lystn

Hey everyone, Kirk here again and welcome back to the daily call. On today’s daily call, we’re going to answer the question – “Should you run all option trades through the trade optimizer?” This question comes from David Tunney who asked this question and he said he was looking at the trade optimizer and the toolbox software and just wondered like – “Do we run all of our trades through the optimizer?” The short answer to this is – Yes, we do. Other than the fact that now I’ve run so many trades through the optimizer, I’m generally getting a better feel for what works in different market environments. I would say though that – Do you need to run all of them through the optimizer? You can totally guess and you can totally wing it and do it. But the reason that we built the optimizer and the reason that we did so much back testing was so that we had a better understanding of when and where trades would be more efficient or optimized as far as strike prices, profit targets, stop losses if any stop losses, etcetera. What we wanted to do and what I’ve always wanted to do for a long time which is why we spent so much money and so much time building this software is I wanted to know specifically if we were 60 days from expiration versus 30 days from expiration and implied volatility was the same and we were looking at an ETF and we wanted to do strangle, but if we were 60 days from expiration versus 30 days from expiration, what the heck do we do different, if anything? Is it the exact same setup? Do we sell the 15 Deltas regardless of that time period or do we do something different? What we found for sure in doing the trade optimizer and the back testing is that a lot of factors like time until expiration, implied volatility levels, etcetera change the dynamic of how you should setup your positions. For example: If we’re closer to expiration say 30 days from expiration, we might need to sell a 20 Delta strangle, a 20 Delta on each side. If we’re further from expiration, we might need to sell a 15 Delta strangle, 15 Delta option on each side. But if implied volatility is high, we might need to do something different if we’re 30 days from expiration and implied volatility is high versus implied volatility being low and 60 days out. Again, you can see that you ultimately can if you want to do it totally by yourself and use the same type of strategy. But if you know for sure unequivocally that there’s a better opportunity, a more optimized position and it takes you 10 seconds to run that optimization which is what we’ve built the whole thing to do, then wouldn’t that serve you well? Wouldn’t that generate enough capital, enough return over time or reduce any potential loss that you might be getting yourself into by just tweaking that position just a little bit on entry? Again, the answer to your question is – Yes, we run all of our trades through there. I think you don't necessarily “need” to run your trades through there. You can guess, but I think the system pays for itself in spades because it’s a one-time fee and it’s lifetime access anyway. It pays for itself for sure, not only in the first run or first two runs, but over the course of even a month. You might optimize your trades just that much better. The other thing that it does which is really cool is it not only just tells you how to setup the strike prices and how far out to go, but it also tells you where you need to take profits to generate the most return. What we found too is that in some cases, we’re better off holding for a 75% of our profit target versus 25% versus 50%. In some cases, maybe closer expirations, you might even have to hold all the way to expiration. But the system does that automatically, so it tells you exactly how you setup the trade, where you setup your profit targets and where you setup any stop losses if any actually do generate higher returns. It's pretty slick. Obviously nobody has it. That's why I love this system. I think it’s really good and I think it’s very valuable for you guys. It’s a drop in the bucket as far as value goes, so I think you guys will enjoy it. As always, you can get a demo of it, you can take a look at it and test it and kick the boots on it by going to optionalpha.com/toolbox. Again, that’s optionalpha.com/toolbox.