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A few weeks ago we introduced a new strategy to our members. While a double diagonal spread is a well known strategy, we are trading it with a tweak. The double diagonal strategy is part of SteadyOptions service, along with straddles, strangles, calendars etc. One of our members have mentioned that "I realize they are lower risk in the sense that they can be open longer without big losses, but feels to me like playing not to lose." Here is a response from our contributor @Yowster who introduced the strategy: Well... Lay me outline reasons why I like them (and I've been doing a ton more of them in personal trades in addition to the official ones, and are tracking even more of them). They are extremely low risk, of all the trades I've had on or tracked only one (a DE personal trade) was down by 10% or more at any given time provided I exit prior to T-0, and I wound up able to close that one for a small gain. I've had many make gains of 15% or more (NVDA, SQ, PANW were recent trades I closed within the past few days that fall into this category). Of the trades I've placed since January (about 25 of them), roughly 75% of them have been winning trades with an average gain across winners and losers of ~5% (and there were a few large winners like BA and MRNA that I only tracked and didn't have on). I compare the results to straddle trades since they have similar profit targets, although holding periods can be longer. Compare a 75% win rate with ~5% average gain to our historical straddle results found here and these DD returns are very good. One of the common things heard from many members over the years is that the shorter duration straddle trades are difficult to manage when they can't be watching the market all the time. DD's don't fall into this category as they can be open for longer periods of time, you can easily have GTC orders to close at profit targets and you don't have to worry about avoiding larger losses when RV suddenly spikes downward - so DDs are very good trades for people who can't be watching the market all the time. Regarding the "playing not to lose" comment. Managing downside risk as much as possible is one of my primary goals with SO trades, as larger percentage losses can have a large negative impact on portfolio performance. I look at DDs simply like this - I can have roughly 75% of trades be profitable (some smaller gains, but quite a few over 10% and some getting to 20%), but have almost all losses limited to below 10% (most losers below 5%) and that math works out very well over the longer term. Currently, we have 4 DDs open as official trades and this will be the most you are likely to see at any given time - thereby leaving plenty of slots for other trade types. Members have different risk tolerances so not every trade type we use is a good match for all members. But for people who can't be monitoring the market all the time and for some trades where you'd like a higher capital allocation because of the lower downside risk, DDs can be a good match this category. As one of our members mentioned: "Regarding the "playing not to lose" comment. Managing downside risk as much as possible is one of my primary goals with SO trades, as larger percentage losses can have a large negative impact on portfolio performance. I look at DDs simply like this - I can have roughly 75% of trades be profitable (some smaller gains, but quite a few over 10% and some getting to 20%), but have almost all losses limited to below 10% (most losers below 5%) and that math works out very well over the longer term. Many option forums or traders will report a win percentage, total percentage over a few years. However, I will say that over long periods of time, the unlikely occurrence of a higher risk/higher return strategy of will greatly reduce a portfolio. The cost of the extra options easily is worth the alleviation of risk. If you look at their historical performance. This was once of there better performing trades over time. So thank you Yowster. I also like that some trades are large enough stocks that you can exceed the recommended allocation without significantly effecting the float with a larger trade, as a straddle/strangle under a dollar needs is less desirable for me. I completely respect this strategy is for a 100k portfolio. I may be trading occasionally more, but that's a different topic that has been discussed I believe." My 2 cents: To put things in perspective, we closed 9 DDs so far with average return of 5.1% and average holding period of 9 days. Only 2 losers, both 2-3%, and none of the trades was down more than 5% at any given time. Even when the stock doesn't move, the losses are minimal. If someone believes that 5% is not a good return for options trades, I suggest reading Is 5% A Good Return For Options Trades? Yes, some options gurus will tell you that you should aim for at least 100% gain in each option trade, otherwise it is not worth the risk. What they don't tell you is the risk you will be taking. So I would say that on risk adjusted basis, those results almost too good to be true. They are also pretty easy to open, and because the holding periods are longer than straddles, members have more time to enter. Closing can be done with GTC order, and many times members get better results - just check the previous DD discussion topics. Commissions impact is negligible - in today's environment, many brokers have zero commissions, and even for people who pay 0.30-0.50 per contract (which is high by the current standards), the commissions impact is less than 0.5% per trade. As for the statement "playing not to lose" - guilty as charged. Limiting losses is our main goal at SteadyOptions. And if you look at our track record, in the last 12 years we were able to produce triple digit gains while keeping the drawdowns very small. I can only salute @Yowster for constantly coming with new variations of well known strategies in every market environment. Another consideration is trade allocation. Lets say you are willing to risk 2% of the account per trade. If you know that the maximum risk is not likely to be more than 10-15%, you can easily allocate 10-12% per trade. But if your risk is 100%, your allocation should not exceed 2% per trade. So your overall performance will not necessarily be better with high risk high reward trades, but with much higher risk. So yes, we are playing not to lose. Keeping your losers small is one of the key elements in trading. Subscribe to SteadyOptions now and experience the full power of options trading at your fingertips. 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This article will shows how this works, and how IV can affect your decision on what type of trade to open. Directional Spreads Let’s start with the simplest of options spreads, the put or call vertical spread which is often used as to place a trade for a stock to move in a certain direction. Here’s a slightly OTM (Out of The Money) call vertical debit spread on AAPL about a month away from expiration (a popular spread to play for stock price to rise). The stock price is $182 and the call vertical is long the 185 call and short the 190 call. Note the highlighted Vega section that will illustrate some important points regarding IV: When the spread strikes are OTM (stock price is below both long and short call strikes) the trade is vega positive. This means while the spread remains OTM, increasing IV will help it retain more of its value. As the stock price rises toward the spread strikes the degree of vega positive becomes less. It eventually becomes vega neutral at roughly the break-even point for the spread at expiration. As the stock price rises even farther, approaching the higher short strike and beyond, the trade will become vega negative. This means when the spread is ITM (In The Money), decreasing IV will help the value get closer to the spread width (the max gain). How can this factor into a trade opening decision? When opening a bullish call vertical spread when IV is elevated it may help to enter near the vega neutral position with the long strike ITM and short strike OTM. This will be likely be a setup where the max gain is equivalent to the max loss. If the stock price rises then you’ll hit the point where the spread becomes vega negative sooner, so any drop in IV won’t hurt. Conversely, if opening when IV is lower you can start out with both legs of the call vertical being OTM. This will give you a setup where the max gain is higher than the max loss, but you know that any further IV decline is less likely and therefore the downside risk due to dropping IV is not as high so it can be ok even though it will take more of a stock price rise to get to the point where the trade turns vega neutral and then vega negative. Spreads for Minimal Stock Price Movement I’m now going to focus on common spreads to play for minimal stock price movement. The Iron Condor (IC) is one such spread and shown in the following chart, it consists of both an OTM put credit spread and an OTM call credit spread. When the stock price is in the winning position between the wings it is vega negative meaning an IV drop will accelerate profit growth above the level that just time decay would generate. Conversely, an IV rise will decelerate profit growth. Also note that when the stock price gets to the losing zones within and beyond the wings, the IC becomes vega positive meaning an IV rise would help keep the losses smaller. How can this impact a trade opening decision? Opening an IC when IV is low means that you’ll have to use closer to ATM strikes to get the same opening credit compared to times when IV is higher when you can get the same credit with farther OTM strikes. Also, when opening with low IV a further IV decline is less likely, so you won’t get the accelerated profit growth when IV drops. Opening an IC when IV is somewhat elevated means to can go farther out with strikes (so a bigger stock price move is required to get to the losing zones) and any IV decline can accelerate profit growth provided the stock price doesn’t make a significant move. Many people don’t like Iron Condors due to their risk vs reward where the max loss is higher than the max gain. Let’s look at two other common spreads to play for minimal stock price movement that have more equal risk vs reward and how IV can factor into which one to use. The first is the calendar spread, which commonly uses the ATM strike when playing for minimal stock price movement. The primary gain catalyst is theta decay (and minimal stock price movement) but IV can also factor in. As shown on the chart below, its vega positive everywhere meaning that rising IV will always help the trade. Rising IV will both increase the gain potential and widen the profit tent. Declining IV will lower the gain potential and tighten the profit tent. The other common spread to play for minimal stock price movement is the butterfly spread. Its PnL chart looks very similar to that of the calendar with a balanced risk vs reward and similar break-even points. The primary gain catalyst is the same as the calendar, theta decay and minimal stock price movement. But there is one important difference, the butterfly is vega negative when in the winning zone meaning that declining IV will allow gains to grow at a quicker rate. How can this impact a trade opening decision. When IV is lower, further IV decline is less likely so using a calendar is a good choice as any rise in IV can help the trade. However, when IV is elevated and IV decline is more likely then a butterfly can be a good choice as any decline in IV can help the trade. Spreads for Stock Price Movement in any direction I’m now going to focus on common spreads to play for significant stock price movement, either up or down. A long straddle or long strangle consists of only long legs, so they are always vega positive. Rising IV will lessen the impact of negative theta, falling IV will add more price decrease to that of negative theta alone. This is why straddles and strangles are typically used in the timeframe before earnings where you have the virtually guaranteed IV increase to counteract some of the negative theta. A reverse iron condor (RIC) is the inverse of the iron condor. It consists of and OTM call debit vertical spread and an OTM put debit vertical. How far away from ATM you go impacts the risk vs reward setup. Note that the RIC is vega positive when in the losing zone between the put and call wings, so any IV decline will accelerate losses. The trade becomes vega negative when the stock price moves into a winning zone, so if you get the stock price to move then you are guaranteed to have a winning trade regardless of what happens with IV. There are certainly more complex trade setups to use in any of these scenarios, but I’ve covered some of the most popular trades and you can see how current IV can impact your decision to use one trade setup instead of another.

Performance Dissected Check out the Performance page to see the full results. Please note that those results are based on real fills, not hypothetical performance, and exclude commissions, so your actual results will be lower, depending on the broker and number of trades. Please read 2022 Year End Performance by Trade Type for full analysis of our 2021 performance. We have extensive discussions about brokers and commissions on the Forum (like this one) and help members to select the best broker. Please refer to How We Calculate Returns? for more details. The 90% annual return was below our long term average, 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 long straddles and tight long strangles kept us away from trades with bigger losses, but also kept us away from trades with larger gains. While the markets were down 20-30%+ (their worst year since 2008), we consider a 90% return pretty good. After 11 years in business, SteadyOptions maintains its position as the most stable and consistent options trading service, with 123.2% Compounded Annual Growth Rate. We proved again that we can make money in any market. As one of our members mentioned: "I would rate the 3% profit for March 2020 as even MORE successful than the 25% profits for Jan/Feb. If someone can make a profit in a month when there was total carnage in the markets, then that shows resilience and security in the trading strategies. It shows that even during a black swan event, the system works, and the account will not be blown." Our strategies SteadyOptions uses a mix of non-directional strategies: earnings plays, Long Straddle, Long Strangle, Calendar Spread, Bitterly, Iron Condor, etc. We constantly adding new strategies to our arsenal, based on different market conditions. SO model portfolio is not designed for speculative trades although we might do some in the speculative forum. SO is not a get-rich-quick-without-efforts kind of newsletter. I'm a big fan of the "slow and steady" approach. We aim for many singles instead of a few homeruns. My first goal is capital preservation instead of doubling your account. Think about the risk first. If you take care of the risk, the profits will come. What makes SO different? We use a total portfolio approach for performance reporting. This approach reflects the growth of the entire account, not just what was at risk. We balance the portfolio in terms of options Greeks. SteadyOptions provides a complete portfolio solution. We trade a variety of non-directional strategies balancing each other. You can allocate 60-70% of your options account to our strategies and still sleep well at night. In 2022 we use around 30% of our capital 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. Our performance is based on real fills. Each trade alert comes with a screenshot of our broker fills. We put our money where our mouth is. Our performance reporting is completely transparent. All trades are listed on the performance page, with the exact entry/exit dates and P/L percentage. It is not a coincidence that SteadyOptions is ranked #1 out of 723 Newsletters on Investimonials, a financial product review site. The reviewers especially mention our honesty and transparency, and also tremendous value of our trading community. We place a lot of emphasis on options education. There is a dedicated forum where every trade is discussed before the trade is placed. We discuss different strategies and potential trades. Unlike most other services that just send the trade alerts, our members understand the rationale behind the trades and not just blindly follow the alerts. SO actually helps members to become better traders. Other services In addition to SteadyOptions, we offer the following services: Anchor Trades - Stocks/ETFs hedged with options for conservative long term investors. Steady PutWrite - puts writing on equity indexes and ETF’s. Simple Spreads - simple spread strategies like diagonals and verticals. SteadyVol - Volatility based trades. We offer all services bundle at $2,495 per year. This represents up to 63% discount compared to individual services rates and you will be grandfathered at this rate as long as you keep your subscription active. Details on the subscription page. More bundles are available - click here for details. Subscribing to all services provides excellent diversification since those services have low correlation, and you also get the ONE software for free for 12 months with the yearly bundle. We also offer Managed Accounts for Anchor Trades and Steady PutWrite. Summary 2022 was another excellent year for our members. We are very pleased with our performance. SteadyOptions is now 11 years old. We’ve come a long way since we started. We are now recognized as: #1 Ranked Newsletter on Investimonials Top Rated Newsletter on Stockgumshoe Top 10 Option Trading Blogs by Options Trading IQ Top 4 Options Newsletters by Benzinga Top 40 Options Trading Blogs by Feedspot Top 15 Trading Forums by Feedspot Top 20 Trading Forums by Robust Trader Best Options Trading Blogs by Expertido Top Traders and People in Finance to Follow on Twitter Top Trading Blogs To Follow by Eztoolset Top Twitter Accounts to Follow by Options Trading IQ I see the community as the best part of our service. I believe we have the best and most engaged options trading community in the world. We now have members from over 50 counties. Our members posted over 125,000 posts in the last 9 years. Those facts show you the tremendous added value of our trading community. I want to thank each of you who’ve joined us and supported us. We continue to strive to be the best community of options traders and continuously improve and enhance our services. Let me finish with my favorite quote from Michael Covel: "Profits come in bunches. The trick when going sideways between home runs is not to lose too much in between." If you are not a member and interested to join, you can click here to join our winning team. When you join SteadyOptions, we will share with you all we know about options. We will never try to sell you any additional "proprietary systems", training, webinars etc. All our "secrets" are included in your monthly fee. Happy Trading from SO team!

This skill is about blending analytical prowess with a dash of intuition. Think of it as chess, but the pieces are stocks, bonds, and the occasional cryptocurrency. Via Pexels The Art Of Calm And Portfolio Diversification In asset management, not putting all your eggs in one basket isn’t just good advice; it’s a survival tactic. Diversification is your financial calm. It’s about balancing different asset types to mitigate risk. Imagine a tightrope walker juggling while crossing Niagara Falls; that’s you balancing equities, bonds, and alternatives. The goal? Not falling into the turbulent waters of market volatility. Relationship Rodeo: Client Communication And Management You’re not just managing assets; you’re managing people’s dreams and fears. Effective communication with clients is a delicate dance. You need the empathy of a therapist, the persuasion skills of a salesperson, and the patience of a saint. Remember, for every client who understands the stock market, there’s another who thinks NASDAQ is a type of medication. The Sherlock Holmes Of Due Diligence Asset management isn’t just about picking winners; it’s about not picking losers. That’s where due diligence comes in. You need to have the investigative skills of Sherlock Holmes, digging into financial statements, understanding business models, and sniffing out risks. Sometimes, it feels like you’re trying to solve a mystery where the butler, the candlestick maker, and the gardener are all suspects. Risk Management: Playing Financial Jenga Risk management in asset management is like playing a never-ending game of Jenga. Each investment decision can either stabilize or topple your financial tower. This skill involves understanding and managing various risks – market risk, credit risk, liquidity risk, and the occasional existential risk when your coffee machine breaks down. Tech-Savvy: The Digital Wizardry Gone are the days when asset management was done with just a pen, paper, and a phone. Today, you need to be a digital wizard. From algorithmic trading to blockchain, technology is reshaping the asset management landscape faster than you can say “Bitcoin.” Embrace technology, or risk being the financial equivalent of a dinosaur - and not the cool T-Rex kind. GIPS Compliance: The Invisible Tightrope And then, there’s GIPS compliance. Think of it as the invisible tightrope you walk every day. For the uninitiated, GIPS (Global Investment Performance Standards) ensure fair representation and full disclosure of investment performance. It’s like the referee in a football game - you don’t always notice them, but they’re essential for fair play. The Financial Chef: Crafting Investment Strategies Finally, crafting investment strategies is like being a chef in a high-end restaurant. Each client is a patron with unique tastes and dietary restrictions. Your job is to craft a menu (investment strategy) that delights yet adheres to their risk appetite. It’s a blend of creativity, precision, and occasionally dealing with the kitchen catching fire (market crashes). In conclusion, mastering these seven skills will not only make you a competent player in the asset management space but also the life of every financial party. Remember, in this game, knowledge is power, diversification is your shield, and wit is your sword. Now go forth and conquer the financial world, one investment at a time! This is a contributed post.

In a word, trading is really hard. Markets are extremely competitive. The smartest people in the world flock to financial markets looking to get rich. There are massive hedge funds set up solely to harness the talent of said smart people. Not only are they likely smarter than you, they have access to more money, information, and technology than you. A formidable opponent. But the world is littered with millionaire traders with average intelligence. So what gives? Most new traders enter the stock market with preconceived notions about how it works. Good trading isn't about predicting earnings numbers, finding the perfect technical pattern, or being the best analyst. In other words, new traders think that trading is like a big game of chess with fixed rules. One of the biggest differences between successful and failed traders is grasping the "metagame" of how markets trade. While strategy development, risk management, and other fundamental trading concepts are vital, mainstream trading literature tends to gloss over these three factors that we'll highlight in this article. So if you've had a creeping suspicion that markets are more than just a game of predicting numbers and finding the trading pattern, you'll love these three concepts that most new traders fail to grasp. The Market is a Wicked Learning Environment Getting good at most things is simple (not not easy). Learning guitar starts with plucking the strings correctly. Then understanding the fretboard. Soon you're learning chords and playing songs. After that comes soloing and lead guitar work. With each hour of practice, you can feel yourself improving and progress is relatively linear. Learning guitar, like most skills, is a kind learning environment. There are predictable patterns to follow and feedback is instant. Trading is different. There are no hard rules, and even when there are, following them can still lead to negative outcomes. Imagine you create a trading strategy based on selling VIX futures after a large spike in volatility. After some backtests, you conclude this is a highly profitable strategy. You're ready to go - it's time to become a trader and print money. But your first trade blows up in your face. So does the second, and the third. You did everything right in your strategy development, avoided all the pitfalls when backtesting, and even forward-tested your strategy. And yet, the market punished you for it. You might feel tempted to go back to the drawing board. But that might be a mistake, too. The market is a wicked learning environment. There's tons of randomness and unpredictability. Experience, education, and practice doesn't directly translate into improvement. The "rules" of the market are dynamic and ever-changing. Markets Are Extremely Competitive Markets are a player versus player experience. You're competing against everyone else trying to make money in markets. In every trade, there is a winner and a loser. For you to win, someone else needs to lose. And your competition are some of the smartest people in the world. There are massive hedge funds set up solely to harness the talent of said smart people. Not only are they likely smarter than you, they have access to more money, information, and technology than you. A formidable opponent. And just when you think you've figured out the strategy of the best players, the metagame changes. Just as it does in any competitive video game like Counter-Strike or DOTA. Some successful traders try to fight the big hedge funds head-to-head using the same strategies. Although many fail. But many traders carve out a niche of their own by playing a different game entirely. When HFT firms started to dominate scalping, the best scalpers adapted. They prolonged their holding periods and figured out how to continue to win using similar concepts but changing a few key factors. The Market is a Beauty Contest The stock market is a beauty contest. But not in the way that you think. John Maynard Keynes, the legendary economist upon whom many presidents based their fiscal policies, came up with this concept called the Keynesian Beauty Contest. And in a word, he explained that traders and investors pick stocks based on what they believe others think is valuable, rather than their own analysis of the stock's value. The 1990s dotcom bubble is a perfect example. Many smart traders make a killing buying stocks like Pets.com at ridiculous valuations. But they keenly sensed that most investors were hungry for internet stocks and would buy virtually anything. For many, it wasn't about Pets.com and Webvan's great business models, it was cynically deciding that investors were acting stupid and they could profit from that stupidity. You can get a sense of the Keynesian Beauty Contest by turning on CNBC. Anchors are obsessed with "market reactions" to news and events, rather than the material of the events themselves. Because that's what drives markets.

tastytrade tried to Put The Nail In The Coffin On Buying Premium Prior To Earnings. They did it several times, and we debunked their studies several times. Kirk Du Plessis from OptionAlpha conducted a comprehensive study backtesting different earnings strategies. This is the part that is relevant to our pre earnings straddle strategy: The conclusion is that buying long straddle (or strangle) and closing the day before earnings is a losing proposition. The backtest included different entry days from earnings: 30, 20, 10, 5, or 1 day from the earnings event. Our real life trading results are very different: You can see full statistics here. The question many people ask us: are all those studies wrong? How their results are so different from our real life trading performance? The answer is that the studies are not necessarily wrong. They just have serous limitations, such as: The studies use the whole universe of stocks, while we use only a handful of carefully selected stocks that show good results in backtesting. The studies use certain randomly selected entry dates, while we enter only when appropriate. The studies use EOD (End Of Day) prices while we take advantage of intraday price fluctuations. The studies exit a day before earnings while we manage the trades actively by taking profits when our profit targets are hit. This makes a world of difference. If you are not a member yet, you can join our forum discussions for answers to all your options questions. Here is a classic example how real trading is different from "studies". On March 2 2:30pm we entered CPB straddle: The price was 3.05 or 6.5% RV. When considering a trade, we look at the straddle price as percentage of the stock price. We call it RV (Relative Value). We based our entry on the CPB RV chart: We exited the trade on March 3 10:05am for $3.45 credit, 13.1% gain EOD price on March 2 was 3.40 and EOD price on March 3 was 2.95. The study using EOD prices would show 13.2% LOSS while our real trade was closed for 13.1% GAIN. Two points that contributed to the difference: We have a very strict criteria for entering those trades. In some cases we might wait weeks for the price to come down and meet our criteria. Based on historical RV charts, we would not even be entering this trade at 3.40. On the last day, we did not wait till the EOD and closed the trade in the morning when it reached our profit target. This is just one example how a "study" can show dramatically different results from real trading. On a related note, using a dollar P/L in a study is meaningless - this alone disqualifies the whole study. The only thing that matter is percentage amount. Why? Because in order to get objective results, you need to apply the same dollar allocation to all trades. For example, lets take a look on stocks like AMZN and GM. AMZN straddle can cost around $200 and GM straddle around $2. If AMZN straddle average return was -10% or -$20 and GM average return was +50% or $1, the average return should be reported as +20%. In the study, it would be reported as -$9.5. Don't believe everything you read. Use your common sense and take everything with a grain of salt. I have a great respect for Kirk. He is one of the most honest, professional and hardworking people in our industry, but even the greatest minds sometimes get it wrong. Related articles: How We Trade Straddle Option Strategy Buying Premium Prior To Earnings - Does It Work? Can We Profit From Volatility Expansion Into Earnings? How We Made 23% On QIHU Straddle In 4 Hours Why We Sell Our Straddles Before Earnings