NDLA Performance - Market Analysis on Apr 30th, 2019

While I wait my here is the promised dollar results since May 2018.

1. The first strategy consists in just taking the NDLA trade no matter what. No price limits, no upper ceilings. Just taking the position and letting expire (no early taking of profits):

       01  02   03 04   05     06  07  08   09  10     11  12
2018   NA  NA   NA NA 2080 1267.5 990 170 -135 -10 -607.3 -65
2019 3710 540 2175  0   NA     NA  NA  NA   NA  NA     NA  NA

Total: $10,115.20 in net profit when buying just 1 contract when the signal was generated. As you can see the results are staggering and the max draw down occurred between Sept 2018 to Dec 2018 and was $807 in total, so the profits are more than 12X the max losses incurred during that year. Not bad at all for this all-out strategy.

2. The second strategy is the one we have been using so far recently and consists of buying the signal but only if the cost of the spread is $2.0 or less:

       01  02   03 04   05     06  07  08   09  10  11  12
2018   NA  NA   NA NA 1500 1207.5 990 170 -135 305 -55 305
2019 2870 540 1295  0   NA     NA  NA  NA   NA  NA  NA  NA

Total: $8,992,50 net profit. So as you can see profits are lower because we are not taking all the trades, in particular during periods of high volatility (which is when the spread is very expensive). The advantage is that the max draw down happened in Sept and Nov 2018 with a total loss of $190 which is incredibly low. So in this case profits are reduced but the risk reward is massively improved to about 47X which is mind blowing in terms of risk management.

3. Here another strategy that consists in taking partial profits whenever the target is seen before expiration:

       01  02  03 04   05    06  07  08   09   10  11  12
2018   NA  NA  NA NA 1080 567.5 390 270 -135 -410 460 505
2019 1410 440 775  0   NA    NA  NA  NA   NA   NA  NA  NA

Total: $5,352.20 which is still a very decent profit given that we bail out early on. The only problem is that the max draw down is $545. Overall the strategy is not that bad as profit is still 10X risk but the previous two are much better.

So here you have it folks, you can take your pick of strategy (and mix and match if you want). Also, we haven't had any signals in April at all so far, but as you can see May last year was very good in terms of dollar gains for all 3 strategies.

For those not familiar, please test out our Gamma Optimizer tool for selecting the optimal option strike and exp date.

Leo Valencia hosts the Gamma Optimizer options service at ElliottWaveTrader.net.