RUT Straddle - Normalized Return Charts

In the last two articles (here and here), we reviewed the backtest results of 28,840 short options straddles on the Russell 2000 Index (RUT).  If you haven't read the last two articles, you may want to first read the introductory article for this series Option Straddle Series - P&L Exits.

In this post, I am going to show the P&L results in line-chart form rather than the heat map tables I used in the last articles.  The data in the charts below is only for the non-IVR filtered trades.  The first set of charts shows the P&L Per Day amounts, with each chart representing the results for trades started at the same days to expiration (DTE).  Here are a few key points for each chart:
  • Each colored line in a chart represents a particular profit taking percentage level in terms of the credit received
  • The X-axis displays the loss taking percentage level in terms of the credit received
  • The Y-axis displays the average normalized percent P&L per day
  • The Y-axis scale is the same for all the P&L per day charts in this article

Before we go further, I want to reiterate that these returns are the average normalized returns per day.  What does this mean?  Here are a few points to consider, and that I considered, when calculating these P&L numbers:
  • Each data point in each of the seven P&L per day charts had different average trade durations.  One data point may have had an average of 15 DIT, while another may have had an average of 60 DIT.  With most of these strategy variations, there were approximately 100 trades entered for each data point in the charts below.  100 times 15 is 1500 total DIT for a strategy, while 100 times 60 yields a total of 6000 DIT.  The number of DIT obviously impacts the average P&L per day.
  • When a straddle is entered at 38 DTE its initial portfolio margin (PM) requirement is going to be greater than say a straddle entered at 80 DTE.  The difference in margin requirement can be nearly 20% greater in this example.  This initial PM number must be taken into account in order to fairly compare P&L per day values...and has been in the charts below.  Using dollar amounts instead of average normalized P&L per day would not necessarily take into account the different margin requirements for the different DTE variations.

With that background information finished, let's dive into the charts...

38 DTE
38 DTE RUT Short Straddle Summary Normalized Percent P&L Per Day Graph
(click to enlarge)
A couple of patterns stand out here.  The first is that if you want to maximize your P&L per day at 38 DTE, you should take your profits at 10% and losses at 25%...diminishing returns after that loss level.  That loss level also seems to be the best for the other profit taking levels at 38 DTE.

45 DTE
45 DTE RUT Short Straddle Summary Normalized Percent P&L Per Day Graph
(click to enlarge)
At 45 DTE, you can maximize your P&L per day by sticking with the 10% profit taking level.  The P&L per day numbers increase as we increase our loss taking level from 25%, to 50%, to 75%, with a peak clearly present at 75%.  Taking larger losses than 75% doesn't make sense at 45 DTE.

52 DTE
52 DTE RUT Short Straddle Summary Normalized Percent P&L Per Day Graph
(click to enlarge)
At 52 DTE, it doesn't make much sense taking a loss greater than 50%, and a case could be made to stick with a loss level of 25% to maximize your P&L per day for several variations.  The 45% profit taking level was the top performer at 52 DTE.  The 10% profit taking level wasn't far behind when taking losses at 25% of the credit received.

59 DTE
59 DTE RUT Short Straddle Summary Normalized Percent P&L Per Day Graph
(click to enlarge)
At 59 DTE, the 10% profit taking level really slips behind, with the 25% and 35% profit taking levels showing the greatest P&L per day readings.  The loss taking levels show a clear pattern here...as losses are increased from 25%, to 50%, to 75%, P&L per day readings increase for all of the profit taking levels.  At 59 DTE, don't set your loss threshold greater than 75%...your P&L per day numbers drop off rapidly after this loss level.

66 DTE
66 DTE RUT Short Straddle Summary Normalized Percent P&L Per Day Graph
(click to enlarge)
At 66 DTE, the 50% loss taking level has only slightly lower P&L per day readings than the 75% loss taking level for the four top performers.  There is a clear trend of increasing P&L per day readings as the loss levels are increase from 25%, to 50%, to 75%.  At 66 DTE, the top profit taking levels are 35% and 45%.  As with the 59 DTE variations, don't set your loss level greater than 75% for the 66 DTE variations.

73 DTE
73 DTE RUT Short Straddle Summary Normalized Percent P&L Per Day Graph
(click to enlarge)
At 73 DTE, we can maximize our P&L per day by using a 10% profit taking level and a 50% loss taking level.  The maximum P&L per day value for the 25% profit taking level also occurs with a 50% loss taking level.  The other profit taking variation all see a maximum P&L per day value at the 75% loss taking level.

80 DTE
80 DTE RUT Short Straddle Summary Normalized Percent P&L Per Day Graph
(click to enlarge)
At 80 DTE the P&L per day readings for a given profit taking level do not change too much with different loss taking levels...the lines are fairly flat...except for the 10% profit taking line.  For the 80 DTE variations, you might want to set your loss level at 25%, since it seems that there is not much of an increase in P&L per day if you let your losses expand beyond this point.  At 80 DTE, the 25% profit taking level was the top performer.

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The next set of charts contains the average normalized P&L per trade for the seven different DTE reviewed in my RUT straddle backtest series.  The different initial PM requirements were used when calculating the P&L per trade numbers similar to how the PM was used in calculating the P&L per day numbers.  Also, as above, the next seven charts use the same Y-axis scale...now to the charts.

38 DTE
38 DTE RUT Short Straddle Summary Normalized Percent P&L Per Trade Graph
(click to enlarge)
The greatest P&L per trade numbers were associated with the variations that carried trades to expiration (NA) rather than using a profit taking target.  The greatest P&L per trade value for the 10% profit taking variations occurred at the 25% loss level.  The other variations had their greatest P&L per trade values at the 100% loss level.

45 DTE
45 DTE RUT Short Straddle Summary Normalized Percent P&L Per Trade Graph
(click to enlarge)
If you choose to trade at 45 DTE, the magic loss taking level is 75%...taking a greater loss than this does not increase your P&L per trade.

52 DTE
52 DTE RUT Short Straddle Summary Normalized Percent P&L Per Trade Graph
(click to enlarge)
At 52 DTE, you pretty much hit your max P&L per trade numbers at the 50% loss taking level.  P&L per trade increases as you increase the profit taking percentage from 10% to expiration (NA).

59 DTE
59 DTE RUT Short Straddle Summary Normalized Percent P&L Per Trade Graph
(click to enlarge)
At 59 DTE, there is a clear trend of increasing P&L per trade as you increase the loss taking level from 25%, to 50%, to 75%...with a drop in P&L per trade as you increase the loss taking level above this point.

66 DTE
66 DTE RUT Short Straddle Summary Normalized Percent P&L Per Trade Graph
(click to enlarge)
P&L per trade numbers are still greater at 66 DTE than at shorter DTE levels.  At 66 DTE, profit taking at 45% showed the highest returns.  We continue to see the trend of increasing P&L per trade as the loss taking levels are increased up to 75%.  No reason to use a loss level of greater than 75%, since there are lower per trade returns after this point.

73 DTE
73 DTE RUT Short Straddle Summary Normalized Percent P&L Per Trade Graph
(click to enlarge)
At 73 DTE, the loss taking levels of NA, 45%, and 35% are clustered together, and reach a maximum P&L per trade at the 75% loss taking level.  For the 25% and 10% profit taking levels, the maximum P&L per trade values occur at the 50% loss taking level.

80 DTE
80 DTE RUT Short Straddle Summary Normalized Percent P&L Per Trade Graph
(click to enlarge)
Up until this point, P&L per trade has been increasing with DTE.  But at 80 DTE, the maximum returns per trade are lower for profit taking levels above 10%.  Also, at 80 DTE we do not see the peak returns occur at the 75% loss taking level...the returns per trade continue increasing all the way to the 150% loss taking level...except for the 10% profit taking level.  The 10% profit taking level showed maximum per trade returns at the 50% loss taking level at both 73 DTE and 80 DTE.

For most of the charts, the 10 percent profit taking level and the 25% loss almost always yielded a return of 5% on the PM requirement...and the PM requirement becomes smaller as we move out in DTE.  So, 5% at 38 DTE is going to be a greater dollar amount than 5% at 80 DTE.  I thought the data around the 10% profit taking level was interesting.

When we are actually trading these straddles, not just analyzing the data, we need to consider effective capital utilization.  Let's look at a quick example:
  • Profit taking at the 10 % level will generally have your DIT at about 30% of DTE.  So, for a 38 DTE trade we can expect to be in the trade for approximately 11 days, while an 80 DTE trade would last approximately 24 days to hit the same 10% profit taking level.
  • For the 10% profit taking level, using a 25% loss target, will yield approximately a 5% return on PM at both 38 DTE and 80 DTE...but the 5% number will be a larger dollar value at 38 DTE than at 80 DTE.
  • This is a slightly contrived example, but it illustrates how to consider applying the data in my blog posts to your trading.

When we consider profit taking targets we need to consider how these targets impact DIT.  Here are a few approximations that seem to hold with RUT straddles:
  • The 10% profit taking level will have your DIT at approximately 30% of DTE
  • The 25% profit taking level will have your DIT at approximately 60% of DTE
  • The 35% profit taking level will have your DIT at approximately 70% of DTE
  • The 45% profit taking level will have your DIT at approximately 80% of DTE

Don't forget, that as the profit taking level is increased, the win rate drops.  See my RUT Straddle Summary Page for links to all of the articles in the series.  Lastly, over the next several days I will tweet (@DTRTrading) win rate line-charts and DIT line-charts, similar to those above.


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RUT Straddle - Backtest Results Summary - Part 2

This is a follow up to my RUT Straddle Backtest Results Summary and presents the RUT straddle  results in a slightly different format.  Basically tabular results in a structure similar to my iron condor and strangle results articles (here, here, and here) ... with each row associated with a strategy exit variation.

Below, you'll see the same trade metrics that I presented in my last post, but organized with the strategy variations in rows.  For each trade metric category I've included two tables.  The first table in each category has the DTE columns grouped by IVR.  For example, the first seven DTE columns are associated with an IVR of < 25%.  The second table in each category switches the groupings between DTE and IVR.  For example, the first five IVR columns in the second table are associated with trades initiated at 38 DTE.  Since I already discussed these results in my last post, I won't spend a lot of time describing the results below.


P&L Per Day
As we noticed in the first article, the largest P&L per day metrics were associated with an IVR > 50%.  Recall that only two or three trades per year met this IVR filter criteria...so the green cells are associated with significantly fewer trades than the other cells...this could be a pro or a con depending on how you use this information.  The 38, 45, and 73 DTE variations showed the highest readings in the IVR > 50% group.

RUT Short Straddle Summary Normalized Percent P&L Per Day version 2
(click to enlarge)
RUT Short Straddle Summary Normalized Percent P&L Per Day version 3
(click to enlarge)


P&L Per Trade
Same as above, the trades that met the IVR >50% criteria had the highest P&L per trade numbers.  Only about 20 trades out of 100 met the IVR >50% criteria.  For the non-IVR filtered category (NA), all 100+ trades were entered.  The 38 DTE variations had the lowest P&L per trade readings, since they received lower credits and spent less DIT.  The profit taking level of 10% was another area of lower P&L per trade readings, since these variations extracted the smallest percentage of the initial credit received.


RUT Short Straddle Summary Normalized Percent P&L Per Trade version 2
(click to enlarge)
RUT Short Straddle Summary Normalized Percent P&L Per Trade version 3
(click to enlarge)


Win Rate
The profit taking at 10% of the credit received, stands out in the tables below, although maybe not as clearly as in the win rate table in the last post.


RUT Short Straddle Summary Win Rate version 2
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RUT Short Straddle Summary Win Rate version 3
(click to enlarge)


Sortino Ratio
Columns of strength are apparent in the two tables below.  The clustering of strength is much more clear in the Sortino table in the last article.  That said, don't ignore some of the other solid numbers that are overshadowed by the 73 DTE, IVR > 50% readings.  For example the non-IVR filtered regions (NA) at 59, 66, and 73 DTE.


RUT Short Straddle Summary Sortino Ratio version 2
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RUT Short Straddle Summary Sortino Ratio version 3
(click to enlarge)


Profit Factor
The Profit Factor region of strength matches the Sortino Ratio region of strength, and is associated with the IVR >50% filtered trades at 73 DTE.


RUT Short Straddle Summary Profit Factor version 2
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RUT Short Straddle Summary Profit Factor version 3
(click to enlarge)


Days In Trade (DIT)
The shortest DIT are associated with the trades entered at the lowest DTE.  As the profit taking levels are increased, the trade duration is extended.  Loss taking levels do not increase trade duration as much as increasing profit taking levels.  The information in these tables can give you a sense of how long you should expect to stay in a trade as a percent of DTE.

RUT Short Straddle Summary Days In Trade version 2
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RUT Short Straddle Summary Days In Trade version 3
(click to enlarge)


Number Of Trades Entered
You'll enter the most trades (over 100) if you don't use the IVR filter...the second most trades occurred with the IVR < 50% filter.  As I mentioned in the last article, one approach for the IVR > 50% filter could be as an indicator to increase position size for the 20% of trades that meet this criteria.


RUT Short Straddle Summary Total Trades Entered version 2
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RUT Short Straddle Summary Total Trades Entered version 3
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Total P&L
The greatest total P&L numbers occurred with the non-IVR filtered (NA) trade variations...the result of more occurrences.

RUT Short Straddle Summary Percent Total Returns version 2
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RUT Short Straddle Summary Percent Total Returns version 3
(click to enlarge)


If you want to check out the details behind the numbers shown in the tables above, take a look at my RUT Straddle Summary Page that lists links to all of the articles in the series.

Also, today and tomorrow I will tweet (@DTRTrading) tables that only show the heat map results for the non-IVR filtered trades.  These might be interesting to traders that enter trades every month.


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RUT Straddle - Backtest Results Summary

Over the last seven weeks we reviewed the backtest results of 28,840 short options straddles on the Russell 2000 Index (RUT).  In this post, I won't discuss how these trades were structured and managed. For background on the setup for the backtests, as well as the nomenclature used in the charts and tables below, please see the introductory article for this series: Option Straddle Series - P&L Exits.

At a high level, we tested 7 different days-to-expiration (DTE) for trade entry.  For each of these DTE, we tested 8 different loss management levels (based on the credit received for selling the straddle).  For each of these loss management levels, we tested 5 different profit management levels, again based on the credit received for selling the straddle.  This comes out to 280 different tests for each monthly option expiration  (7 x 8 x 5 = 280).  We backtested all of the monthly options expirations starting in January 2007 and running through August 2015...a few more than 100 monthly options expirations...and that's how we got to the 28,840 trades.  This does not include the 5 IVR filters that were tested (no filter, >25, <25, >50, <50) ... If I did, we'd need to multiply the 28,840 by 5.


Equity Curves
Enough of the intro, let's get into the results.  Just like I've done in my prior full-summary posts, I'm including equity curves for each of the DTE.  In the images below, each row is a separate DTE, starting with 38 DTE at the top, and ending with 80 DTE at the bottom.  I am only including three profit taking levels (10%, 25%, and 35%) in order to fit a representative number of equity curves in this post.  Also, note that the y-axis is the same across all 21 of the equity curves below.


RUT Short Straddle Curves 59 to 73 DTE, Risk:Reward Exits
RUT Short Straddle Curves 38 to 52 DTE, Risk:Reward Exits
RUT Short Straddle Curves 80, Risk:Reward Exits
(click to enlarge)

So what can we learn from these equity curves...essentially the same things we learned from the SPX straddle equity curves. The trades with higher profit taking levels had the greatest returns for a given DTE.  Also, the trades with the longer durations (higher DTE), in general had greater returns for a given profit taking level.


General Trends
For the RUT short option straddle articles I chose not to share the scatter plots.  The trends that we noticed in the scatter plots for the SPX short option straddles were also present in the scatter plots for the RUT short option straddles.  If you have an interest in seeing a particular scatter plot, let me know and I'll see what I can do...nothing very different from the SPX scatters though.

IV / IVR Scatter Plots
The higher the IV, or IVR, the larger the returns for a given trade.  Our profit taking is tied to the credit received, and a higher IV or IVR will result in a larger credit compared to a trade entered at a lower IV or IVR.  This also has an impact on our expiration break-even points for the trade, with a higher IV or IVR pushing our expiration break-even points further away from ATM.

IV Scatter Plots
Many trades were entered at an IV level between 15 and 40...both winning and losing trades.  This also makes sense considering the range of the RVX.

DIT Scatter Plots
Another recurring pattern was that higher DTE and/or higher profit taking percentage, resulted in longer trade durations.  This was expected, but it was nice to see that the data confirmed our intuition.

IVR Filtering
The most consistent IVR patterns were related to the IVR > 50% filter.  In general, trades that met the IVR > 50% criteria had higher win rates, higher P&L readings, and higher profit factors.  The downside?  ...only about 20% of all potential trades met this IVR criteria ... so, only two or three trades per year.  When you do see this filter criteria met, you should strongly consider increasing your size for these RUT short straddles.


Quantitative Results
In all of the tables below, I followed the same structure as the tables in the summary posts for the individual DTE.  The only difference is that the heat map coloring below evaluates all of the data, so that we can visualize the strength of IVR filters, profit taking levels, and loss taking levels across the entire data set.

The first table shows the normalized percent P&L per day for all of the strategy variations.  The variations that met the IVR > 50% filter had the highest readings.  The highest readings for this group occurred at 73 DTE, with loss taking at 75% or greater, and profit taking ranging from 25% to 45%.  As I mentioned above, you were only able to enter these IVR > 50% trades two or three times per year ... only two or three times per year did we see a RUT IVR level greater than 50% at trade entry.

When we evaluate these normalized P&L per day readings, we need to also consider how many days during the year we will generate these daily returns.  Using IVR to filter our trade entries will dramatically reduce our annual DIT.  Low profit taking levels and low loss taking levels will also reduce our annual DIT for a given DTE trade entry window...so all four (IVR, loss %, profit %, DTE) need to be considered when targeting a particular daily return.

RUT Short Straddle Summary Normalized Percent P&L Per Day
(click to enlarge)

The second table shows the normalized percent P&L per trade for all of the strategy variations.  Again, we see the highest per trade returns associated with the variations that met the IVR > 50% filter, with the 73 DTE variations standing out.  If we look at the non-IVR filtered variations (NA), we see return profiles similar to those of the SPX...although not quite as good.  For traders who are executing these trades every month, this is the column to focus on.

RUT Short Straddle Summary Normalized Percent P&L Per Trade
(click to enlarge)

The third table shows the win rate for all of the strategy variations.  Similar to the SPX straddles, the highest win rates occurred at the 10% profit taking level...regardless of IVR filter level.  Most of these particular win rates were in the 90% range.  For the non-IVR filtered group (NA), many of the 10% profit taking variations also had win rates in the 90% range.  For this same non-IVR filtered group, with entries from 59 DTE to 80 DTE, the 25% profit taking level was in the mid to high 80% range.  For these 25% profit taking variations, the average P&L per trade numbers were in the mid to high teens...not the highest in the table, but very good for a monthly trade.

RUT Short Straddle Summary Win Rate
(click to enlarge)

The fourth table shows Sortino Ratios for all of the strategy variations.  The extreme readings for the 73 DTE variations in the IVR > 50% group really stand out...and tend to hide other readings that would normally be good for straddles (0.45 and higher).  If we ignore this grouping, what we see are areas of strength at 59 DTE, 66 DTE, and 73 DTE at the loss taking levels of 25%, 50%, and 75% in the non-IVR filtered group (NA)...see secondary table below.

RUT Short Straddle Summary Sortino Ratio
(click to enlarge)
(click to enlarge)

The fifth table shows the profit factors for each of the strategy variations.  The extreme readings for the 73 DTE variations in the IVR > 50% group again overshadow the other results.  If we ignore the results in this grouping, we see other regions of very strong profit factors...see secondary table below.

RUT Short Straddle Summary Profit Factor
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(click to enlarge)

The sixth table shows days-in-trade (DIT) for each of the strategy variations.  As we've see in all of my SPX and RUT straddle articles..the quicker you take profits or losses, the shorter your trade duration.  Also, longer DTE variations required you to stay in your trades longer in order to hit your profit exit.  In general, we can see in the table that, to collect 10% of the credit received (10% profit taking level) required a trade duration of roughly 30% of the entry DTE.  At the 25% profit taking level you needed to stay in the trade around 60% of the entry DTE.  For the 35% profit taking level it was about 70% of the entry DTE; 45% profit taking took your trade duration to about 80% of the entry DTE.  These estimates are for the non-IVR filtered strategy variations and are consistent with the SPX straddle results.

RUT Short Straddle Summary Days In Trade
(click to enlarge)

The seventh table shows the number of trades that were entered for each strategy variation.  The number of trades for a particular variation, along with the DIT (previous table) have a large impact on your portfolio returns.  As soon as you apply an IVR filter to trade entry, you reduce the number of trades that you take...as seen in the table below.  These results are also consistent with the SPX straddle results.

RUT Short Straddle Summary Total Trades Entered
(click to enlarge)

The last table shows the.total non-compounded normalized returns by strategy variation.  The non-IVR filtered variations had the highest returns, which is related to these variations having the most trades (100+, see table above).  In general, the trend is for higher returns with higher DTE...and is the same pattern that we noticed with the SPX straddles.

RUT Short Straddle Summary Percent Total Returns
(click to enlarge)

In the variations above, I am most interested in the non-IVR filtered strategy variations because I prefer to enter these trades monthly.  Based on a number of factors, my preferred variation is profit taking at 25%, loss taking at 75% and DTE in the 55 to 70 range.  These are the same profit taking and loss taking levels I selected for the SPX.  Another set of variations that are interesting are the 50:10 between 59 and 80 DTE...these have win rates in the 90% range.  Also note, that 2015 was an unusually good year for both RUT and SPX short straddles....don't expect this higher than normal win rate to continue.

If you want to check out the details behind the numbers shown in the tables above, take a look at my RUT Straddle Summary Page that lists links to all of the articles in the series and associated Tweets.


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RUT Straddle - 80 DTE - Results Summary

This is the seventh article in a series looking at the automated backtest results of selling at-the-money (ATM) options straddles on the Russell 2000 index (RUT).  For background on the setup for the backtests, as well as the nomenclature used in the tables below, please see the introductory article for this series: Option Straddle Series - P&L Exits

This post reviews the backtest results for 4040 options straddles sold on the RUT at 80 days-to-expiration (DTE).  Eight different loss approaches were tested on these straddles.  On top of these eight loss approaches, tests were conducted with no profit taking, and profit taking at 10%, 25%, 35%, and 45% of the credit received.  You can find the prior RUT straddle summary posts at the links below:


The results for these backtests are summarized in six heat map tables.  In these tables, each row corresponds to a different loss exit percentage.  For example, the first row (25) corresponds to the strategy variations where losses were taken at 25% of the credit received.  These rows have values from 25 to 200.  The columns are a little more complicated, and are grouped first by IV rank (IVR) level, and then by profit exit percentage.  You can see that each IVR percentage level contains five columns (10, 25, 35, 45, and NA)...with each column representing a profit taking percentage.  For example, the first column lists all of the strategy variations where the IVR was less than 25% and profits were taken at 10% of the credit received.

The first table shows the average normalized P&L per day by IVR, profit taking percentage, and loss taking percentage. We see the familiar pattern of the IVR > 50% level outperforming the other IVR levels in terms of P&L per day.  The highest daily returns were concentrated in the 45% profit taking level with the IVR > 50%.  The top strategy was the (50:45) variation using the IVR > 50% filter...this variation had a P&L of 0.92% per day (on initial PM).

80 DTE RUT Short Straddle Summary Normalized Percent P&L Per Day
(click to enlarge)

The second table shows the average P&L per trade by IVR, profit taking percentage, and loss taking percentage.  The IVR > 50% level had the highest P&L per trade readings, with the 45% profit taking level having the greatest strength.  The top strategies were the (50:45) and (125:45) variations using the IVR > 50% filter...these variations had a P&L of 51% per trade (on initial PM).

80 DTE RUT Short Straddle Summary Normalized Percent P&L Per Trade
(click to enlarge)

The third table shows the win percent / win rate by IVR, profit taking percentage, and loss taking percentage.  The lower the profit taking percentage, the higher the win rate for a given IVR grouping...this has been a consistent pattern for both the SPX and RUT, and across DTE.  The highest win rates occur with profit taking at 10%.  This 10% level had the highest win rates with the IVR < 25% group, with many values of 96%.  One point to note, the non-IVR filtered group, with profit taking at 10%, had many win rates of 90% or more with DTE at 45 or greater.  For example, the non filtered (50:10) variation had readings of 90% (45 DTE), 89% (52 DTE), 91% (59 DTE), 88% (66 DTE), 95% (73 DTE), and 91% (80 DTE)...very solid win rates with low risk and low profit taking.

80 DTE RUT Short Straddle Summary Win Rate
(click to enlarge)

In the fourth table, we see the Sortino Ratio by IVR, profit taking percentage, and loss taking percentage.  The Sortinos at 80 DTE show strength at the 25% and 50% loss taking levels.  The region of greatest strength is the non-IVR filtered group.  The largest value was 0.76 for the non-IVR filtered (25:NA) variation...closed at a loss of 25% of the credit received or carried to expiration.  This variation had a win rate of 56% and a P&L per trade of  24%.

80 DTE RUT Short Straddle Summary Sortino Ratio
(click to enlarge)

The fifth table shows the profit factor by IVR, profit taking percentage, and loss taking percentage. There is a region of strength in the IVR > 50% group.  The other area of strength is the IVR < 25% group, with profit taking at 10% and loss taking at 100% or greater.  The largest value was 4.4 for the (100:10), (125:10), (150:10), (175:10), and (200:10) variations in the IVR < 25% group.  These variations had win rates of 96% and P&L per trade values of 12%.

80 DTE RUT Short Straddle Summary Profit Factor
(click to enlarge)

The last table shows the average days-in-trade (DIT) by IVR, profit taking percentage, and loss taking percentage.  Quicker profit taking, translates into shorter time in the trade.

80 DTE RUT Short Straddle Summary Days In Trade
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Which variation of the 80 DTE RUT straddle is best?  If I was going to sell an 80 DTE ATM RUT straddle every month, I would go with the non-IVR filtered variation, taking profits at 25%, with a loss threshold of 50%.  This would put the lower bounds of my gains at 50% of my losses (25/50).  The win rate should be approximately 82%, profit factor at 2.3, and an average P&L per trade of 19%.

Based on all of my SPX and RUT straddle backteests, an IVR of greater than 50% occurs during only about 20% of all possible monthly trade entries.  When this occurs at a 80 DTE trade entry, I would increase my trade size,  but still trade the (50:25) variation.  During these periods of increased IVR, many of my trade metrics would improve.

You can find links to all of my RUT straddle articles, and RUT straddle tweets on the RUT Straddle Summary Page.  In the next one or two posts I will summarize the results of all of the RUT short straddle backtests.


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