Oct 26, 2021

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized
Options before deciding to invest.

Asym m et r ic Lever age If you lose 50% in a trade, Look back Fir st Back t est an d a n ew f eat u r e
you'll need a 100% return on the next trade, just to tastytrade has its own backtesting environment.
breakeven. Login with your tastytrade credentials or signup
for free:
Here is the math:
https://lookback.tastytrade.com/
Requ ir ed Gain t o Br eak even = 1 / (1-loss in %) - 1
Here is how to create your first backtest:
1) Start with the Chain Tab.
2) Type in a symbol. Let's use the 20-Year ETF, TLT
3) Choose an expiration. Let's use December17.
4) Now let's backtest the results of consistently
backtesting a strangle. Click the 135 put and the
151 call. The Premium collected is $161. It might
be different when you run the strategy.
5) At the top, click to the "Backtest" tab.
6) Now Click "Run Backtest".

The useful information is at the top -- 79% of the

time, a strangle in TLT based on those delta calls
and puts has been profitable. The Average profit
is $8.27 per trade. BUT this is the "average,
includes huge "outlier " losses as well.

Wh at 's M ovin g? Check out: EWJ, EWZ, DXJ, IEF, A new feature is "Show Median" -- which
GLD for relatively high IV Ranks. eliminates those huge movements (outliers) from
the results -- thus providing a more realistic
results.
Ear n in gs t h is w eek w e ar e w at ch in g:
today, close - M SFT, GOOG/ GOOGL, TWTR, AM D Have a great week trading! Keep those positions small!

Oct 27, pre-market - KO, M CD, BM Y, BA, GM M ich ael Rech en t h in , Ph D

Oct 27, post-market - TEVA Jam es Blakew ay

Oct 28, post-market - AAPL, SBUX, AM ZN, X Eddie Rajcevic

 Th is is on e of ou r f avor it e visu alizat ion s. It is plotting IV (x-axis) against IV Rank (y-axis).
Translation:
Top Lef t = When comparing them to other stocks, these symbols don't move much. HOWEVER,
compared to the last year volatility, these stocks are moving a relatively large amount
Bot t om Lef t = When comparing them to other stocks, these symbols don't move much. AND,
compared to the last year volatility, these stocks are moving aren't expected to either
Top Righ t = IDEAL zone for premium sellers. When comparing them to other stocks, these symbols
move a lot. AND, compared to the last year volatility, these stocks are moving a relatively large
amount
Bot t om Righ t = When comparing them to other stocks, these symbols move a lot. AND, compared
to the last year volatility, these stocks are moving aren't expected to either

© tastytrade, 2021 Michael Rechenthin, PhD | James Blakeway | Eddie Rajcevic Page 2 of 7
M SFT ear n in gs ar e t oday af t er t h e close. The average historical move is -0.9%.

© tastytrade, 2021 Michael Rechenthin, PhD | James Blakeway | Eddie Rajcevic Page 3 of 7
 Alph a Boost Microsoft (M SFT) reports earnings tonight after the close. We used the Alpha Boost trade
generation system to find some trade ideas in M SFT.

© tastytrade, 2021 Michael Rechenthin, PhD | James Blakeway | Eddie Rajcevic Page 4 of 7
 The MSCI Brazilian ETF (EWZ) is down
-16% year to date as Brazilian stocks
continue to fall. Contrarian traders
may lean long, assuming Brazil is due
for a comeback. With an implied
volatility rank (IVR) of XX traders can
likely find a premium collecting trade
that fits any directional bias in EWZ.

As with much of the tech world,

Alphabet (GOOG & GOOGL) shares
are off their recent highs as they head
towards the earnings announcement
tonight. In GOOGL current IVR is 29
with an expected move by Friday of
±$105.05.

Constantly in headlines, Boeing (BA)

continues to see two-sided action in
2021, with the stock price keeping
afloat above $200 but far off the
March highs over $275.
BA reports earnings tomorrow
morning, IVR is low at 10. The stock
has an expected move of ±$7.55 by
Friday.

© tastytrade, 2021 Michael Rechenthin, PhD | James Blakeway | Eddie Rajcevic Page 5 of 7
 In t er est ed in join in g t h ou san ds of ot h er f in an ce geek s?
Sign up for a free weekly subscription at:
info.tastytrade.com/cherry-picks

Th e w or ld eager ly aw ait s each Tu esday m or n in g.

© tastytrade, 2021 Michael Rechenthin, PhD | James Blakeway | Eddie Rajcevic Page 6 of 7
Glossar y
IV. Implied Volatility is the estimated volatility of a security?s price derived from its option price; the higher the IV,
the more expensive the option and therefore the larger the expected price move. IV is an annualized number of
volatility, e.g. a IV of 27 means the option?s market is pricing in an annualized price range, either plus or minus, of
27%.
IV Ran k . IV by itself doesn?t tell us if if the volatility is high or low - but IV Rank does. An IV Rank of 70 means that
the IV is 70% between its low and high IV over the past year. The higher the IV Rank, the higher the security?s IV is
compared to its past year. We provide six levels to make evaluating easier
Opt ion Liqu idit y. At tastytrade we have our own theoretical measure of option liquidity, Poor, Moderate, Good,
or Great. It examines the options?bid/ask spread, open interest, and the number of strikes with non-zero bids
Cor r elat ion w it h S&P 500. Correlation is a statistical measure of how strong a relationship two securities have
with one another. A correlation of -1 means the stocks are perfectly negatively correlated (they move in opposite
directions), while a correlation of +1 means the stocks are perfectly positively correlated (they move in the same
direction). A correlation of 0 means there exist little relationship.
Ear n in gs. The earnings date of the security. In practice we tend to see stocks have a larger amount of implied
volatility (IV) nearer to earnings as the market is pricing in the fear of the upcoming earnings announcement. In
parenthesis, is BTO or AMC; "Before the Open" or "After Market Closes", respectively. Upcoming earnings dates do
sometimes change.

Disclosu r es
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized
Options before deciding to invest in options.

tastytrade content is provided solely by tastytrade, Inc. and is for informational and educational purposes only. It is not, nor is it
intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment
strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its
content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations.
Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor
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comparison, statistics, or other technical data, if applicable, will be supplied upon request. Multi-leg option strategies incur higher
transaction costs as they involve multiple commission charges. tastytrade is not a licensed financial advisor, registered investment
advisor, or a registered broker-dealer. Options involve risk and are not suitable for all investors. Please read Characteristics and Risks
of Standardized Options before deciding to invest in options.

Futures accounts are not protected by the Securities Investor Protection Corporation (SIPC). All customer futures accounts' positions
and cash balances are segregated by Apex Clearing Corporation. Futures and futures options trading is speculative and is not suitable
for all investors. Please read the Risk Disclosure for Futures and Options prior to trading futures products found in Disclosures under
the Documents tab.

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