Analyzing Recent Week-by-Week ATM Straddle Results


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MarketChameleon has sifted through the last 12 weeks of at-the-money option straddle returns to find symbols that had the most consistent positive performance to enhance your trading portfolio.

Results Summary

Over the most recent 12-week period, MarketChameleon has detected 18 stocks with unhedged option straddles that had historical win rates of over 60%, average returns of better than +10%, and median returns of greater than +10%.
Within the same time frame, we found 13 stocks that had straddles that met those conditions when the straddles were hedged only once at the initial trade delta and then held for the remainder of the week.
If we change the hedging technique to re-hedge the delta at the end of each day, we discovered 16 symbols that met those same conditions.

Standouts

Among the symbols analyzed, using the unhedged delta results, LOW had notable returns -- a 83% win rate with an average weekly return of +40%. When looking at hedged-once straddle performance, GDX had a 75% win rate and an average return of +41%. A standout from the results of the hedged-daily straddle analysis, FDX had a 83% win rate and an average return of +33%.

Methodology

The objective of this analysis is to backtest potentially undervalued (or overvalued) option straddles with high historical win rates and the best average returns over a period of 12 weeks. The benefit of buying long straddles is that the risk is limited while the potential profit is boundless. Long straddles also offer protection against increasing volatility and sudden market moves.
We analyze at-the-money option straddles for each symbol's nearest expiration, and compare the value of the straddle from the initial value on Monday morning to the closing value on Friday afternoon. It would be considered a "win" if the theoretical trade increased in value from the opening to the closing. Additionally, we provide the flexibility of multiple hedging strategies -- first would be unhedged, which is a naked option straddle with no stock attached; then hedged once at time of trade, which is a delta-neutral straddle hedging the net deltas at the time of the trade and then holding until close; and last daily re-hedged, which also hedges the net delta at the end of each day through the week.

Using the Report

To take a look at the results for yourself, follow this link to the full report. Below is included a screenshot as to how we set the filters for this report.

A screenshot of how the filters are set for the Week-by-Week Straddle Performance Report