Backtest options strategies

Kirk Du Plessis 8 Comments. In most investing or online trading circles, it's common place to hear people tout the need for "stop loss" orders to theoretically protect your portfolio.

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And while there is no doubt that stop loss orders help mitigate large drawdowns from time to time, the question I never see asked is, "What am I giving up by implementing a stop loss order as part of my trading system? Still, we all accept this golden rule as an undeniable investing truth, because, well, it's always been something you're told to use.

Today, I'll challenge this long-standing requirement for stop loss orders when trading option strangles. Until now, nobody has built a system to backtest this variable on the scale and scope that we have here at Option Alpha. Sure, you've likely seen one-off backtesting research segments elsewhere, but nothing as specific and targetted as what we've created. Sounds pretty far-fetched, doesn't it? Well, it's not, it's just a small sample of the backtesting results we've been compiling over the last year that can help you make smarter, more profitable trades starting today.

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No stop-loss, no matter what happens. Would go all the way to expiration, win, lose or draw. No time to read the show notes right now?

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This week's question comes from Devin who asks:. I have been using mostly iron condor 2 strategies. When looking at the portfolio beta weighted analysis, it suggests that I get a decent profit in the middle of the range with breakeven at around and on the SPY.

There is still substantial tail risk outside of these boundaries, however. Does it make sense to consider buying one SPY call at and then put another SPY put at to protect against the tail risk?

When it is simulated, the maximum profit drops. But would then have pretty decent profit anywhere along the SPY price curve without using too much capital. Does this strategy make sense? Or am I missing something? I'm humbled that you took the time out of your day to listen to our show, and I never take that for granted.

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Glad you enjoyed the episode. Awesome great to hear thanks Rob! I this backtest NO we did not use any other defensive strategies — we just wanted to test the legitimacy of raw stop-loss or not. These tests and the ones with the early profit taking go back to and respectively so do account for bear and bull markets.

The Stop Loss Myth — 10 Backtested Option Strategies Prove They Create More Losing Trades Kirk Du Plessis 8 Comments October 24, Just finished listening to Show The Stop Loss Myth - 10 Backtested Option Strategies Prove They About The Author Kirk Du Plessis. Yes you can play around with the math on allocation as you see fit.

Haha still in beta ironing out all the kinks and bugs before releasing it. Expiration day we close for win or loss and open another one.

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