 All right. Welcome to the class. We are here to talk about the Option Omega Option Strategy backtesting software. So welcome. Super excited to share some of the stuff that we will be sharing today. This is number two webinar that we've done with with Troy from Option Omega. So back by popular demand. Before we get started, just a couple of housekeeping notes. Make sure you turn off other devices, focus. We've got a ton of good information to share with you today. If you do have questions, just type them in the Zoom chat. Troy's going to be doing most of the presenting. I'm going to be moderating the chat. So if you have questions that are relevant to what Troy's talking about, I will interject those questions to him, relay those to him. If it's not relevant, we will make sure we answer your question, but we'll probably save it until the end. Also, this presentation will be recorded and the replay will be available by tomorrow morning at the latest. Quick risk disclosure. Neither Option Omega or Navigation Trading are financial advisors or broker dealers. Any securities used in these examples are for illustrative purposes only. Navigation Trading nor Option Omega is recommending that you buy or sell any security. And we are looking at backtesting. So backtesting past performance is not indicative of future performance. Investing does involve risk. Options trading may not be suitable for some investors. Make sure you check out the document. Characteristics and risks of standardized options available from your broker and no part of this presentation may be copied, recorded or rebroadcast in any form without our prior written consent. Most of you on here today are most likely familiar with Navigation Trading. I'll let Troy do his own introduction, but a quick background on us. We've been doing Options and Futures Trading Education since 2016. I've personally been trading over 20 years since 1999. We trade based on statistics and probabilities. And what you'll see with this backtesting software, it really enables you to hone in on those statistics and probabilities before making trades with any real money. We also have a podcast called The Trade Hacker Mindset all about the mental discipline side of trading. You can find that on Apple, iTunes, Spotify, wherever you listen to podcasts. And we also have our Trade Hacker community on our Discord platform. So a couple of things before I turn it over to Troy. What are we going to talk about today? Well, in our last presentation, which was in October of last year, Troy did a pretty deep dive into the Option Omega backtesting platform. So I'd like Troy to spend just a few minutes kind of going over some of the details of the software in general. But really, he's going to dive deeper into some of the cool new stuff. For those who are not familiar with Option Omega, you're able to quickly backtest any option strategy literally in a matter of seconds. And the one thing that really sets Option Omega apart from any other backtesting software is they have intraday data. So you can backtest to the minute, you can backtest intraday strategies, not just end of day. So it's a pretty cool feature. One of the things that I'm going to have him touch on is the new trade replay feature that I think is really cool when you're trying to analyze specific trades. We're going to talk about some zero DTE stuff, some ratio stuff, trading in different VIX environments, and much more. If you are not a subscriber to Option Omega already, Troy and his team have been generous enough to offer to our community a pretty significant discount. So monthly is usually $99 bucks a month, and you can get it for $49.99. Or if you want to do the annual versions, usually $600 a year, our members get it for only $300. So if you're interested, go to navigationtrading.com slash Omega. And Landon, if you could type that in the chat just so it's there because we're going to move off here, but navigationtrading.com slash Omega. And with that, I will turn it over to you, my friend. Take it away, Troy. Thank you so much. It's an honor to be here again. And I'm going to share my screen with you real quick. Let's see here. This is always the most terrifying part of any presentation to me, is making sure we're good. So can you guys see my screen? Looks good. Good. Okay, sweet. All right. Well, I appreciate it again. It's an honor to be here and talking options and talking back testing, which is obviously something we're passionate about over here at Option Omega. And I know navigation trading is too. So again, thank you. A quick background of me been trading for about six years now. Yes, for five or six years and trading options, that is. And kind of been all over the map with trading options. And I always like to give a shout out. Navigation was one of the first options places that to me was just the most legit place it could be. I mean, they just do a great job of educating. And I'm sure if you're listening to this, you probably are already aware of that. So big shout out to navigation trading because they are definitely an OG in this space. So we started trading. Me and I was a software engineer and my buddy Rusty and I worked in the same office together and we would just talk options all day long and started trading options. And our other partner, Matt, one of Rusty's good friends, we all talk together and talk options and things like that. And we wanted to figure out a way to do probabilistic trading. And that's the benefit of the kind of options environment as you can trade neutral strategies. And that's really what we were interested in. And so we set about looking to trade neutral strategies. And we came across back testing and we thought, man, this is going to be awesome. And we started using some different back testers. And we found me personally, I found the strategy. And I was like, man, I'm going to be a zillionaire in like six months with this thing. It's just crazy. And I put some trades on according to what the back tester said, maybe their parameter should be. And lo and behold, they did not match the parameters of the back test. And what we realized afterwards and after losing some money, which is always the quickest way to learn things, I realized that the most back testers use what's called end of day data. And so what they're doing is they're taking a snapshot and it's usually at 3.50pm before the market gets all wonky. They take a snapshot at 3.50pm and whatever the price is at 3.50pm, that is the day's price. That is the day's trade. If you put on the trade, they're going to look at it the next day at 3.50pm, basically. And what I realized through that is that we were not getting really accurate fills. If you look at a day like today, January 19th, there was just wild swings in the market throughout the day. And so you're not getting realistic fills or realistic data in our opinion. And so what we attempted to do is set about trying to figure that out because we were software engineers and we're cocky as people, software engineers, and so we figured we could solve it. And it's a very, very hard problem, but we feel like we've done a pretty good job of being able to solve it. And the solving of it was intraday data using one minute data. And the reason most people don't use one minute data is it's very, very intense from a computational standpoint. But, and I'll shout out to my partner Rusty, he's kind of a chief software engineer, he's just a genius and was able to make it, anybody can do it, but can you do it fast? And that's something we're very proud of, is that it's pretty snappy. So we set about, launched it last March, March of 22. And it's been just a super fun ride so far. And we've learned a ton from it. We built it for ourselves. We built it as our own tool. And we quickly realized this might be something that other people could use as well. So with that being said, I will just jump in and I'm not looking at the chat. So if there's any questions or anything with that, just let me know, okay. Yep, I've got you. Okay, I appreciate it. So this is the dashboard of Option Omega when you're logged in. And this will show you your test and you can see it in a card format or a table format. I'm a nerd, so I go towards table format. But what is a back test? What is a test? Well, what we're looking at in general is we want to test different strategies and see how they would do through time in a mechanical way. And so I will just create a new back test real quick. And we'll just go quickly through it again. We have a lot of resources that you can see if you have any questions about how to set up a back test. We have a lot of resources, but I'll move quickly just to kind of give you an overview. So we go back to 2013 and we use one minute data. And we have some quick little common things. Everybody wants to test the COVID crash. Everybody wants to test your today, things like that. But otherwise, you can go back to 2013. And the tickers we have are SPX, SPI, IWM, and QQQ. And we get a ton of requests for different tickers all the time. And we're very sympathetic to it. The reason we started with these is these by far the most liquid options available, these indices. And so we feel like trading IWM is a good proxy for rut, whereas you might be able to test some things out, rut, I love rut, I've traded rut at a time, but rut is very difficult to back test just from a liquidity standpoint. So those are our tickers. And we have some common strategies that you can do. And I'll just do one here real quick just to show you how this works. But these are common strategies. And if you look down here at this colorful little Christmas tree, these are each individual option legs. And so if you look at an iron fly, change it to an iron condor, you can notice that things are changing. The legs are changing. And we can do that for you, or you can do it yourself. So you could just exit out of that, and you could create your own strategy. So you could say, I want to sell a put a five delta put that's 10 days out. And you could do just that. You could also say, I want to do it, not a delta based on delta, but percentage out of the money. So I want to do it like 10% out of the money, which would be huge, but or 1% out of the money, right? Or something like that. You could also do fixed premium. So you could say, for like credit targeting, you could say, I don't care about the deltas, I want to sell a put where I can receive $2 credit. So only put this on if I'm receiving $2 of credit. Or you can do it strike offset, you could say, I just want to sell something 50 points away to the downside. So there's a lot of different ways you could do it. But the way I usually trade is just Greeks. So I do delta and things like that, but there's tons of different ways, obviously. So let's just say you want to sell, let's just say a 20 delta. A 20 delta put 10 days out, you can then create a spread if you want. And there's a couple of different ways to create a spread. If you wanted to do it based on delta or something like that, you could buy the spread and say, I want to sell a 20 delta put and buy a five delta, buy a five delta put. So therefore, I'm spreading it out. Or you could say this little button, which is my favorite button, option to make it the link button. And what that does is it will link this child to the parent. So then we can say, okay, I'm selling a 20 delta put. I want to buy the put 25 points below that. So making a 25 wide put spread. And there's a couple of different things to that. You can lock it. And the locking it basically says like, we're only going to put this on if that strike matches, because if you've ever traded options of like different times with calendars and things like that, sometimes there's not a strike 25 points away. And I'm moving fast, so slow me down if I need to, but uses a DTE, all that means is basically only put this on if there's a 10 day out contract. Otherwise, we will just find the closest one to 10 days. So we'll put that on for right now. And allocation is super interesting and produces some really crazy results, fun results to look at. And it's part of, in my mind, I always say allocation is part of the strategy. It's a strategy in of itself. So what you can do is you start with an amount of funds. And so in this instance, we're starting with $100,000. And then you say for each trade, how much of this allocation do I want put on per trade? So let's say for this, we want to put on 10%. You could then say, especially if this is doing it every day and some aren't closing every day, you might start having quite a few positions on. This max open trade is a way to say basically, the biggest my book ever gets is five. I only want to ever get it up to five trades open at any given time, or something like that, or 20 or whatever you want to do. And if you do that, one thing you could do is you could say, what I want to do is I want to close the oldest trade, when loser draw, when I put a new trade on. And that would be one way to kind of keep it at five, even if you want to keep going. And then the other thing, and this is great for just testing purposes, is you can put contracts per trade. There's two reasons I use this. You, when I want to just see a trade by itself without introducing allocation to it, I'll just do one. And it kind of gives me a good theoretical understanding of the trade itself. The other way I'll use it is if I have a trade that I really, really like, and it's just doing really well, and it's growing exponentially. Well, if you look at the back test, you might end up with like 4,000 trades, or sorry, 4,000 contracts per trade or something like that, as it's exponentially growing. This is a way basically to say like, let's keep it liquid, guys. Let's not go crazy. I'm a big roller, but I don't foresee ever putting on more than 200 contracts per trade or something like that. So you can do it that way. And then it starts getting real, we go down the rabbit hole a little bit. So that's the overall kind of structure of the strategy. And now we get into when do you want to put the strategy on? And so you can put it on anywhere from 9.32 to 3.59 in the morning. Actually, it's 9.31, I believe. And you can do it a couple of different ways. You could say, I want to put this trade on daily. So we're just going to put it on every day that the criteria meets. You could say, I want to put it on weekly, meaning like I want to put it on only on Mondays, or I'm a Monday, Thursday person. I work. And so those are the only days I could do it. Or you could say, I want to put it on the like third Friday of every month. Like I want to target OPEX. I want to see what that would look like. And that's one way you could do it. Or you can put specific dates. So you can whitelist dates that you want to trade. So this is really helpful if you're testing like FOMC, which is the equivalent of like Trader Christmas, or at least it was last year, or CPI, or something like that. You can compile those dates and then put them here, and then just trade that and see what would have happened. You can also use VIX, the Min and Max VIX. You could say like, I only want to put a trade on if VIX is over 20 or under 20. Or I only want to put it on if it's under 30 or over 30. You could do it a couple different ways like that. And then we have some technical indicators. We have RSI, Min and Max, and then simple moving averages. And so the RSI, if you're familiar with that, you can go ham on that. And then with the simple moving, we have a couple different ways you can do it. You can say like, I want to do it if it's below the 50 day, or if it's above the 50 day, or I want to compare it. I want to say, I want to see if the 50 day is greater than the 10 day. You could do that too. You can also use gaps. And we have little bullets, so it's always helpful. This gaps are when the market moves a certain percentage from the previous close to the current open. So market closes today. Let's say we gap down 50 points overnight. What you could say is I want to, I want to see what would happen when we open 50 points down. I only want to open trades up when we open 50 points down. I want to test that. Or you could say 50, but I don't want to go crazy. Like between 50 and 100. Or you could say like, hey, I want to see what happens on a day when it's up 20 points. And you see this percentage, I'm saying in points, but you can also do a percentage. So you could say like a gap down of 1%, max gap down of 2%. Or with points, a mini gap up 20, a max gap up of 50. And you could do it that way. You can also test according to intraday movement. So you trade when the market moves a certain percentage from the opening price to the current price. So we opened up and then we gap down 50. What happens on a intraday gap of 50? I want to test that. Or you can do that using intraday movement. And then we have a fun one, if you're familiar with squeeze metrics, which you can go to their website. It's they've got some crazy cool stuff. It's not worth explaining right now. But basically, they look at instead of, think about instead of terms of like VIX range for the day, they have some metrics that kind of put that in a gamma environment. So a gamma move, gamma move for the day, or points based on gamma and things like that. So you can definitely play around that and look up more. So then we get into the thing, when are we going to take this off? What are we going to do? And we have a couple of different things. You can do a profit target, either based on percentage, a fixed price, or a closing order. So for instance, the closing order is like, I know I'm selling credit spreads. I know I'm collecting $2 per spread because I set it up that way. I'm going to set a closing order for $1. And I want to test that. You can. Same thing with stop loss. You could say I want to base it on a dollar or I want to base it on a percentage of premium or closing order. And then we have these things that are pretty cool called trailing stop. And I'm not going to get into trailing stop because there's just a couple of different ways that people calculate it. But basically, the effect is you set a stop and after a percentage profit, or a fixed loss, the profit starts moving, the stop starts moving. And so if you've ever traded and sold like a credit spread or something like that, or a debit spread or anything, and you started locking in profit, let's say it went up 200 bucks or whatever, and you're up 200 bucks, maybe you start ratcheting it up to the max, the stop loss now is like, you're going to make $100. Well, trailing is similar. And some brokerages have that built in, some don't. But basically, how it works is at a fixed profit target, the trail starts moving. The other cool thing you can do is use profit actions. And profit actions are crazy. Because what you can do is you can say, okay, at 10% profit of this trade, I want to close 50% of my allocation. And I want to adjust the stop to $1.5%. And I want to adjust it to 0.05%. And then I want to say at 20% profit, I want to close the other 50%. And we're done there. So I don't need to adjust it. And so you can test taking profits, which we think is super helpful. If you've ever traded multiple contract trades at any point, we've all kind of wondered about that, especially if we've had a profit and then lost it. I'm sure in the back of our heads, we've always wondered, I wonder if we just started scaling out of this, what it would look like. Well, we try to allow you to do that, or at least test that. So then we have exit conditions. This is profit and loss is an exit condition, but we have more. So you can say, I want to use an early exit. I want to say this is a 10-day trade. Max, I want to exit five days out. I don't want to deal with gamma the last five days. So I'm just going to get out. Or you can say, and this is useful for like zero-day trades, especially say you put it on at 9.32. You say, I want to get out at 11 a.m. I don't want to play around. I just want to get out at 11 a.m. and see what would happen. You can test that. Same indicators as before. So you can test according to the men and max and the simple moving averages getting out based on those. You can also exit when your short is a percentage or points from the underlying. And so this isn't useful for calendars or flies or things like that, but it is useful for when you're selling premiums. So you have a short strike and you want to test what happens if it's within a certain amount of points from the short strike. You can test that. You can also test if it just moves, which is helpful. So like for instance, if you put like a butterfly on and say it's like a 15-day butterfly and it's like 60 points wide, 60 point wide butterfly. Well, you could say, all right, I want to get out if it just moves 60 points. Basically saying like if it gets to the longs, I just want to get out. You could also test that. And then this is my favorite and least favorite section. This is called the miscellaneous section. I call it the pain section because what this is is we want to try to make these tests as real as possible. And so we allow you to add commissions and fees to your tests. And you can also add slippage to your test. And we just added stop loss slippage as well. So if you've ever taken a stop loss before, you know that you don't get what you want all the time or usually. So we have that set up as well. You can also ignore trades with a wide bid ask spread. So something's too good to be true, usually is. And we have found that these indices that we use are pretty liquid, but there's definitely times where you would want to check that. So if you're testing COVID crash, I guarantee you that the bid mask got super wide, got over 100 basis points. And so you might want to test that. Or you might want to look at that just to double check your position and see what the test would have done if maybe those crazy moves hadn't happened. You know, that's the way you could do it. Close open trades on test completion basically means like when the test is done running. So we're running this like for four years or whatever, how long we want to run it. If there's still trades on, say we're trading like 45 day calendars or something, when the test is done, if there's still trades on, just close those when loser draw. These two are these are theoretical and actually have a test. I want to show you some of this. There's reasons for it and reasons not to do it. Cap non opening profits at the profit target basically says, Hey, something went your way. Hallelujah. We did it. We had a good feel. What this says is, don't take it. Let's just see what would happen if we just hit our profit target, if we didn't go over it. Now we will obviously do it with like opening, because if there's a gap or something, it'd just be unrealistic to not have that off. Same thing with stop loss. You can say, I think I can discussionarily do this better than the test. So I want to just leave this at a stop loss, cap it just to see if this test is viable or not. And there's reasons to do that and reasons not like I said. Same thing here. You can do require two consecutive hits at the profit target. So you're only exiting trades when the max profit is hit for two consecutive time intervals. So what is that? It's basically saying like, no, this was a real fill or we think that we think this there's a good chance this actually would have got filled through time. And then same thing for stop loss. You'd say like, I wanted to hit the stop loss twice. And again, these are punishers. So I like to hit the profit. I like to do the profit target, but not the stop loss. You can also use min max entry premium. And what that is basically is you're looking for, it's basically a way to look for a specific price. So you say, I want to trade, I want to receive $1 on my spreads. This is a way to say, don't open this trade unless I receive a dollar from my spreads. Again, just trying to make it more realistic. The short-long ratio basically is the longs to shorts. And it's a way of we're trying to get at is the price cheap. So for instance, for like buying premium or like doing calendars or any time spreads, are your shorts in this ratio, are they basically cheap according to the longs or are they expensive according to the longs? Blackout days are similar to whitelist days. So for instance, I said above, if you wanted to test CPI, but maybe your trade is like, I'm never going to trade CPI over my dead body when I trade CPI. I'm out that day. I go fishing that day. Well, you can put those dates in here and the test won't run on those days. So you can sleep easy. And then this is an interesting feature for people who are selling spreads throughout the day. It's gotten really popular as year day stuff lately. And so this is basically saying if a trade, if I get stopped out via profit or because of actual stop loss, I want to put the trade back on. And we give you some metrics to do that. You can say like, what conditions do you want? Do you want to delay the reentry? Do you want to reenter if it's before a certain time of day? Do you want to not reenter if it's after a certain time of day? And so as you can see, there's a lot to it. And it makes for a lot of fun times figuring out what is a good strategy. So I don't remember what we did up here, but we'll just run this just to see a 50% profit target, 1.5% stop loss. I didn't put enough money on it. Hold on real quick. I'll actually don't do this. Let me cancel that. I had something going on before there, but it'd be easier just to show you one of the results here. So that's it in a nutshell. Are there any questions about that? I know I moved super fast, but we can look at some results and kind of show you what all that looks like when it comes together. No questions yet. Awesome. Okay. So here are four tests. And I thought it'd be interesting just to look at some different environments, some different things that ways to test depending on who you are and what you do and all this stuff that can result in some wildly different results. So first off is this two day iron condor. And so I'm going to go through the results and just show you what we do here. So we give you the underlying, we give you the dates that you ran it. And then we show you the legs that you were running during this test. And then we show you all your entry conditions. So in this case, this is a two day iron condor. And it takes a minute to look at this, but once you get it, you get it, trust me. So you're selling a 25 Delta put and you're buying the long 50 points below it. And then this one is a little different. You're selling a 50 Delta call. So at the money call. And you're buying a long 50 points above that. So it's a 50 wide condor, but the Delta, you're not going to be Delta neutral on open because the Delta's are skewed short because your call is at the money and your short, your short calls at the money and your short put is 25 Delta. So obviously this worked really, really well last year. Why would it work really, really well last year? Because we just went down. I mean, it won 85% of the time, but would it work every year? I don't know. And this is the thing that with Option Omega I've learned so much about just trading in general. I went into this, we all went into this, Rusty and Matt and I saying, all right, let's find the trade that works throughout time, the 2013 to 2022 trade. And they are there. I promise you there's gold in those hills. But what's far more interesting to us is you can definitely see that overall option strategies change through time and there's different landscapes and different environments to do certain things. And so a trade like this where it's an at the money call and the 25 Delta put people are saying, should you do this? Well, I'm not telling you to do anything. There's options and all risks. But it's an interesting idea. If you have go into a trade saying I am neutral to short the market, this might be, but I still want to collect premium. I still want to collect theta. I'm still a theta trader at heart. Maybe this is something to look at that's interesting. And so you put this trade on at 945 and we do it every day and we do it only when there's two day expirations. So we're not putting anything on usually Fridays with this. And we're allocating 50% of portfolio and I always tell people you should never allocate 50% of your portfolio to anything. I'm not a financial advisor. That's just my opinion. Options involve risks. But it's interesting to test the allocation with it. And so we put that on for this reason. And with this, like I said, I like to keep it real as much as I can. And so I'm saying, I don't care how big it gets. I'm not going to do more than 100 contracts per trade. And we'll go through here in a second and show you maybe what that would look like if you didn't. And so this trade is actually really simple. The exit condition, I'm going to get out only if I either hit the profit target or it's the next day. Those are my exit conditions. I either get out for 10% or I exit the trade the next day by 11 AM or at 11 AM. And then for the miscellaneous, I put two and a half bucks for opening these. Each brokerage is different. I like to test different things. And so for this one, it's just opening fees for two and a half dollars. And so that's kind of this at a nutshell. We show the P&L. We show the CAGR, the Compendental Growth Rate. We show your max drawdown during the trade. And we show you your mar ratio. Mar ratio is basically CAGR divided by your drawdown. So it's a way of a ratio to look at how good was this trade, your CAGR compared to what your drawdown was in the trade. Your win percentage is you're winning 85% of the time. This is basically a premium capture info. So we basically say, okay, this year and this past year, if you would have ran this test, you would have sold $32 million in options premium. And you captured or you collected, you collected that, you captured this much, you kept 4.4% of that. And then we show you your starting capital, where you started, and then where you ended up. Then we give you some averages, what your average trade was, what your average winner, your average loser, your max winner, your max loser. Obviously, these are big numbers because it's sequential through time. It's growing exponentially because of our allocation. The average days in trade, this is really useful, especially one, two, three-day trades, to show you how long you're in it. On average, we're in it less than one day. And we put on 137 and we won 117. And then down here, we give you some basically just a quick summary view of it, of like a year to date, which again, this is one year, so it's not super useful for that. But if you're going back multiple years, it's useful. Your return versus your max drawdown. And then we show your funds by date. And then we get into something really useful. We get into what each trade did. And so I'll show you, yesterday's, we basically update our data every night in the middle of the night. So today's action in the stock market, you'll be able to test it tomorrow. So we're one day behind the market, basically. And so this trade yesterday, we put on at 945 AM when the opening price was at 4,003. And we sold 100. Now, why are we starting with 100? Because this is descending. We can ascend it and start with January of last year. And you can see we started with four contracts. But I'm showing you the latest. So we've made it up to 100 in our allocation. But each contract, we collected $2,200 roughly in credit. The market went down because this is a it is a short delts trade that worked pretty well in the sense that in one hour, we hit our profit target of 10%. And that was it. We also show you what your max loss was during that point. So at some point in that trade, you were down 6%. And that's super helpful too when you're looking through these things and trying to figure out like, okay, what should I test for a stop loss? It's really helpful to be able to go through the trade log and say like, oh, okay, it's 12%. Let's see here, 33%. 68%. It gives you a good way to look at maybe 10%. I want to just cut it. I don't want those to be, I don't want to take big losers like that. And then we show you what your max profit was as well. So that's helpful as well. And then we just came out last month with a way to dive deeper, because if you look at this, this is every trade and that's super useful. And if you do this for nine year or 10 years now, I guess, because it's 2013, if you go back a decade, you're going to have a lot of these suckers. And it's helpful to see, it's helpful that you can actually see the different environments changing through time, even in the trade logs, if you run it back in 2013. But this right here is something we came up with last month. And it dives into that individual trade. And we call it trade reply. And basically what it does is it shows you each date or each hour, depending on how short-term it is, that you are in the trade. And we show you the premium. And obviously, if you're selling premium, you want the premium to go down. If you're buying premium, you want the premium to go up. So we can look at the underlying SPX here and what VIX was doing all along. And yesterday, so it's super interesting, right? It's we jump in, we're going up, our premium is rising. It makes perfect sense that that would happen. Right? VIX kind of is staying put. VIX isn't doing much during the lifetime of this trade. And then right around here, we have this, my little zoom thing is blocking it, but I can't see what time that is. But I'm guessing around 10.25, 10.25. We have the draw. And then your premium starts dropping. It rises again on that first kind of push higher. And then obviously, if you were trading yesterday, you saw we just continue to go down all day. So within an hour, you were out. And you can do that with each one. You can do that going back to however long the trade is. So go to ascending here. Our first trade in this back test, January 3rd of last year. What were we doing? Well, we put it on and almost immediately, we were profitable that day. VIX was rising as well. And so that's super helpful. The VIX underlying in the trade mixed together in a chart, seeing that through time. It's really helpful with spreads put selling, but it's also super helpful with debit spreads and or calendar spreads because you can see what the VIX is doing through time. And you can get a sense of, okay, in our mind, it's a teaching tool. You learn about double calendars. You say, okay, I see what's happening. VIX went up. And my profit's increasing. Okay, theoretically, I get that. But let's actually look at a trade that the back test put on and see what happened there. So we found that very useful. People seem to like it a lot, which we're thankful for. And you can go through this pretty quickly. There's ways to go through these. You can also filter it by winners or by losers only. Hey, Troy, can I interrupt you for a second? Please, yeah. I was just going to go back to the trade replay. I've been testing an inverse or a long iron condor strategy. And another example of where this can help you from a psychological standpoint is that's a trade where sometimes, if you can visualize it, it's got a big valley where you'll have a loss if price just kind of stays stagnant. And so what you'll notice on something like that is, it may be showing a loss for the majority of the day, but then right at the end, if the market makes a move, it becomes a winner at the end of the day. So that's important to understand because if you mentally cannot handle that type of scenario where you're losing most of the day, and then at the end of the day, it becomes a winner, then that may not be a trade for you, even though it back tests well. Yeah. That's exactly, yeah, I couldn't say it better myself. That's another way that happens is when you look at a trade like this and someone says, okay, this is an awesome trade. Man, obviously, everyone starts with this, which is maybe not always the thing you should look at, but you start with 85% win rate. And you say like, oh, that's awesome. That draw, and the drawdown is not bad at all. Well, yeah, theoretically, it's not bad at all, but can you handle a 32% drawdown in your account? Is that something that you would be able to do? Some people say, yeah. Some people say no. It's important to be able to at least figure that out in real time. And I think to your point, trade reply kind of helps you go a little bit deeper with, okay, I really would be losing money, like by the hour, right here until the end of the day. So maybe this is a trade for me, maybe it's not. So that's the result in nutshell. But just to show you a quick, this is 100 contracts per trade. What would happen if we took that off? We took off 100 contracts per trade, and we just let it go. This is where it gets super, super intriguing to me because, and this is the point of allocation percentage. Again, remember our previous, and this is one thing that we can look at here. This is our recent runs that we've done. That shows you kind of the recent ones you've done. But if you look at this, okay, we've made 19, you know, 1,900,000 theoretically. But we have a much, much bigger drawdown, a much bigger drawdown. If you look at this graph, you have some rough times towards the end of the year it looks like last year. If you just do what is the equivalent of, you know, you can do the math, but 343 contracts versus 100. So this is the thing that's super interesting is, okay, capping it at 100 reduces your drawdown, reduces your P&L, but it out reduces your drawdown. And not every trade is like that, but it's really useful to test allocation like that to say, I only ever want to put 100 on. I don't ever want to get to 4 million or whatever. You can also say something to the effect of like, okay, I only want to do 100 per trade, but I want to get there quicker. So I want to allocate 100% of my portfolio. Again, don't do this, but we can test it. We can see what would happen. Super interesting. Almost the same result, almost the same result going 100% with the capping. Again, these are just little things as you trade and you back test that you start to realize like, oh, okay. So really how much I'm allocating does make a huge percentage. Again, let's turn that off. We were at 1,900,000 went before without that. But if we're doing 100% of our allocation, you don't get any more money, but you do get a much, much scarier drawdown at 100% allocation. So I find that very interesting because I'm a nerd and I like to look at this stuff all day, but let's return that back to, let's say that was 10%. And I'm going to say right now we're just going to do one, which ignores everything I just put in. So we're just going to do one contract just for testing purposes. And so this really gets, this is where it gets helpful with one too, if you're removing the allocation, because then the averages kind of start showing themselves a little clear. The average winner of this trade is 330, the average loser is 800. So you're obviously losing a lot more than you win, but you win a lot more than you lose, if that makes sense. It's like a Yogi Bear, almost like a Yogi Bear there with that. So that's some of, that's that first test. And it's interesting, it's a condor basically, go back to it. It's a two-day iron condor that's a call, 50 Delta call at the money and the 25 Delta put, and then they're 50 point wide. So it's a 50 point wide condor, but it's skewed. And if you're in the chat real quick, I can, it's helpful if you're a member, Option Omega, if you can, if you belong to Option Omega, you can see this basically, and if you don't, you can't, but I'll put it in there just for anybody who wants to look at it. So that's that one, super interesting. Again, should you run that throughout time? I don't know if you should run that throughout time. I don't know much of anything, but I think it's very interesting. And I know if I was short, Delta's, it'd be very interesting. So this is the second one. And this one's my personal favorite, not just because of the P&L, but just because of my style. So I trade double calendars a lot. I love double calendars. I love the idea of being long Vega and long theta. And so that's my personal opinion. And what this is, is a five year look at one trade. And this trade is very, very simple. Basically, going back to 2017, every Monday at the end of the day, 3.50 PM, we're going to sell the two day out and buy the four day out options. We're going to sell the two day out 20 Delta put, sell the two day out 15 Delta call, and then buy the same strikes making it a calendar, four days out. And we're allocating 25% of our portfolio. And our profit target is 40% on this trade. We want 40% or we want to get out at 945 the day that the shorts are zero day. So the day of expiration for the shorts. Or we want to get out when it's 15 past, 15 points past our strikes. So 15 points above the calls or 15 points below the puts. Those are our criteria. We're requiring two profit target hits. We're capping the profits. So we're being really conservative here. And personally, I love this test. This is like one of my favorite tests. And it just shows a couple things to me. We say all the time there's different environments. I just showed you that with the Condor. They're definitely different environments. But there are also some trades that just slow and steady wins the race. They just work sometimes. And this is one of those to me that is pretty helpful of just remembering. Like remembering things of like, oh, should I be, what's the right trade to put on? There's sometimes you can get into analysis paralysis. I like this trade a lot because it's like, well, if you just would have done this the last five years, theoretically, you did pretty well. And again, I'll show you the trade replay just because it is pretty interesting. Oh, and one thing just to show you, this is not using the cap. So you know, are you putting on 5,700 of these? No, no way. So let's just try to make it realistic. So this one takes a little bit longer. It goes back five years. And we try to average these out to where like five years is 30 seconds depends on what you're doing. But we think it's pretty fast for what it does five years and 30 seconds. That's pretty good. Yeah, we try. We try. So you know, you're not 27 million. But still, I don't think anybody's sad. You know, I don't think anybody's mad about this one. And to show you the trade replay on this, this is this week. So you put this on exercise. This was last week because the market was closed Monday, and this is exact DTE. And so because the market was closed this Monday, last past Monday for MLK day, we didn't put a trade on. And it didn't try to adjust to the next day because we used the exact DTE. I only put it on Mondays if there's a Monday. So this is the previous week. But you can see very, very interesting. The VIX is going down, right? And the market is going up. Although really like classic criteria for a double calendar not working, right? Theoretically, it could work. But like realistically, if you trade double calendars, you don't want to hear that. Like, all right, I'm going to put this double calendar on. And like, it's going to just rally 50 points. And VIX is going to go down, you know, quite a few percentage. Nothing crazy, but definitely still rolling down. That's really helpful to see. It's really helpful to say, like, okay, well, that worked. Well, it went on at three to 940. Let's see where our strikes were. Ah, okay. Our calls were 3955. So what was happening? It reached kind of our tent of profit. Even though IV was falling, it still reached our profit because we exited at the specific time, but it was profitable because we got into the range of profitability for it. This would definitely be like a tent in the middle sagging type trade when you lose. Like, if it just does nothing and VIX collapses, you know, this is a good example. October 24th. You put it on at 3798. You took it off 30 points later. You're way below your strikes because the VIX was so high. So VIX is starting up way up here and we're going way down there. And even though there was a price drop, it just wasn't enough because you started with VIX and therefore you started with your range being very wide. And so there was just nothing you could do than that. So anyway, I really like this trade. I'm going to save this and show you how this works. So because this is a safe trade, I'm just going to replace it because I changed it towards a hundred max contracts now instead of unlimited. So I'm just going to save that. And I will put that, oh, I'm bad at zoom here. Let's see here. I'm putting that in the chat. Okay. So two more tests real quick. How are we doing on time? Am I going to slow? All good. Okay, sweet. I'll do two real quick. So this is a ratio that one of our members in our discord community shared and it's not his test per se. It's kind of based around the idea. And I'm going to show you two versions of it real quick. So if you traded options for a while, you know that put, there's usually a put skew and therefore put premium is usually more expensive than call premium. Usually there's some caveats to that. But in the indexes, especially put premiums, usually more expensive. So what this is doing is it's basically trying to test a theory. And I always tell people with back testing, I'm not looking for the perfect trade. I'm looking for really good ideas. And so this is just an idea. And what it is, is it goes back three years, it goes back to basically the COVID crash. It starts in the COVID crash and it goes to yesterday. And what we're doing is we're selling 240 delta zero day puts. And we're buying two puts 50 points below that. And then we're selling one call call 40 delta zero day, and we're buying a call below that. So this is kind of think of this as like a condor, but it's ratioed. We have a two to one that puts are two to calls one. And in zero day, and we open the trade first thing in the morning, every day, using exact DTE obviously, because zero day, we're using the exact strike offsets, meaning basically that like, it has to match the strikes that we want. We're allocating 25% of our portfolio. Again, don't don't do that unless you know what you're doing. And maybe even then don't do it, I don't understand. But, and then this is the key, this is the key for this test, which is interesting. Because this again, this is an idea test. This isn't like when I would never say do any of these tests, but particularly these last two, these are theoretical tests. These are ideas that I find interesting. We only put this trade on if the market overnight opens, it basically opens down at least one point. So what are we doing? We're basically saying like we only put this on when the market has opened down for the day. And our exit condition is 50% profit target, or a $2 stop loss. So we either lose $2, or we make 50%. Those are our criteria. We have some opening fees. We put slippage on the stop loss because we're going to get stopped out a lot on this trade, as I'll show you, as you can see the wind percentage, you don't win a lot in this trade. And yet it's profitable. Therefore, it's a weird idea that's worth maybe thinking through. The key of this one is that you're re-entering the trade after you exit. And I'll show you again what that looks like. So way down here, we're re-entering the trade. If we hit our profit target, we put it on again. If we hit our stop loss, we put it on again. And we're going to do that all day unless it's after 3.30 p.m. Eastern time. That's our criteria. And so what happens is you get stopped out all the time. You have a huge drawdown. And yet it's profitable. It persists. And so what do I take away from that? What I take away from that basically is that there's different ways to do this with premium that can play with SKU. It's almost like a weird option specific thing through where you're really just targeting SKU in this in some ways. And just to show you kind of the trade replay of a loss. On this loss, you got stopped out on the call side, which is funny because that means it really, really rallied basically because the 2-to-1 buys you a little bit more room. It's a little bit positive delta trade. Like you're starting out with some positive deltas, but you're still negative gamma. So you can flip over and still get stopped up on the call side eventually. And that's what happened here. In a similar way, that was funny because it just happened so fast. Sometimes you got to go back. You put this on at 2.49 p.m. You got stopped out two minutes later. Now, why did you get stopped out two months later? Because it's 2.49 p.m. and the range of profitability is very, very small at this point. You're putting it on a $11 profit for a lot of risk at that point, theoretical risk, because we're getting stopped out. But you just do that all throughout the day and yet you persist. Is this my favorite trade? Certainly not. Is it super interesting in a way that perhaps this is a really, really good view of how PutSQ works in SPX? I think it is. I will show you the final one. So again, that one was, you just put it on if the market opens down at least one point. Obviously, you could put that. There's 4 million ways you could test that, but that's the first one. This one. Hey, Troy, before you jump into that one, I just want to answer a couple questions in the chat. Ram asks, does it capture the max heat a trade took for profitable trades? And yeah, if you, maybe you didn't see before, but either on the trade log on the two right hand columns shows max loss, max profit throughout the trade. So you can see it there or the trade replay that Troy had displayed. So if he didn't catch that part, maybe you can watch the recording. But yes, you can see throughout the entire trade where the profit and loss came in, max heat, max profit, all that stuff. Yeah. Yeah, for sure. And then the one other question is Pep's fan says, can you test the performance of an indicator or set of indicators? And maybe you missed that as well. But he Troy displayed, there's some moving averages and a couple other things that can be used. Yeah, we have currently we have RSI, Minimax, and you have simple moving averages where you can do compare them or below and above them. It's one of our top kind of feedback that we get, requests that we get and can't make any promises, but just say that it is something that we are thinking through and working through a little bit. And without going into too much detail, Troy, taking too much time, you also have the ability to upload a spreadsheet of potential trade signals, correct? Yeah, I didn't even think about that. Thank you for saying that. So, yeah, a lot of people use indicators in their trading and so they might use TradingView or a different charting platform. We can, you can actually now, you can actually create an upload and we have a ton of documentation how to do this, because they have to be specific. But basically, there's a way now that where you can import entry times and exit times of where looking back through history, your trades would have, you would have wanted to take trades. So for instance, if you have a, oh, let's say you're using some, some proprietary thing that you created, and you have a back test in TradingView or something like the data is there for like a year of when I wanted to go long or short in the market. Well, you can actually now use Option Omega by uploading that. And what you do with it is you can do it a couple of different ways. And there's actually a ton of videos. It's actually kind of complicated because there's a lot to it. But basically, in effect, if you have custom indicators and things like that, you can actually test that there's ways possible not to test an Option Omega, your custom signals. And you can do it using your own strikes when you wanted to enter or you can do it based on like, I want to put on this type of strategy at this point. So you can base it on time or you can base it on like when to get long and things like that. Very cool. Thank you. Yeah, for sure. Okay. Final one. This one's very crazy. I put this at one contract because I just wanted to start with the theoretical. So this is very similar to the same thing. But I want to show you, I want to show you like why ideas can be really interesting even though if they don't result in a good back test or why a good back test might not be good ideas and how you might have to figure that out. So this is I won't tell you which one this is either. So basically, this is very similar to the last one except for we're selling a four to one ratio, right? And it's 25 Delta, four of them, and then a hundred away, and then a 40 Delta just 140 Delta call 225. Now, why are you doing the 100, 225? Basically, that's simulating for those who don't have the margin. It's simulating basically selling a naked strangle. That that's how that's working is it's a way in your brokerage that people use it just sell them far out to just simulate naked strangles. Now, here's the caveat to that. It's not that simulated because you can take huge losses. So I wouldn't, I wouldn't advise doing that, you know, unless you know really know what you're doing. But this trade is four to one ratio, and you're selling trade, you're opening at 932 in the morning, you're doing it every day, and you're allocating 100% of your portfolio. So this crazy, but the kicker is we're not really allocating 100% of our portfolio because we're only ever doing one contract at a time. And so the profit, the exit conditions are you're taking a profit target 50%, or you're taking a stop loss at $1.50. And then we're doing that thing that I showed you before, which is we're doing a trailing stop. So after 10% profit, we're going to start trailing our stop up. So it's no longer $1.50. It's dependent on where the price is and what we've locked in on this one. And this is this is the key. This is the thing to pay attention to why all of these pain boxes matter. We have opening fees and slippage and things like that. We have closed trades on test emissions, and we have cap profits and cap losses. We have acquired two price, two profit target hits. And then the same thing is the last one, we're going to reenter this over and over. That's the rinse and repeat. But I want to show you something before we get into the kind of theoretical or the look at it. A couple of things. So this is Wednesday yesterday. And I want you to look at how this works. Because as you can see, we put on in this trade a just crap ton of trades. Starting at, I'm not even going to count it, but starting at 20 at 9.32, you've put on by 10.52. You've put on maybe 10 trades. And then it just keeps going all day long. You're just doing it all day long. You're selling premium, right? Getting stopped out a ton, right? 50% of the time you're getting stopped out. And yet it's profitable, right? With a very small max drawdown. I want to show you something that's interesting though. This cap losses. Again, we cap the losses at the stop loss. I want to show you what happens when we turn that off for this trade. And this is where each trade really, you kind of have to, you have to make sure you're not doing the thing that's very human, which is overfitting. Because you look at even like 225 longs, 100 shorts, you know, 100 points long down 225 up. That's the perfect ratio. This has, you know, the ability to be curve fitted all around it. Now here's a fun question. Why is this taking so long? It's taking so long because like I said, each day you're putting on up to like 50, 50 trades a day, right? So removing that one bullion where we get stopped out, you know, we remove, we cap the loss at the theoretical stop loss. Once we remove the theoretical stop loss, we actually start getting hurt quite a lot with this, right? Why? Well, because real life is happening, that when you're selling spreads like this and the market's moving very fast, your slippage basically in real life gets very, very big, right? I mean, I've seen people lose a dollar just trying to get out on some of these before. And so it starts looking like that all over the place. And the thing with these type of trades is you're not going to get a lot. Like that's actually a pretty good one. Like the underlines going down, therefore the premiums going up, you get stopped out, right? When you put it on again, either get stopped out, you don't get stopped out. Still, you're not winning that much less. You're winning 49% when it was capped. But once you uncap it, it takes a hit. So I just wanted to show you that because I wanted to show the possibilities and really kind of what we're about is we're not trying to find trades to where it looks like you win a billion dollars. I've found those trades and here, and I found those trades and other back testers, but I'm a trader. That's not what I'm interested in. I'm interested in finding a trade that I can have confidence in. And different trades have different levels of confidence, but the point of back testing is to beat the crap out of it to where you can increase confidence. And so that's what all these are for. That's why all the exit entry conditions, we want it to be a confidence builder as much as an educational thing. So with that being said, if there's any other questions I can answer those, otherwise I'll stop sharing and give it back to you. No additional questions coming in yet, but just to kind of reiterate a couple things, I think you're right. I mean, as traders, we're constantly tweaking and tweaking a back test until we find something that looks awesome. But you've got to be really, really careful that you're not curve fitting, that you're not cherry picking, that you're not, because you can always find things that show in a back test very good results. But like you showed there with the capping your stop loss is just one little tweak, which could be more like real life, can really change the back test. So be mindful. One thing that I try to do is if I have a good back test, I actually try to break it. I try to tweak things and do things of what would I do in real life in this situation and try to add those things in. So I kind of try to do the opposite of what I think a lot of people do. And it really helps you just kind of understand the back testing, understand, just try to be reasonable in what you would actually be doing in your real trading. And just to kind of add to that, that's part of the reason, like we work with educators like navigation, because options, I mean, we say it for legal purposes, but options do involve risk. And the thing with options is you absolutely can perfect things. And so at the end of the day, you really do need education. And we work with educators who are passionate about what they do, because you can go into this thing, never trading options, and keep clicking buttons and the saying like the monkey is going to come up with Shakespeare eventually. But is he really coming up with Shakespeare? And that's what educators do is they help you realize like, oh, I've got to get better at a bunch of different things, psychology, all these things before I can really make this happen. And so because even this is the point, even a great back test, even like a perfect back test, if you don't have the right mindset, if you haven't like been trained in the way of thinking through how options work and how you should be thinking when you put trades on, you can still just trade it wrong, you know. And so you can still lose money on it. That's just part of real life. And so anyway, I just wanted to just kind of hit home. Like that's why educators are so important in this space. Great stuff, Troy. Tim W says fantastic, Troy. I'm glad you're emphasizing the drawbacks of back testing compared to real life trading. Yes, sir. The other thing I want to mention too is if you are not a member of Option Omega, again, I just put the link. Troy and his team have been generous enough to give our community 50% off. Just go to navigationtrading.com slash omega. And if you have not been in the Option Omega Discord, it's a great community. It's very active, a ton of people posting, sharing trade ideas, sharing back tests, the cool feature that Troy showed and he shared a couple of back tests here in the chat is you can literally just click that button, gives you the link that you can share. You can get feedback on it. A lot of people will post a back test and say, Hey, what are your thoughts on this? How can I make it better? Or is this realistic? All those different things. So it's a great community and I'd highly encourage anyone who is really serious about trading to get active, not only on the software, but also in the Option Omega Discord. Appreciate that. But other than that, I guess Troy, I mean, you just, you did just a very thorough job. We are just not getting many questions. So kudos to you. Oh, no, I appreciate it. It's fun to talk through this stuff. And I'm always, there is so much truth that I'm always afraid I left. I did leave a bunch of stuff out and talk about portfolios and things like that. But no, I appreciate you having me on. It's always a joy. Yeah. And we have a, we have a channel in our Discord called the backtesting channel and Troy and Rusty are jumping there from time to time to answer questions as well. So you can just tag him in our Discord as well in the backtesting channel. And they're very responsive. You know, there's three of them. See, there's only one of me guys. There's three of them. So you can just pound them with questions all you want. Thank you for that. Andrew K says, why does the allocation make such a big difference in strategy performance? Well, that's not necessarily a backtesting thing. That's more, I would point you towards there's a book that's really, it's one of my favorite books. It's called Fortune's Formula. And it's about the Kelly criterion. And basically the thing that people don't take into account with allocation is the allocation in of itself is a strategy. And so sports betters have known this for a long time. But I think those of us who are perhaps newer to retail trading options, haven't really had a chance to see that in action. And so it really can make a huge difference. The difference between a 50% allocation or 75% allocation, 5% allocation and 10% allocation. And so we allow you to test that just because we think that's part of real life too, is you should know how much you should put towards this trade, especially probabilistic betting, sports betting and things like that. They've done this for years. And options aren't betting, but there's a way to think through it with a probability standpoint that there's some similarities to how you should put it on and think about what your allocation should be per trade. And Kelly criterion is really good. I know there's some other ways people do it, but personally my favorite's Kelly, but that would be my, I would point you towards that. Yeah. And Andrew, can you think about this? I mean, if you are allocating 100% of your account, and Troy gave some examples of that. And obviously he wasn't saying you should ever allocate 100% of your account, but maybe you have a $10,000 balance. So you could back test what if I was allocating 100% of that $10,000 balance or whatever it is. But think about this. If you're allocating a high percentage of your account in a back test, and you go through a sizable period that's a drawdown, remember, you're continuing to ramp up that size as he showed you. You can get those contracts escalating up into the hundreds and thousands of spreads put on at one time, and then you go through a drawdown. Well, now you're allocating so much more into a negative period. And so, so of course, you're going to see a massive drawdown in that case. Whereas had you kept your number of contracts or a smaller percentage of your allocation more steady, that drawdown is just going to be a little bit of a blip on that graph instead of a big valley. Troy, what was that book again? It's called Fortune's Formula. It's a good one. It doesn't, it reads like a mystery novel in some ways, but it's kind of a biography of Edward Thorpe, who was actually started and he was a, I think he was at Princeton or somewhere, but started as a professor and beat the Blackjack. He figured out a way to beat Blackjack. And then he moved on to investing and he did a lot of work on compounding and allocation percentages. Gotcha. Very cool. Yeah, Andrew K, exactly. It's a side effect of compounding, right? If you're compounding and you're getting bigger and bigger and then you hit the drawdown, and it's just, it's kind of the sequence of returns too that comes into play there. So, and that's what, that's what the back test will help you, help you decipher. Tim W says, the only caution about the Option Omega Discord group is that not everyone there is a successful trader and you have to be careful who and what you follow. Steve was a much better trader then. Well, thank you, Tim. Appreciate that. I would fully agree with that, but and I invite, I would extend that, not just Option Omega, but really any discord that's not led by educators is, you know, there's people who are figuring out who are earnest, but you know, I'll put it this way. I'm not putting on every trade I see in the Option Omega Discord. I really enjoy seeing people think through them and I think of it in terms of like a big options, you know, class where everybody's together talking through ideas more than the any specific. We're not doing trade alerts at the Option Omega Discord. I'll put it that way. Very cool. All right, guys, we're going to wrap that up. If you have any other questions, like, like I said, you can post them in the Option Omega Discord or you can post them in our back testing channel in our community. And Troy, thanks again. Always great to have you on and we will do it again in the future. Sounds great. Thanks again. All right. Take care, everybody.