 Welcome! In this video I want to talk about how to calculate your profits and in the example we're going to use the ETF XRT strangle that we put on. So this was a live trade and I want to walk you through from beginning to end because a lot of people have a hard time kind of figuring out what their overall profit is after you've had to make several roles and adjustments so hopefully this will help out. So let's walk through this first off on December, excuse me, February 22nd on the state here so I've marked them with the shaded ovals. On the 22nd we sold a strangle okay IV was nice and high above that 50 level. It subsequently jumped up even further spiked up and a big move down and it continued to move down and kept going and going and at this point on 321 so almost a month later the price breached our downside break even so it breached our call strike and that's our trigger to make an adjustment okay so what we did is we rolled our calls down okay that's the mechanical thing to do if it tests our put side we're going to roll the untested side down so we rolled the calls down and then price reversed and moved up on us and then moved back down and on this date here we adjusted again we're getting closer to expiration so we wanted to roll that to the next cycle so we rolled out and then price continued to move higher and on this date we rolled out again so this was four seven on five one we were at a point where we needed to roll out to the next expiration again so we did that there and then today on 516 we closed the trade so we put it on back here on 222 closed it out 516 so almost three months okay a lot of times we can be in a trade and make a profit within a number of days or a couple weeks in this case we ended up holding it and rolling and adjusting several times before we got out so let's go back to the slides and take a look at what all that meant from a profit standpoint so here's how we break it down so I copied the exact trade tickets onto the slide here so you can see what our entry was on 222 we sold this for 67 cents and as you can see here we sold five contracts so then on 321 as I mentioned it moved down so we had to roll down the calls so we bought back our 47 calls and we rolled those down to the 42 okay so now we're holding a 41 put and a 42 call okay then for 7 we made our next adjustment where we we rolled our spread to the next cycle and we we kept those strikes the same so you can see 41 42 41 42 so we bought back the 41 42 here and we sold them out in May 42 41 here okay then when we rolled out to the next month on 5 1 we actually moved up our strike one more time because remember price had moved up on us a little bit so we bought back the 42 and the 41 and we just sold the 42 in both of them so we rolled this put from 41 up to 42 collect a little bit more credit so that ended up giving us a 42 straddle right 42 call 42 at the put so that technically is a straddle when you when you have the same strike and then today 5 16 at the time of this recording we bought back the entire position all five contracts 42 put 42 call and for $1 87 debit okay so if we add up these credits so we've got a 67 cent credit that we initially got for placing the trade we took in another 36 cent credit when we rolled down the calls we when we rolled to the next month we collected another 91 cent credit and then we when we rolled to the next month again we collected another 89 cent credit giving us total credits of 283 okay so and then we bought back the position for a buck 87 so 283 minus what we paid for it gives us the total profit of 96 cents multiply that by 100 because each contract controls 100 shares so that gives us a profit of $96 per contract times the five contracts gives us a total profit of $480 okay so the point of this is showing you a how to calculate profits okay after your rolls and adjustments you need to add up the credits this is on a strangle specifically you need to add up the credits and then you subtract any debits or what you bought it back for and that will give you your total total profit and then you have to obviously multiply that times the number of contracts you did and that gives you the dollar amount that you won total on the trade so that shows you how to calculate it the other takeaway here is the fact that you've got to stay mechanical when you need to adjust make the adjustments if you don't need to adjust don't make any adjustments just stay mechanical and this is what can happen over time your your your credits accumulate and they continue to stack up when you buy it back you're going to end up with some profit now this is a really good example just because it illustrates that fact of staying mechanical and how you can profit from just making the necessary adjustments making the necessary rolls and remember we initially took in a 67 cent credit and we ended up with a 96 cent profit so you know over 100% of max profit on the trade just by rolling you know we could have taken we could have taken the trade off at a couple of these other points for a break even or a or a small profit but by just rolling and adjusting and collecting more credit giving yourself more time to be right on the trade we ended up with a nice $480 profit on the trade with you know and this was a pretty small trade XRT is only a you know 40 some dollar stock doing five contracts pretty small trade and a $480 profit so if you look at that from on a percentage basis of the amount of capital that you used for the trade a very significant return so even though it took us a little longer than usual we were in this for a few months as opposed to you know less than one month it still paid off and that just shows you the power of staying mechanical and using the adjustment techniques that we teach if you'd like to learn more about the different strategies that we use to make consistent returns come see us at navigationtrading.com we've got a ton of free resources including the navigation watch list which is a list of the most profitable symbols to trade for each type of strategy we've got the volatility indicator which you've seen on my charts you can download this directly to your thinkorswim trading platform and we've got a free options course called trading options for income which is a step-by-step guide to get you making consistent trades right away we look forward to seeing you there