Ophir Gottlieb

Agree.

We use the rules that govern Reg-T for "amount risked." Here you go: CALCULATING 'AMOUNT RISKED' FOR OPTION STRATEGIES If you are ever in doubt about the margin requirements, The Options Clearing Corporation publishes a very handy options margin calculator here. Options Margin Calculator In an effort to help save time, here are the results: Naked Short Put Initial margin requirement: * 100% of option proceeds, plus 20% of underlying security value less out-of-the-money amount, if any * minimum requirement is option proceeds plus 10% of the put’s aggregate exercise price (number of contracts x exercise price x $100) * proceeds received from sale of puts(s) may be applied to the initial margin requirement after position is established, ongoing maintenance margin requirement applies, and an increase (or decrease) in the margin required is possible What Does the CMLviz Back-tester Use? We use the most conservative value: 100% of option proceeds, plus 20% of underlying security value less out-of-the-money amount, if any Here's an Example Position Short 1 Mar 100 puts(s) at $5.00 Underlying stock at $100.00 Put is at-the-money Initial Margin Margin Requirement (Amount Risked): $2,500.00 Proceeds from sale of short put(s): $500.00 Margin call (SMA debit): $2,000.00 Naked Short Call Initial margin requirement: * 100% of option proceeds, plus 20% of underlying security value less out-of-the-money amount, if any * minimum requirement is option proceeds plus 10% of the underlying security value * proceeds received from sale of call(s) may be applied to the initial margin requirement after position is established, ongoing maintenance margin requirement applies, and an increase (or decrease) in the margin required is possible What Does the CMLviz Back-tester Use? Again, we use the most conservative value: 100% of option proceeds, plus 20% of underlying security value less out-of-the-money amount, if any Here's an Example Position Short 1 Mar 100 call(s) at $5.00 Underlying stock at $100.00 Call is at-the-money Initial Margin Margin Requirement (Amount Risked): $2,500.00 Proceeds from sale of short call(s): $500.00 Margin call (SMA debit): $2,000.00 Selling Spreads We take the minimum of either the naked short option risked or the max loss of the spread. Buying Options or Option Spreads The amount risked is the cost of the option or the spread. Can you explain more about short straddle and short strangle risk? In the most basic sense, the straddle and strangle risk calc is simply taking the put risk and adding it to the call risk. Where it gets more invovled, is that what the TradeMachine ultimately displays is the "max risked". This figure tracks how risk changes over the course of the entire backtest, and it takes into account the running cash balance, commissions, etc. If, for example, a certain out of the money (say 25 delta) short call were being sold over and over, and the stock never moved, then the cash balance of the backtest would be slowly building. So, if this option required $1000 of margin (aka $1000 of risk) the first time, and the system collected $100 for selling it, for a net risk of $900, each subsequent rollover the risk would go down by $100 as the trader's net cash balance builds. When there is both a short call and a short put, in most circumstances (other than trading "guts" in the money strangles) at least one of these options expires worthless and has a positive effect on the net cash. This, in turn, affects the risk, by increasing the cash, and reducing the risk from this point forward. The reverse is also true. If the trader loses $5000 on the first trade, the risk for the overall backtest is now $5000 higher, and so the max risked calculation at the end will reflect this much higher risk. So, even if the end result is very positive, the risk along the way may have been substantial.

VXX has only existed for 8 years and for each of those years it has worked.. Your tone is a little negative, which is fine by me, but it will eliminate opportunities for your trading. A closed mindset is disastrous for traders.

But adding a stop limit is yet another layer of risk protection, and the back-tester does account for gaps. Try to think of trading as a continuum of knowledge growth. We are all somewhere that is not a the 100% mark -- a growth mindset will allow us to see opportunities that exist, even if we did not think they existed before.

VXX is a great choice as it uncovers the vol dynamics of VIX. Here is the irrefutable evidence: The Marvelous Implications of a Stop Loss and VIX Dynamics - The Trade That has Won for 8 Straight Years The Marvelous Implications of a Stop Loss on iPath S&P 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX) Date Published 2-15-2017 The Trade That Keeps Working The iPath S&P 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX) is easily one of the most interesting instruments I have ever encountered as an option market maker physically on the NYSE ARCA floor and CBOE, remotely. It's a bet on contango (or backwardation depending on your position) in the VIX and it has been just unimaginably consistent. But, while the best keeps on working, the nature of the brief periods where it reverses means large losses can be sustained in a short-period, unless you're prepared. Understanding the risk profile of VXX has meant massively higher returns. For the most part, the VXX just goes down all the time... Here is an all-time chart for VXX: But here is that chart over the last two-years: For obvious reasons, it has become one of the most crowded trades in the market -- short and short and short again. But, we can also examine this instrument with options. While buying puts seems like the obvious move, there is a slightly less risky approach -- selling call spreads. With a spread, we hedge one option with another as opposed to a naked long (or short) position. Here is what selling out of the money call spreads has done over the last 2-years, rolling every week (so trading weekly options) (Source: CMLviz Trade Machine) That's a 73% return with 83 winning trades and just 21 losing trades for a 79.8% win rate. Since delta is actually a proxy for probability, owning a 40 delta option should be in the money about 40% of time. And that means that selling it should work about 60% of the time. What we have discovered here is 79.8% win rate, but the times when the VXX rises are abrupt and can cause portfolio draw downs, even if over the long-term the short call spreads were winners. It turns that as traders we have a tool for this behavior, and it's called a stop loss. You see, a short call spread can only make 100% in a single trade, but it can lose far more than that. It does not have a symmetric profit loss profile. But, if we cut those losses off at the knees and totally reconstruct our profit loss profile, we can actually erase a huge amount of risk and increase returns. Here's what happens when we put a stop loss at 50% for the call spreads every week. Here's how we do it: And now the results: (Source: CMLviz Trade Machine) In English, if in any given week a call spread turns against us for a 50% loss, we buy it back and wait for the next week -- not allowing that trade to get worse. We see a 73% winner turn into a 126% winner and we took massively less risk by using a stop loss. While the win-rate has gone down, the returns have jumped higher. In in the case of the VXX and its rare but abrupt sporadic up turns, this is a highly sophisticated, albeit very easy approach, way of dealing with this phenomenon. THE KEY The key here is to find edge, optimize it -- in this case by putting in a tight stop -- and then to see if it's been sustained through time. For VXX it has, and that makes for a powerful result. We've just seen an explicit demonstration of the fact that there's a lot less 'luck' and a lot more planning in successful option trading than many people realize. Here is a quick 4-minute demonstration video that will change your option trading life forever: Tap here to see the Trade Machine in action

Sure, if you a sell a put spread @ $2 (for example), if it goes to $4, you have a 100% loss. The back-test then buys the spread back for $4, takes the $2 loss (100%), and waits for the next period to put the spread on again. This prevents the spread from turning into a massive loser, like 200%, 300%, even 400%. It's a double risk adjustment: 1. use a put spread rather than a naked put 2. even with the spread,use a stop loss. This turned a 10% losing strategy over two-years, into a 68% winning strategy. It uses the back-tester to examine the vol and stock dynamics of Apple to create a trading plan before placing the trade. This is why the back-tester exists. Plan. Execute. Never (ever) guess.

So, I can't give advice, but this is how I feel: Vol and stock dynamics tend to be sticky (that's why, for example, people use technical analysis). It's these vol and stock dynamics that the Trade Machine (back-tester) finds for us and are basically impossible to find without a tool like this. But, there must be two underlying beliefs: (1) The stock direction will be, at least, semi-similar to the back-test period (this is why I do not believe more data is better for an option back-tester. I usually look at the last two-years or one-year (or even six-months), and not further, even though the back-tester has more history. This is broadly called stock dynamics. (2) The vol dynamics will be at least semi-similar. In the short-run, this is "usually" true. See how VIX or VXX move essentially in long trends (for VXX it has been an 8-year trend). The vol dynamics are usually the piece we can count on unless we know of some huge event -- like TSLA releasing the Model 3. The companies that I love to do this with are large ones. So, AAPL, GOOGL, BAC, JPM, IBM, and several others. Here are a few examples: Trading options in the banks in the era of Donald Trump There is Edge in Bank of America Options Apple: You can be a better option trader Mastering IBM Vol Dynamics to Profit from Options and Avoid Earnings

Amount risked is actually the max draw down accumulating through time or the hypothetical max loss on the trade (whichever is larger). A max draw down data point though is very clever. We will add to the list. Thank you!

May 19 Expiry 40 Delta Call: 310 Put: 295 10 Delta: Call: 355 Put: 250 You can always find the details of a trade through history by clicking on a back test tile (it will open up the full trade list). I can't say really if you want to discuss a trade with the community. I think it could be useful, but I know many ppl that see a trade, test it, and roll with it. I think either way is fine. Find your comfort zone, define your strategy, become an expert at it, and you should do just fine. Feedback from trusted sources is very nice to have.

Generally agree with you.

Great! Thank you.

Was it really a collapse? Where is the market now? What is the catastrophe? The fiat currency system will fail? Gold will be the only true currency? Really? What catastrophe are we under right now? If you do truly feel that way, then, yes, surely leave the market, buy gold. Otherwise, it's just something to say (Peter Schiff). Remember, he said that the Dow Jones Industrial average would trade at the price of gold per ounce -- this was 2008. Today the Dow is at 20,600. Gold is 1,285. He never changes his tone. Is it possible that everyone n the world is right and he is wrong as opposed to the opposite? I'm not very bullish right now, certainly see downside risk, but I simply see no catastrophe, other than our news has been hijacked by click bait. Fuller analysis: VALUATION The market is definitely at a toppy valuation and bullish sentiment is definitely near all-time highs. First, we start with charts that cover valuations: Our image is from Factset: Back on December 31, the trailing 12-month P/E ratio was 17.9. Since this date, the price of the S&P 500 has increased by 6.9%, while the trailing 12-month EPS has decreased by 1.9%. Thus, both the increase in the “P” and the decrease in the “E” have driven the increase in the trailing 12-month P/E ratio to 19.5 today from 17.9 at the start of the year. (Source: Factset) And the real takeaway: “The current trailing 12-month P/E ratio of 19.5 is above the three most recent historical averages: 5-year (15.9), 10- year (15.9), and 15-year (17.6).” Conclusion: Any objective measure reads that the market’s valuation is high relative to its history. TECHNICALS We can look at other measures of valuation as well. For those that are technically minded: The top chart is a measure called the “RSI.” Any number above 70 generally reads as “over bought.” We are sitting at 72.4. The big chart is the S&P 500 — we leave that as the focal point of the analysis. The third chart is the %R, which is a momentum indicator. Readings from 0 to -20 are considered overbought. Readings from -80 to -100 are considered oversold. We are at -22.45. The fourth chart is the Stochastic Oscillator, which is another indicator of momentum where 20 is typically considered the oversold threshold and 80 is considered the overbought threshold. We are at 83.85. Conclusion: All three technical momentum measures read that the market is currently over- bought. SENTIMENT Market sentiment, which is usually a contrarian indicator, is extremely high. As a contrarian indicator, the higher it is, the worse it looks for equities. In the chart below we can see both the elevated level today, but also the low back in October 2008, which 6—months later was the signal of beginning of our current bull market run. In fact, according to Charlie Bilello of Pension Partners, “the % of bulls in the Investors Intelligence sentiment survey hit 63% this week, the highest since January 1987.” It is worth noting that peaks in investor sentiment, if they do portend a market sell-off, can be up to 6-months early in the signal. Conclusion: Investor sentiment is very bullish, at a level we haven’t seen in about thirty years. VOLATILITY Realized volatility has become a favorite headline for the mainstream media, but while the volatility has been extremely low, it has not been an indicator of poor returns. This is also from Charlie Bilello. It shows the 15 lowest volatility years and that eleven of the fourteen previous showed the S&P 500 ending with positive returns. Conclusion: Don’t read these headlines if they intend to remark on returns (not options), they are click bait and a waste of your time. There is no signal here, one way or the other. DIVERGENCE One of the worst things we can see from a market is when the indices rise because of a small number of mega caps and the rest of the market is actually drifting down. We aren’t quite there yet, but we do have a divergence. The S&P 500, which is market cap weighted, is now diverging from the equal weighted S&P 500, and that’s not a great sign. Conclusion: A divergence is forming and if it widens, it could be a sign of a weakening bull. INTEREST RATES Please read this carefully. Interest rates are at historic lows. The current rate environment is not the issue. The Federal Reserve just signaled that it would be raising rates soon, and it may be on a path to several rate hikes. It’s the several rate hikes part that is important, and here’s why: Jesse Felder shared this chart from BofA Merrill Lynch. The chart shows us that, in general, once rates get high enough, we can be on some shaky ground. Most recently the tech boom and the housing crisis both ended with a series of rate hikes and ended up in recessions. Conclusion: rates are at historic lows, but, if the rate hikes come fast and furious, they do tend to signal the end of a bull run, in recent history. EARNINGS The market rise is not irrational exuberance, rather it is a reflection of stronger earnings, stronger GDP growth, dropping jobless rates, and rising wages. Focus on the yellow bars — those are earnings. We finally broke out of our earnings recession and are showing some nice growth, with forecasts for more. Some of that is a monster rebound in energy due to oil prices, but not all of it. Conclusion: Earnings are growing and the earnings recession appears to be over. However, the market is rising faster than earnings. GDP We have been in a period of sustained GDP growth and while it has not sustained a growth level above 3%, we are well passed the doldrums of sub 1% growth. Perhaps most importantly, we got this read from the Bureau of Economic Analysis (our emphasis added): The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, residential fixed investment, nonresidential fixed investment, and state and local government spending. And now on to the critical issue of debt. DEBT The images we will share here come predominantly from the “QUARTERLY REPORT ON HOUSEHOLD DEBT AND CREDIT” published by the NY Fed. First, the mainstream media can’t help but sell click bait about Auto loans and the impending disaster. I kid you not, almost every major publication has drawn a parallel between the auto loan bubble we are in now, to the housing bubble we were in back in 2007. This is totally preposterous. Auto debt is exploding, but…. First: Auto loan debt is now at $1 trillion. Housing debt topped $12 trillion. Second: Auto loan debt is fixed rate (non-adjustable), has an average date to maturity of about 5-years and an average amount in the $25,000 range. Housing debt was becoming substantially adjustable (non-fixed rates), had an average date to maturity of over 25 years and an average debt amount well in to the several hundreds of thousands of dollars. To compare these two is nothing less than catastrophizing. Catastrophizing is an irrational thought a lot of us have in believing that something is far worse than it actually is. Catastrophizing can generally can take two forms. The first of these is making a catastrophe out of a situation. Conclusion: Auto debt is high, but it is nothing even near to close to that of the housing debt we once saw. Now, a lot more important images about debt: Mortgages Mortgage debt is rising, but is well below the levels we saw before the last recession. This image not only shows the magnitude difference in the debt, but also the quality of the debt. The dark blue, yellow, and light gray colors are the sub-prime debt. The dark gray and blue bars are the prime or ‘Alt-A,’ debt. Also, the median credit score for mortgages has been falling, but it’s still above the 750 high water mark. We can also look at the trends in late payment mortgages: We want to see the green line rising, which is loans moving from late to current, and the red line dropping, which is loans moving from 30-60 days late to 90 days late. We see both. Conclusion: Mortgage debt is rising, but it’s still not at a scary level. Credit scores are dropping, but they too are not at a scary level. Do note the trends. Broader Debt We can also look beyond just mortgages and Auto loans. Looking broadly at all installment debt (an installment debt is a loan that is repaid by the borrower in regular installments), loan delinquencies are pretty low and certainly well below the 15-year average. Conclusion: We are not in a debt delinquency crisis. We can also look at delinquent debt by type: Conclusion: Credit card debt, mortgages, auto loans, and HE (home equity) debt balances over 90-days delinquent are dropping. But there may in fact be a massive wave of trouble coming in the next few years from student debt. Finally, we can look at foreclosure and bankruptcy rates: Conclusion: Bankruptcies are on the decline and have been for over half a decade. Foreclosures are generally trending lower. Margin Debt Margin debt is just below all-time highs in real terms. Here is a great chart: Source: Advisor Perspectives The current level is at its record high. Note the inflation-adjusted version is just off its record high in April 2015. It’s hard to see in that chart above, but the percentage growth in margin debt is far outpacing the percentage growth in the S&P 500. Source: Advisor Perspectives A good portion of that margin debt was a Fed fueled zero interest rate policy (ZIRP), but the recent rise is just a good old fashioned debt pile to buy stocks. Source: Advisor Perspectives Conclusion: The data is not conclusive but there is circumstantial evidence that the retail public is partially fueling an equity boom with margin debt. Or… there is this chart: What we see is not that margin debt is growing unbounded, but rather that the underlying asset (the stock market) to debt is actually in a state of equilibrium. NOW WHAT? First of all, now you know what I know. You can use this data to come to any conclusion you feel comfortable with before I chime in. But, alas, I will chime in. The market, broadly, has gone beyond toppy to generally overvalued. I don’t think it’s “bloody murder end of the world” over-valued, but yeah, it’s high, and sentiment is remarkably bullish (which is usually bad) while margin debt is at an all-time nominal high. Now, some of that optimism is due to rising earnings, rising GDP, higher wages and dropping unemployment. More of it comes from rising home prices, which makes everyone “feel wealthier.” But, some of it is just speculation. The market has risen by more than earnings dictate, which has led to this high valuation and overly bullish momentum and sentiment. We are not in a housing debt bubble (which is different than a housing price bubble), and comparing an Auto bubble to a housing bubble is laughable.

Catastrophising is generally not the way to go, nor the people to follow. Hard analysis, skepticism, research -- all good. Catastophisers like Peter Schiff are actually quite unable to see the flaws in their own thinking and are well worth a block. Here is a tiny bit from CML Pro, our research subscription service, that we sent out this Sunday -- different subject, but catastrophisers are always there.: III. MARGIN DEBT There is just no nice way to say this, and we owe it to you to be honest, the headlines that have been catastrophizing margin debt are either written by people that are looking to get web traffic for pay on advertisements, or they are written by journalists with no real background in finance. This is the catastrophe chart: The blue line is the S&P 500 and the redline is the level of margin debt. It looks obvious, right? We’re over margined and there is going to be a collapse. First, that indicator has been catastrophized before — in fact, in 1981 the NY Times warned of “weak investors” and the potential for a great fall. Here is the article lead, with a chart of the S&P 500 below it. Yeah, not exactly “pushed into a painful fall.” But, that was just a fun look back at a catastrophizing article. Here is the actual margin chart we should be looking at: That is a chart, going back to 1980, of margin debt relative to the market cap of the Wilshire 5000 (loosely, we can call this “the stock market”). What we see is not that margin debt is growing unbounded, but rather that the underlying asset (the stock market) to debt is actually in a state of equilibrium. That doesn’t mean there won’t be a large stock drop — in fact, even this equilibrium level looks elevated to the past — but, it is not growing out of control. If you really want catastrophe headlines, just read anything on the Business Insider, the “news agency” started by fraudster Henry Blodget (he was banned from the securities industry by the SEC and fined $4 million about 15 years ago so he started a clickbait news site and just sold it for $400 million and… missed revenue expectations that the buyer was betting on). That was back in 2014. The great thing about this idea is that they can keep publishing, every few months (which they do), and eventually, what do you know, the market will go down and they will say, “ha! see! margin debt!.” It’s worthwhile for us to keep an eye on this relative to market cap, but Barry Ritholtz said it best back in 2015 on Bloomberg: And that was back in April of 2015 — so, yet another two-years of drum banging. Alright, hopefully we are past the idea that margin debt is a predictor of anything.

Even better -- soon, when the custom strategies are up, you can sell a put spread to fund a long call, and cut the risk down a lot. We're pretty excited about the custom strategies -- about 4 weeks away.

Also, an interesting set-up I see with Tesla Tesla (TSLA): There's an opportunity, now, with this volatility

Yeah, so selling a risk reversal (selling puts to buy calls) yields, more often than not, a credit, and it has upside. But, of course, it has way more downside risk. Here is a recent take I did on Alibaba (BABA) and a risk reversal, but, I avoided earnings and used a stop loss. Getting Long Alibaba (BABA) With a Risk Reversal Just understand the additional risk -- it is aggressively bullish

yeah, it's definitely something traders do, but it takes a special kind of risk tolerance. I do not trade earnings, generally. Slow, steady, high probability -- that's my preference.

Actually, you have probably seen everything several times over, really. Remember when TARP didn't pass and then the SEC didn't allow market makers to expire short in a bank stock (until Citadel changed their mind intraday) ? That was an amazing time to be a market maker -- I'll never forget it. Firm value swung by hundreds of millions of dollars intraday and it all ended up being... "just a thing."

We use prices to calculate profit and loss, not IV. Also, using the words "never" or "always" in trading are generally not good places to be. Allow for flexibility in your trading process -- a trader that is inflexible to new ideas is likely one destined to failure. Further, if the vol was always too high, ppl would sell it. Earnings vol pricing is not a mistake -- vol rises bc the earnings event drives a larger one-day move than the other days. It's the amount of that move that is priced into the options. Example for NFLX. The left side is the days before earnings. The right hand side is the IV. Just assume earnings fall on an expiration and are BMO. Assume "normal IV" for NFLX is 35% (which is the IV180) -5 35% -4 35% -3 35% -2 35% -1 35% Earnings 100% (and expiration) --- Avg vol 48% The vol rises into earnings because the average volatility gets larger as days pass. So, if we looked at this one day before earnings: -1 35% Earnings 100% (and expiration) --- Avg vol 68% The vol would rise from 48% to 68% as the earnings date approaches although "nothing has happened." It's just the reality of the days left in expiration and the weight that the one earnings day carries as the other days go away. (side note: never take the average of vols, they are square roots, so this is a simple example, not mathematically totally accurate) The vol falls after earnings, bc the event has ended. The "vol crush" happens at the same time the underlying realizes its large stock move. They are coincidental -- they happen together. There is no magic edge to holding or selling earnings vol through the event. Now, there may be a trade that benefits from the vol patterns and not holding through the event. That is... possible and the contrived example above is a pretty good step 1 of 10 to see that trade.

"Earnings Only" is opening two-days before earnings and closing two-days after earnings. But, you can test that with weekly and monthly options. In general,owning the earnings vol in almost every other company is not a sage trade. Having said that, here is how the last year has looked for NFLX using iron condors (so owning vol but not naked) http://tm.cmlviz.com/index.php?share_key=EnOIns9kK1nXB04j In general I do not like owning earnings vol, but I know ppl who are just marvelous at it. As an aside, owning vol in general has been a winner for TSLA and NVDA, but when you avoid earnings: * Volatility in NVIDIA Corporation (NASDAQ:NVDA) May Mark an Opportunity * How to Profit from Tesla Inc (NASDAQ:TSLA) Stock Volatility

Of all the things we do have planned, we do not have a short-term plan to add new instruments (like commodities). Future's options are a possibility, but not in the short-term. As you note, the ETFs are one way to get to those assets, but certainly not exactly those assets.

Thank you for your feedback, Javier. We have a slightly different view of the world in options (not stock). Since options are a derivative (not the calculus derivative, the actual English meaning) and their value is also determined by derivatives (like volatility) we do not believe more data is helpful. In fact, when I do a back-test, I rarely use 3-years, more commonly, I use one-year or even 6-months. The back-tester is designed to show us, for each underlying instrument, how to trade the options if the stock behaves "semi-similar" to the past. Option trading is volatility trading, whether you mean it to be or not. That is a mantra I cannot stress enough. The back-tester allows us to look at an underlying, and rigorously test how that volatility has affected trades. It's one of the great wonders of option trading, but volatility dynamics tend to stay similar to each other for a specific underlying for quite some time (the easiest examples are VIX or VXX, but it goes down to individual securities as well). I use Veeva Systems (VEEV) as my example just bc I took the time to write it up. But, this is a stock that rose 100% in 2-years, but taking three bullish approaches: * Long Call * Long Call Spread * Short Put spread (http://www.cmlviz.com/cmld3b/index.php?number=11369&app=news&cml_article_id=20170328_investing-in-upside-in-veeva-systems-inc-nyse-veev-with-options) Two are actually losers bc of the volatility dynamics -- irrespective of the stock rise. So, for Veeva, if you happen to be bullish, being a net seller of vol is the approach that has won. Even further, stock dynamics (sometimes referred to as technicals) also tend to repeat in time (that's why ppl use technical indicators). The option back-tester also allows you to benefit from that semi-similarity when you test stops and limits. When it comes to more robust back-tests that you are used to seeing and using, that would be for a product like stocks -- where the underlying is the asset in question. I see that you use different standards for futures as well, that's actually closer to stock than options bc the derivative is so similar to the underlying that you can ignore secondary and tertiary impacts (like, there is no gamma, vega, vola, theta). We are going to be releasing a stock back-tester as well. It will have technical indicators and oscillators and it will include sensitivity analysis as you discuss. My very best, Ophir

If I had to choose one and was forced to just choose one, I would, every day of the week, choose a professional option trader on my left shoulder over software. I, too, am a pro, was a market maker on NYSE ARCA and CBOE. That experience is immensely powerful. Luckily, we don't need to make that choice -- we can have both -- the experience of pro trader and the power of the back-tester. I say this totally aside from being the CEO of Capital Market Laboratories, having a tool like the back-tester with a voice of experience, reason and intelligence like Kim, is, in my opinion, a total no brainer if you really intend to profit consistently from options. And yes, I am a consumer of the back-tester as well. I use it to trade. With respect to execution types -- irrespective of the time of quote, executing at mid-market, market, or half way between mid and market (our default), is critical to understanding a realistic trade analysis. Our time stamps use realistic quotes, not those crazy wide quotes at the end. Thanks for your questions! Really shrewd group here and I am very impressed. You're all very lucky to have each other.

Wednesday (end of day) - Trade downloads in Excel - Trades copy and paste into excel with one click - Intraday pricing for stops Next Monday (end of day) - 4 years of data - Spreads based on dollar denominated amounts (we already use deltas). (backtest a $5 wide spread that is $2 out of the money, as opposed to 40/20 delta spread) Three Mondays from then - Custom strategies (up to 4 legs) - Custom days before and after earnings trading (we have 2 by default now) Actually a lot more coming, but for competitive reasons we will not make it public unless you are a member.

We are adding custom trades soon (create your own and save them). We are also adding technical indicators soon. We do have limit orders already in the application.