This is just a place for me to document my options trades. I lost a ton of money trading options earlier in the year, and felt like every time I went heavy into something thinking it would move one way, it would seem to always move hard in the other way. So I started hedging by trading straddles instead, and sometimes will buy both a put and call out of the money.
Update: I spent a few hours creating a spreadsheet to do some backtesting of options strategies. It's fairly flexible, but also simplified greatly in many ways.
It was created with straddles in mind (or ones that I don't know the name where if the stock is trading at $1 you buy $10 puts and $12 calls, because you expect a big move but not sure which direction)
The first step is to pull historical data from yahoo finance. It has daily high, low, open, close, and volume
Then I set up some parameters to test. They include the following:
Current price
Call Strike Price
Call per Contract Cost
Number of call contracts (actually, as of now it's set up to assume the same number of calls and puts. You can buy only one or the other by zeroing out the cost of the one you're not looking to buy, but you can't buy 10 calls and 20 puts for this iteration of the model)
Put Strike Price
Put per Contract Price
Number of put contracts
days unti lexpiration
1st sell trigger (e.g., sell 50% of the position if the contract value goes up 100%)
2nd sell trigger
What the model does is look at the data and figure out what the gain or loss on the position would have been assuming every day was options expiration. In other words, if there are 5 days until expiration, it takes the closing price from 5 days ago, converts it to the current price and looks to see if the sell triggers would have executed at any point during the next 5 days, and if there are contracts remaining, sells them at the value of the contract as of the closing price after the 5th day.
One important simplification is that I assume NO PREMIUM. So if you have an $11 call and the stock is trading at $12, I value tha contract at $1, even if there is a week until expiration. Calculating the true value would be WAY too complicated (if even possible), and so this model inherently UNDERESTIMATES gains, and the underestimation gets larger as you go further from expiration.
A "simple" example is here. Stock ABC is trading at $10. You buy 4 $9 puts at $1 and 4 $11 calls at $1. The options expire in 5 days, and you'd sell 1/2 of your position if the price doubles (<b>note that here I mean the combined price, since if the price rises your put value goes down, so you want to double your intial outlay in order to be riding "free" shares<b>), and another 1/4 if the price goes up 300%. The closing prices for the last 6 days were 10, 13, 16, 11, 12, 8. The stock went up 25% in the last 5 days (8 to 10) so recalibrating the values as if today was day 1, you'd have prices of 12.5, 16.25, 20, 13.75, 15, and 10. So what we're doing there is saying "if the % change for the last 5 days happened over the next 5 days (until options expiration), what would happen to the stock (and underlying option) price?". So after day 1, the price would now be at $15, and your $11 call would be worth $4. So you would have sold 2 contracts at $4 at some point during that day (you've now gotten your initial $800 back, and have 2 "free" contracts). The next day the price dropped from $15 to $13.75, so no further action would have occurred. The 3rd day the price went up to 20, so your call option would now be worth $9. So at some point during that day you would have sold 1 more call option at $8. You're now sitting on an $800 realized gain, and are riding 1 "free" contract. The 4th day the price drops to 16.25, so nothing happens. Then the 5th day (option expiration) the price closes at 12.50, so just before the close you sell yoru contract for $1.50 for another $150 gain, and your puts expire worthless.
So in the above example, both your 1st and 2nd sells were triggered, but had they not been, all 4 contracts would have been sold for $1.50 at expiration, and you would have lost $200.
The above process is repeated for each day that data is available (10+ years for most big board stocks), and then I do 4 calculations for multiple time periods. I find the number of gains, average gain/loss, maximum gain/loss, and minimum gain/loss (really just the maximum loss) for the last 5 trading days (~1 week), 10 days, 15 days, 20 days, 40 days, 60 days, 80 days, 100 days, 125 days (~6 months), 188 days (~9 months), 250 days (~1 year) 500 days (~2 years). So that is what I will refer to when I say things like "if I made this play each day in the last month I would have had a gain 15 of the 20 days, and made an average of $2,000", etc.
As I said, there are a lot of simplifications here, but I don't have the time or energy to correct them all.
Please let me know if you see anythign egregiously wrong in what I've done here.
Thanks.