 Welcome back. In this lesson, I want to go over the options back tester that you can use to understand the probabilities and the statistics behind the particular strategy that you're going to trade. Before you place a trade, you need to know a couple things. You need to know what your market assumption is. Do you have a long bias, a short bias, or are you more neutral on the underlying strategy? And what is that strategy? Are you going to trade an iron condor, strangle, butterfly? What kind of strategy? A lot of that depends on the implied volatility level, but you need to choose your strategy. And then you need to choose when you want to enter the trade and when you want to exit the trade. At navigation trading, we do not guess on what we think the strategy is going to do. We have statistics that back up every single trade that we put on. Now, that doesn't mean every trade is going to be a winner, but we are putting the probabilities on our side by using a statistical model. Let's take a look at the back tester as it relates to butterflies. So what I'm looking at here is ticker symbol SPY, the S&P 500 ETF. With this back tester, I actually put this in here as an iron condor, even though the way it's structured, it's actually a butterfly. We're selling the spread and in this case the earnings, there's no earnings because SPY is an ETF. So what you're looking at here is as you can see across the board, there's five different scenarios. One is selling the 50 delta column put, remember in a butterfly, we're selling the two at the money column put or call or put and they were buying the wings. So I looked at buying the wings at the 40 delta level, the 30 delta, 20, 10, and 5 delta level. So the butterfly simply gets wider as we go down this line. So as you can see over the last three years, entering trades with 45 days to expiration and managing our winners when it reaches a profit of 25%, you can see we've got on the first one a 234% return, 45, 173. Now this is the butterfly that we most typically put on where we're buying the wings just outside the expected move that typically ends up being about that 20 delta range. So in this case over the last few years, we're looking at 22 wins, 9 losses, a 71% win rate, and the other big thing is this is not even taking into consideration implied volatility. Remember we only put on butterflies in periods of high implied volatility which would even make this even that much more attractive. By the time you're watching this, the options backtester may actually have the IV rank and IV percentile filter built in, but at this time of this recording it does not. But you can see why we like to trade butterfly spreads is because they are consistently profitable. Now maybe you wanted to trade something other than SPY. Let's try Amazon stock for example. If we take a look at Amazon, what you'll notice is you're starting to see some negative returns. So does that mean this is not a good strategy to trade on Amazon? Well let's take a little bit deeper dive and see if there's anything we can do to make this more attractive. One thing you could do is because Amazon is a stock and they announce earnings every quarter, what have you said we want to trade this but not during the earnings. So essentially it's going to exit the trade a couple days before earnings and it's going to re-enter a day or two after earnings. So you just put never trade earnings and you can see it's this one is still negative and we've still got some negatives across the board. So in that case you might think okay you know Amazon's not necessarily the best stock to trade with this with this type of strategy. Every stock has its own little personality. So you could look at Facebook for example and again we're excluding earnings and look at this. You can see some very significant profits, good win rates, good profitability. So you can use this back tester to not only find the strategy that might work best for a particular symbol but also the different symbols and then and how they react in these different environments. If you'd like to get the options back tester yourself I've included the link in the notes and you can check it out there. Hope that was helpful. We'll talk to you in the next lesson.