Market Measures

Mechanical Sizing

| Sep 2, 2016
Up Next
    Market Measures

    Mechanical Sizing

    Sep 2, 2016

    We do not believe in “buy and hold” or passive investing . We want you to take control of your financial destiny. We further believe that a mecahnical strategy of selling premium, especially in high Implied Volatility (IV) and high IV Rank (IVR) environments will outperform. To be mechanical, we had to choose some levels to exit a trade that went wrong and to limit the possibility that we would not be able to continue due to adverse performance. Wa want to protect against a downturn and not fully use our account, while still having enough at risk to make money and outperform passive investing. Can this be done?

    Our study was conducted in the SPY (S&P 500 ETF) from 2005 to present. We sold the 1 Standard Deviation (SD) 16 Delta Strangles at the beginning of each month. We sized the positions to use 30% of the available Buying Power (BP) and held the positions until expiration. We closed the positions early if BP Reduction became greater than 80% of net liq.

    A table of the results compared a portfolio that had a 100% long SPY position to a 30% SPY short premium position. The table included the average weekly returns, weekly standard deviation of returns (a measure of risk) and annualized return. The table showed that the 30% short premium portfolio had higher weekly and annualized returns and lower weekly deviation of returns. A graph compared accounts starting with $25,000 and 100% long invested in the SPY to an account that was 30% short premium. The short premium account dramatically outperformed.

    For more information on the subjects discussed here see:

    Watch this segment of Market Measures with Tom Sosnoff and Tony Battista for the valuable takeaways and the detailed results of our study comparing a portfolio 100% invested long in the market to a short premium portfolio initially using only 30% of capital.

    This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.

    More like this

    tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.  Options, futures, and futures options are not suitable for all investors.  Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on

    tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.

    tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.

    tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.

    © copyright 2013 - 2024 tastylive, Inc. All Rights Reserved.  Applicable portions of the Terms of Use on apply.  Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.