Using Statistics

Using Statistics 1 of 7

Statistics allows for a quantitative approach to the

market.

Today we will cover some of our core mechanics

and why we use statistics to help guide our
decisions.
 Using Statistics 2 of 7

Mechanics we use that are rooted in statistics

include:

● Trade Often With Many Occurrences

● Manage Trades at 50% of Max Profit or at 21
days
● Use Delta When Determining Strikes
 Using Statistics 3 of 7

Multiple occurrences is based on the law of large

numbers.
Expected
1SD Short Put Actual Results
Probability
Trade a Short Put
84% Either 100% or 0%
Once
Much closer to
Trade a Short Put
84% 84% win and 16%
Many Times
loss
 Using Statistics 4 of 7

Study: Measuring Management Profitability

● SPY
● 2005 - 2021
● Sold 16 delta strangle, daily
Compared:
● No Management
● Manage at 50%
● Manage at 21 DTE
 Using Statistics 5 of 7

Managing trades at 50% of Max Profit or at 21

DTE improves profitability.

SPY Held to Managed at Managed at

Short Strangle
2005 - 2021 Expiration 50% 21 DTE
Average P/L $45 $58 $65
Average Win 83% 86% 85%
 Using Statistics 6 of 7

Choosing strikes by delta allows for probabilities to

match trade expectations.
Delta Probability of Profit
50 50%
40 60%
30 70%
16 84%
 Using Statistics 7 of 7

Takeaway:

By following our trade mechanics we are in fact

using a statistical approach to improve our
probability of success. This ultimately improve our
probability of profit and success in trading.
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● EXTRA SLIDES