Managing Gains and Losses in Options Strangles | Trading Data Science

Dr. Data (Michael Rechenthin, PhD) puts more context into why our philosophy is to manage winning strangles at fifty percent of maximum potential profit versus holding the position through expiration. We look at some familiar numbers in an unfamiliar way with the help of our own data scientist. See more options trading videos: http://ow.ly/QkQOW We believe, and our studies have shown, that when selling strangles it is better to take profits at 50% of the credit received and exit quickly (usually around 15 days) rather than to hold out until expiration (typically 30 days) and receive a larger profit. Some of our viewers question our numbers but those who watch this segment will not. Dr. Data provides the numbers tables charts and makes use of the five number summary method that he introduced to tastytraders in his segment on August 13th to explain things. He goes through the data to show the numbers of winners and losers and the average gains and losses. He points out the problem that our doubtful viewers have identified and how it seems that managing winners at 50% would lead to an overall losing strategy. Dr. Data then blows them out of the water and explains what they are not taking into account. The math may seem challenging at first glance but Dr. Data makes it easy. His explanation is convincing and clear. All the information you need or would want is provided. A very convincing stat is the average profit per day. Watch this segment of “The Skinny on Options Data Science” with Tom Sosnoff, Tony Battista and Dr. Data to see in a different context why managing profits and losses is a better strategy than holding until expiration. Math is the most feared four-lettered word around, even to Tom and Tony. Luckily the well dressed Dr. Data is here to show how to tame the beast and even use it to make money. Check out his segments on analysis and data manipulation to understand the reasoning behind our trades. You can watch a new Skinny on Options Data Science episode live and check out all previous episodes everyday at http://ow.ly/EoyGW! ======== tastytrade.com ======== Finally a financial network for traders, built by traders. Hosted by Tom Sosnoff and Tony Battista, tastytrade is a real financial network with 8 hours of live programming five days a week during market hours. From pop culture to advanced investment strategies, tastytrade has a broad spectrum of content for viewers of all kinds! Tune in and learn how to trade options successfully and make the most of your investments! Watch tastytrade LIVE daily Monday-Friday 7am-3:30pmCT: http://ow.ly/EbzUU Subscribe to our YouTube channel: https://www.youtube.com/user/tastytrade1?sub_confirmation=1 Follow tastytrade: Twitter: https://twitter.com/tastytrade Facebook: https://www.facebook.com/tastytrade LinkedIn: http://www.linkedin.com/company/tastytrade Instagram: http://instagram.com/tastytrade Pinterest: http://www.pinterest.com/tastytrade/

Comments

1. I thought you manage undefined risk at 25%?
2. what if you hold till exp and manage losses at 2x?
3. Do you take time into consideration to apply this loss management? I have an IC against SPX which I opened a few weeks ago and it is now 2 times loss, but I have 33 days until expiration. Another trade I opened last week has 40 days until expiration but is already losing 1 times credit, would you still take it off or let it run since it is so long until expiration? With this increased volatility all my trades are losing money and I would be closing them a few days or weeks after opening. The last one I opened last Tuesday and my short strikes (the body) are very wide and unlikely to get hit (1595 puts, 2105 calls). So do you apply this later in the trade or immediately no matter what?
4. Moral of the story: don't be greedy.