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. 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.

There is such a technical condition, and we will review it, right now.

Here is a quick 3 minute video that demonstrates the back-test:

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:

* Never Trade Earnings

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.

* 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:

* Finally, we set a very specific type of limit:

* Use a 20% limit

* Close the trade after 10 days, if the limit has not been hit.

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.

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.

Original post:

The Exact Trigger that Indicates Volatility in Liberty Broadband Corp - CMLViz.com - CML News