Description  Data  Note 

Policies issued  1,000  3 years of historical data 
Total payout at end of policies  $1,000,000  on 100 claims 
Average payout per policy  $1,000  $1,000,000 in payouts / 1,000 policies issued 
Conclusion, the longterm average value or breakeven per policy is $1,000. This is the theoretical value.
The Theoretical Value
The theoretical value is displayed to the right of the current market value. Making it easy to see where the current market is pricing the trade vs the value that has been compiled and calculated from historical data.Description  Data  Note 

Market Price  $1500  Avg Premium Per Policy 
Theoretical Value  $1000  Avg Payout 
Theoretical Edge  $500  Avg Profit 
How it's Calculated
Find your edge in terms of capital 


Find your capital at risk 


Finally, the Theoretical Edge (in terms of percent of capital at risk) calculation 
Theoretical Edge / Capital at Risk 0.43 / 1.55 = 27.7% 
The Theoretical Edge
The theoretical edge is perhaps the most important section of the trade card, this is where you can find how much theoretical edge you have based on calculations from historical data. Just like in the insurance company example, this is the expected average return per trade in the long term (assuming the historical price return distributions of the stock are the same in the future).Description  Data  Note 

Policies Issued  1,000  
Claims  100  
Win Rate  90%  (1000 policies  100 claims) / 1000 policies 
The Win Rate
The win rate simply shows you the percentage of times this type of trade was profitable over a 6 year historical time frame. If you think of each trade card as a policy, then the win rate would show you how many times the policy expired without a payout on a claim.