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pTheta Naked Options Trend Following System Overview and Trade Analysis

DanDirectional Trading, Naked Options, Video Post

Overview:

The video below is intended to help explain the pTheta system.  the pTheta system is a longer term short options trend following system that sells naked options in the direction of the trend.

Trade Analysis:

In the video I take a look at a potential trade in the Russell 2000 ($IWM).  I currently have an open $IWM trade and I’m not planning to take the trade, but the risk/reward is favorable.  Backtesting suggests the trades have a greater than 50% probability of success so the 1:1 risk/reward for the sample trade creates a positive expectancy.

$IWM Naked Put
Risk graph of the $IWM naked put trade evaluated in the video below. The stop level is around 110, which creates a risk/reward ratio of approximately 1:1.

The Video:

I apologize if I sounded a little distracted during the video.  I have two very demanding cats and they were trying to get on my desk while I was recording.  Presumably, they wanted to help us out and they clearly like trading options.