DisclaimerThe results here are provided for general informational purposes from the CMLviz Trade Machine Stock Option Backtester as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. <\/p>\n
Simply owning puts and calls together, like a straddle or a strangle, can be a huge winner, as it was at the end of 2018. But, equally, it has been a huge losing strategy outside of that time frame. So, the need has arisen -- an empirical and structured trigger that indicates when a large stock move is coming so owning a strangle has a higher probability of succeeding.<\/p>\n
There is such a technical condition, and we will review it, right now.<\/p>\n
Here is a quick 3 minute video that demonstrates the back-test:<\/p>\n
We will examine the outcome of going long a short-term out-of-the-money (40 delta) strangle (buying an out of the money call and buying an out of the money put), in options that are the closest to 14-days from expiration. But we follow three rules:<\/p>\n
* Never Trade Earnings<\/p>\n
Let's not worry about stock direction or earnings, let's try to find a back-test that benefits from volatility. Here it is, first, we enter the long strangle.<\/p>\n
* Use a technical trigger to start the trade, specifically:Wait until the day that the stock price crosses below the 200-day moving average and the stock price is below the 10-day moving average. Here is a nice simple image of the technical requirement:<\/p>\n
* Finally, we set a very specific type of limit:<\/p>\n
* Use a 20% limit <\/p>\n
* Close the trade after 10 days, if the limit has not been hit.<\/p>\n
At the end of each day, the back-tester checks to see if the long strangle is up 20%. If it is, it closes the position. If after 10-days the limit has not been hit, the strangle is closed so not to suffer total time decay.<\/p>\n
We can also see that this strategy hasn't been a winner all the time, rather it has won 9 times and lost 2 times, for a 82% win-rate and again, that 658.3% return in less than six-full months of trading. <\/p>\n
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Original post:<\/p>\n
The Exact Trigger that Indicates Volatility in Liberty Broadband Corp - CMLViz.com - CML News<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" DisclaimerThe results here are provided for general informational purposes from the CMLviz Trade Machine Stock Option Backtester as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Simply owning puts and calls together, like a straddle or a strangle, can be a huge winner, as it was at the end of 2018 Continue reading