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After a Winning Trade You Win Again 92% of the Time, But There's a Catch

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Breakdown

0:00lesson

Analyzing strangle performance over 13 years

  • 516 delta strangles used
  • Trades opened daily
  • 45 DTE to 21 DTE
  • P&L measured as % of credit collected
  • Focus on streak persistence
1:42lesson

Statistical fallacies in trading

  • Gamblers fallacy in NFL picks
  • Data to address fallacies
  • Wins beget wins
  • Losses rarely repeat
  • Volatility clustering
3:26lesson

Streak persistence and P&L

  • Two wins in a row 67%
  • Four wins in a row 58%
  • Losing streaks less persistent
  • Losing streaks 20% for two
  • Losing streaks 13% for four
5:13lesson

Average P&L and risk management

  • Winning streaks bank 33-50% credit
  • Losing streaks average 44% loss
  • Premium inflation creates opportunities
  • Losses can be 89% of credit
  • Risk management crucial
7:08lesson

Edge from small wins and risk absorption

  • Small frequent wins create edge
  • Losses compound and deepen
  • Rare but large losing streaks
  • Sizing to absorb losses
  • Survival through volatility
9:01lesson

Summary of key takeaways

  • Profits cluster in winning streaks
  • Small consistent wins cushion losses
  • Losing streaks rare but impactful
  • Sizing to manage risk
  • Edge from frequent small wins

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