How to evaluate LEAPS and Deep OTM options?

Discussion in 'Options' started by TheLEAPSguy, Jun 23, 2020.

  1. ironchef

    ironchef

    I like your suggestion. You have a higher probability of making 230% than @newwurldmn's 275%.
     
    #11     Jun 24, 2020
    guru likes this.
  2. Matt_ORATS

    Matt_ORATS Sponsor

    I would start by setting up a backtest on stocks that you have liked in the past and observe which options strategies performed best.
    In our backtester you can put in dates for entries and exits for multiple symbols.
    You can test things like:
    • Days to expiration 180, 225, 300
    • Deltas 20, 30, 40, 50
    • Only buy a call when the 6 month IV / 120 day historical volatility is < 1.0
    • Only buy a call when the long term put/call skew percentile < 50
    • Only buy a call when the bid-ask spread < 1% of the strike price
    • Exit the call after holding for 180 days
    If you are interested, I can show you how to do this. We also offer consulting where we might run thousands of tests with your objectives in focus.

    I ran a couple of tests on MSFT since 2007: One was a 30 delta, 225 day; the other was a 20 delta, 225 day, exiting after holding 180 days.
    [​IMG]
     
    #12     Jun 24, 2020