-term straddle were only open for 1-3 days. Hedged straddle winning percentage and average gain were down a bit from prior couple of years. I believe this was caused by middling VIX levels during the year, time periods where the VIX was neither too high to avoid entering trades nor too low to have minimal risk of larger than normal RV decline due to VIX dropping for hedged straddles held open for multiple weeks. Very low risk trades as it takes RV levels going much lower than prior cycles for these trades to be significant losers. I am not surprised that the average gain for all straddles (hedged and non-hedged) is lower, as this is a result of short-term straddle trades held open for only a few days. The positive aspect of this is we were able to open more trades, so when you multiply the average gain x number of trades the positive contribution to the overall portfolio performance was good and in line with prior years. Index trades (SPX, TLT, EEM, XLV) 20 Trades – 12 win, 8 loss (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: 4 big losing trades SPX (-100%, -100%, -72.9%) and TLT (-100%) killed the performance of these trades this year. Typically longer duration trades, can be open for 30+ days. Most of these trades were half-allocations, but even at that level the large losing trades have a big impact on the overall portfolio performance. VIX-based trades 3 trades – 0 win, 3 loss (0% win) – Average Loss –66.43% 2018: 14 trades (40% win) – Average Loss -10.89% 2017: 16 trades (75% win) – Average Gain +9.25% 2016: 16 trades (56% win) – Average Gain +1.34% Comments: 3 losing trades which play for VIX to fall from highs, or looking for movement in either direction all failed. Going forward, we will not be using VIX-based trades as these types of trades are in the PureVolatility portfolio. Reverse Iron Condor (RIC) trades 13 trades – 8 win, 5 loss (62% win) – Average Loss -4.39% 2018: 7 trades (100% win) – Average Gain +30.96% Comments: RICs did great in late 2018 when VIX stayed above 20. We used them in the early part of 2019, but as VIX fell back below 20 we had some outsized losses which resulted in an overall small loss per trade despite having more winnings trades than losing trades. RICs are trades that we may use in the future when the VIX gets very high, but we are unlikely to use them in other timeframes. Ratio Trades 28 trades – 18 win, 10 loss (64% win) – Average Gain +2.01% Comments: New trades for this year, based on TrustyJules research and trades. Similar to straddles in that straddle RV is an important aspect of trade performance, but unlike straddles in that the trade looks for stock price movement in one particular direction (almost all trades used calls to look for stock price to go up). A few mid-sized losers lowered average gain%, as larger than normal RV declines caused the trades to lose more than what was expected. Broken-wing Butterfly (BWB) Trades 8 trades – 6 win, 2 loss (75% win) – Average Loss -5.20% Comments: One big -96% losing trade exceeded the gains from all winning trades. Risk/reward is about equal with these trades, but the caveat is that to hit the really big gains you need to hold until expiration day and have the stock price in a tight zone. Conversely, bigger losses can accumulate quicker on stock movement. Given the current trade allocations, will likely avoid these trades in the future to limit risk Summary 2019 Steady Options model portfolio is likely to be around +40% for the year, which is very good for a stock or fund performance in general, but well below the typical SO level. When you dig into the above numbers you see that the overall contribution from our “bread and butter” calendars and straddle trades is on par with prior years (multiply avg gain per trade by number of trades). We had some very large losing trades, and of the top 10 losers only one was from the calendar or straddle trades (and it was at #10). Take away those 10 biggest losers and the model portfolio gain gets to almost +90%. Going forward, a goal is to avoid those bigger losses – here are a few ideas along those lines: Of the -100% losers (or close to it), we see SPX/TLT/VXX butterflies and the stock-specific MMM butterfly. These trades can have very big gains, or very big losses – and the losses can accrue fairly quickly on significant stock price moves in the wrong direction. Even at half allocation, these big losses can have a large negative impact on the overall portfolio performance. However, their potential large gains can be enticing. An idea here is to create a quarter allocation trade, where occasional outsized losses would not be a devastating – and the occasional huge gains would still have a positive impact. Closing early at loss levels is another possibility here, but a large gap in stock price movement in the wrong direction could still lead to a large percentage loss. RICs have 3 of the top 10 biggest losers, they suffered during the timeframe early in the year when market volatility was coming down from highs at the end of 2018 into early 2019. RICs offer great risk/reward setup where 100%+ gains are very possible, but so are big losers. RICs would also be best served by a quarter allocation trade size. In summary, our bread and butter calendar and straddle trades have been consistent performers over the years, and this year too. We have lots of experience with them and tools available to quickly analyze trades (longer term SO members remember back a few years where analysis for these trades was not nearly as easy). So, stick with what has consistently worked. We should be more careful with some of the other trade types, particularly those where bigger percentage gains and losses are possible. As always SO is a great community, where members sharing their ideas and experiences allow us all to learn. Looking forward to a successful 2020. 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