 Hey everyone welcome to another video lesson from navigation trading in this video I want to talk to you about trading Short strangles during a market crash. We get this question from our members all the time Yeah, the strategy is working great now But what happens if we have a crash like we did in 2008 many times newer traders Have a fear of trading naked options. They think oh my gosh If 2008 happens again, I could lose all my money and so forth and so on So I want to take this time take this video to show you a back-tested study of trading short strangles So here's the criteria that we used in our study. We're looking at the S&P 500 SPY We're entering these short strangles with 45 days to expiration We typically like to enter anywhere from 30 to 60 days So 45 days is right in the middle We closed our winners at 50% of max profit like we typically do with our short strangles And we looked at a couple different time frames one. We looked at the most recent five years So just went back five years. This has been a pretty outstanding bull market during that period And so you would think that short strangles do well over that period because if the market goes up implied volatility is contracting Potentially giving you profit with your short strangles So we wanted to look at that and compare that to the market crash in 2007 through 2009 we saw one of the most volatile markets the biggest market meltdown that we've ever seen and So I want to take a look at how the performance of the short strangles did during those two periods So to do that we're going to go to the CML options strategy backtester the CML trade machine and What we're looking at is trading a strangle. It's a short strangle. We're selling that Obviously with SPY there's no earnings. It's an ETF. So we're just gonna put nothing special there We're gonna open the trade at a normal time We're gonna close the trade when we have gains at 50% of max profit And then we're gonna open our next trade immediately. So as soon as we take one off, we're gonna open a new one now Keep in mind. This is not even taken into consideration Implied volatility. Okay, so this means we're just putting these on whether implied volatility is low implied volatility is high It doesn't matter. We're just putting on a strangle no matter what and and seeing what happens over this period so I want to start with the five-year study going back the most recent five years and Typically when we sell strangles at navigation trading, we're kind of playing in this area We're selling the 15 delta 20 delta 30 delta somewhere in here I went ahead and added the 40 delta and the 50 delta Which would essentially be a short straddle at the 50 delta But just give you some different points of reference and so what you'll see is during the last five years I mean it performed really well. I mean high win rates 88% 82% 81% so very high win rates And it's been a profitable strategy now. Keep in mind if we were just putting these on during high implied volatility These numbers would be even better We've been talking to O'Fier and his team at CML about adding that implied volatility filter It's not in the software yet, but hopefully it will be in the future and we'll be able to see how much that Enhances the returns even more. Okay, so no surprise there bull market Contracting implied volatility. It's a profitable strategy But the question is and where I want to take this is to the 2007 2009 time frame again This was one of the most volatile times We've ever seen one of the biggest market crashes we've ever seen and so I want to see how this performed During this period because again when you're selling a strangle, these are naked options Right the risk is theoretically undefined the key is a to keep your position size small relative to your account size and To continue to put these trades on just like we're showing here in this case We're just putting one on as soon as it closes. We're putting on another one that one closes We're putting on another one and this helps give you an idea of how that has performed So look at how this is performed with the 15 delta made over 53 percent over 91 percent win rate 20 delta made over 74 percent with over a 90 percent win rate the 30 delta made over 52 percent 82 percent win rate and then you can see the 40 and the 50 were positive as well One of the key takeaways here is if I hover over this graph here You can see this box pops up and you can see that over that period of time the s&p 500 was down 15.1 percent every other strategy regardless of the delta you chose Every other short strangle regardless of the delta you chose was positive and it was it was positive Significantly so it wasn't as good as it was in a bull market, right? But it was still positive and it beat the pants off the s&p 500 So if you're comparing this to investing in mutual funds or you know, it's very popular just to buy index funds Right, I'm gonna buy low-cost index funds track the market Well, just by doing this simple simple option strategy putting a strangle on taking it off Putting a strangle on taking it off just by doing that one simple strategy you beat the pants off of the s&p 500 So that's the takeaway and the reality is you know, this strategy where there's perceived fear There's perceived risk of having uncovered options naked options Theoretically unlimited risk during one of the biggest market meltdowns. It still was profitable Okay, and again, this isn't even taking into consideration Picking and choosing when we put these on where we're picking and choosing only putting them on in high implied volatility This is putting them on in high implied volatility low implied volatility. Just putting them on one after another so I hope this was helpful and Just showing you the power of what this back testing strategy can help give you not only from a confident standpoint, but overall just finding your opportunities if you're interested in getting your own access to this software To the CML trade machine pro We have worked out a deal with Ophir Gottlieb and his team at CML Where normally the software is a hundred and forty nine dollars a month and that price just went up It was a hundred and twenty nine as he continues to put additional Resources and value in the software that that price will continue to go up However for navigation trading members He has given us a special over 40% off at just eighty nine dollars a month If you're interested in checking that out and learning more there's some videos there on this page Just go to CML viz.com Ford slash nav tee CML viz.com Ford slash nav tee. Hope this was helpful. We'll talk to you next time You