hi everyone and welcome so let's talk about how and when exactly we sell strangles on Futures so uh obviously we um we only sell short strangles on Futures options and there's a very specific um way we do it uh in a very specific way I'll go over everything in this video and you'll see why this is only kind of half the story because having a good strategy is uh you know it's it's really only half the story there's way way more to it now uh we are money managers um it's uh just me and my partner we manage about $5 million in uh in in client accounts uh so essentially we just manage clients's accounts and in this uh on this YouTube channel we don't sell any courses no Discord memberships none of this nonsense uh we only want to build a track record show what we do and obviously potentially uh meet new clients that we uh that we can potentially manage their accounts and obviously make them money so let's begin so this is our current strategy um I'll go over every single point and there's there's quite a bit in this video so bear with me you'll be as detailed as possible um so let's let's begin so obviously we only share sell short triangles um why uh well we really like the idea of being neutral uh and there are many neutral opportunities in the market now uh you also need to understand that this is just one of the setups that we have this is pretty much one of the strategies of the strategies that we have this is the main one this is the one we have over 8 years of experience with so this is why I'm making this video um on this specific strategy and this is the one that obviously made us the most amount of money it has about the 92% win rate and uh for the past 12 months as you know as uh doing managing client accounts fulltime uh we've been able to generate about 56. 31% return um give or take 30 31 32% but a 56% return overall so sh strangles this is essentially why why we do uh when we go neutral uh it's just uh really fits with our personality as well I think so we go 45 days or less now why 45 days or less it's really important uh we used to do 55 days and even 90 days 45 days or less is really when uh Theta starts to kick in so Theta is how much is the option is losing value every 24 hours right and Theta accelerates around 45 days or uh 45 and under so usually we will try and look for trades under 40 days but you know anything between 40 and 45 if it looks looks perfect we will take it for sure um but uh overall and and this is this is a a bit of an a change sometimes we we do we can go to like 55 days or 50 days it really depends um if if there's like a perfect situation uh then we'll go for it but otherwise we definitely want to wait and go for 45 or under so these are the products that we trade so so nothing nothing more nothing less these These are the only thing that we really trade now even the hle and GF we don't actually trade any of them neutrally anymore just because um they do require to have a a bigger stop loss so we need to take a bigger risk to make the same return otherwise the win rate is really bad so actually we don't really trade them neutrally anymore we trade them in a different way but this video will be only about the neutral trading so our short strikes are Delta 20 why Delta 20 and why not 16 well we have experimented with Delta 16 15 and 20 is really the most optimal Delta where we can risk 50% of or we can have a stop loss of 50% of credit and a profit Target to 50% of credit so we risk one to make one with a 92% win rate uh on a short triangle it's unheard of right but we were able to optimize over time we begin with 100% loss and then to we went to 75 and then to 50% uh stop loss so we we risk one to make one that's incredibly uh unique I believe and uh if somebody you know just tries to do it on their own it will hurt their win rate um because again we trade only very specific situations and I'll show you exactly which ones are these um it's not that intuitive unfortunately but you know this is trading right it's not supposed to be easy and if you want outstanding results uh you need to do uh essentially outstanding research outstanding work so this is our stop- loss and take profit now we use the commodity vola volatility index for a good entry I'll talk about us as well I'll show show you an example exactly what it means essentially we don't want to enter in volatility is is really really low right we want to enter volatility is relatively flat or or maybe um yeah a bit high but not not too high not too low definitely we don't we don't look for the extremes we want the least amount of volatility within the volatility if it makes if it makes any sense so for our exit roles um really easy either one of our targets are hit or we Exit 21 days to expiration sometimes we might really hold past 21 depending on very specific situations usually 21 days is the cut off and we might adjust the positions if we need now by adjustment it's either one of two things so let's say we have a position on uh I don't know um on crude oil and then OPEC decides that you know they want to essentially like cut the production of uh of barrels or the output of their barrels per day so the um the price of crude oil might go up and we are within a position so uh we might just exit a position right away just not to risk it because we don't know exactly how the effect will uh or how big will be the effect of OPEC uh cutting their production or we might just kind of buy calls very cheap calls to kind of uh hedge against u a really big increase in price but usually we will just probably cut the position uh and and just close it especially if we are profitable on the position usually when there's there's something uh with when there's a big news around supply and demand with commodities uh this is where usually uh the price will really go up and down pretty significantly or significantly enough to hit our stop loss of 50% of credit right so this is why uh the adjustments uh or the adjustment if needed and it happens it happens you know things happen so uh being able to kind of close your position uh before things get really really bad is also a big thing uh and even though it's kind of breaking the rules but at the same time this is it's also based on a lot of experience that we have uh of when usually we have losses and it's usually when something happens otherwise um uh we have a pretty pretty high win rate so let's talk about the trade management it's also super important uh we keep optimizing it but at this point it's it's pretty well optimized and uh you know this is nothing new I guess if you like trade stocks or trade Futures you you always move your stop loss as the position is is improving right so this is no different here and this has saved us so many trades and then and made us way more money than it lost uh so uh it's it's really really really good but again this is specifically for how we trade it might not work for how other people trade it depends on the system this is very specific to what we do so initially when we open the position our stop loss is 50% of credit take profit is always the same will be at 50% now when the position is up about 25 % of credit our stop loss is moved to 25% loss of the credit right so our Theos is getting better we also mooved the stop loss and we kind of maintain that 50% loss of credit but in reality at this point when we up 25% of credit uh there's only 75% credit left on the position so actually our stop loss is is is more than 50% based on what the position is currently at right because if the position is currently worth $75 dollar and our stop loss uh will be when the position is losing about $5 so at this point our stop loss is more than 50% of the position right because we essentially like we're willing to lose $5 on a $7 half position so uh but yeah I won't go too much into detail into that because it doesn't really matter at the end of the day what matters is we move our stop loss to 25% of credit and the big reason we do it is a nine out of 10 times when if a position goes from positive 25 to negative 25 uh it it usually ends up getting to 50% uh 50% loss Target and or sometimes most times actually even more because this is a pretty pretty B pretty big swing at this point uh and that deepen the position now when the position is up about 40% and again the profit Target stays the same at 50% uh but we move the stop L to 10% profit of the of the of the credit so we either make 50% on the position if the price goes to 50% or we make 10% so at this point we are kind of CT off and this is a no loose situation it's just a question of how much it will be making on this position and again same thing we found out that if the price of of the or if the p&l of the position goes from positive 40% to just 10 to just positive 10% that point something you know something major has happened and and the price is likely to reverse and and and essentially hit a 50% loss Target if we would have not moved our stop loss and last but not least if the when the position is up 47% we move our stop loss to 40% and the same thing we just found out sometimes the you know the price might play around you know and we have no problem taking profit at 40% instead of 50% but be out of the position and and you know um not be exposed to any more volatility or risk in the market because at this point we are really close to the profit Target of 50% right so it's really a matter of a few hours at this point uh sometimes even you know maybe a day maybe half day to get to 50% and if it doesn't happen uh you know it's okay if it's going to bounce around 45 46 but if it goes to 40 then you know again something something happens right in the market so this is one way of uh of of kind of really protecting your positions uh and really improving your your um your win rate right uh majorly majorly majorly so let's talk about a few examples right so these are uh we'll go over four positions that we did uh on January and yes those positions have 55 days to expiration they were pretty good and we decid to take those positions Looking Back Now obviously we would have uh uh opened the positions with uh uh with like 30 I think they had another cycle with 30 some days to expiration and this is also when our stop loss was was at 75% right but uh you know this is essentially doesn't really matter too too much what really matters is the setup itself and what we're looking for for so these lines over here these are not the uh the strikes the short strikes these are the distance to the 50% loss at this point in time when we looked at the position so if the price goes all the way up here theoretically this is where you would hit a 50% L on position same thing on on the on the bottom side and if you don't know how toig figure out those lines it's it's pretty simple if you have you know tasty or thinker swim or interactive we use interactive uh you just go to the position to the position profile and you look at the at the theoretical p&l at different price points um of the underlying and then you can just kind of label them and obviously you need to make sure that they are absolutely um like identical essentially the distance to each side then after you do this you can see okay uh for how long has the price been moving within this range for stop losses right so in our case over here I will not count this as breaking the price and and this either uh but let's say it's been right over here so since November 21st and those positions were opened on January 2nd so it's really close to about a month and a half which is exactly when we want to open positions we want to we want the price to move within our stop loss uh uh lines around at Le or at least a month and a half so again if it's close enough and we have a perfect situation we're going to take it now why is this situation was really perfect well if we look at the seall so the commod volatility index and we see what happened it was what is it January 2nd so January 2nd was the volatility was right right over here so really really high really you know really nice volatility and U obviously we want to open with uh a high volatility if possible uh of course and here the relative high was definitely uh right over here so we opened it on January 2nd right as the as the New Year began and obviously volatility dropped and as volatility drops obviously our position will be profiting quicker and our stops will be getting wider actually right so this is why we decide to open this position usually we will not go for 55 will go for 35 and obviously back then uh stop loss was a bit different um and here the stop loss was actually at 75% so so this this stop loss is is 75% but 50% stop loss is actually just a little bit smaller so there's there's not much difference in between them this is the reason why we went from 75 to 50% right so everything kind of worked out in this position so we decided to open it up and within 18 days in in the position uh obviously we profited two and a half 2 and a half% of capital now currently the way we um the way we trade is we collect about 6% of credit and and we want to take profit at 50% so we risk 3% of capital to make 3% of capital uh that that's pretty much it and as you can see even though the price actually went all the way down here uh because the volatility went down the stop losses they they get wider wider really quickly and position profited even though the price kind of went down which is really typical with strangles as long as you have a good entry and a good entry again see the commodity volatility index it's everything right it's really everything because it tells you if the you know uh evocity is is is high low or or or is it flat right so if it's high or flat you you definitely want to can of get in into the position if it's low you definitely don't want to get into into the position because if volatility increases while you're in the position uh it means your stop losses will get uh much narrower right so it will be much easier for you to kind of heat your stop- loss and uh obviously your win rate will go down so second position we can take a look at let's go look at the the Euro over here so again these these are all positions that were down the same um uh the same month which was January so let's just cut it over here just so it will be easier for us to see well this position you know the exact same criteria you can see this one was 31 days so expiration we were in position for only 11 days uh and uh as you can see it was it was a pretty good range the range was since know it's called it's November 13 and it was January 9th so it was it's uh getting close to two months within of price movement within this range right so and if we look at the commodity volatility index on January 9th which was right January 9th was right over here so again still pretty high uh or closer to the highs and for us the highs would have been you know those two spikes over here and and sorry January 9th right here as and as you can see the price the velocity actually went down and because we have a low DTE uh are you know the Thea kicked in we were out of the position with within 11 days with with our profit Target so same kind of idea and let's go over you know another example so if we take a look we have a copper so copper was also another position with it and this one is also with 55 days days and let's cut it over here so it's easier to see there we go so with copper we opened it again on January 2nd you can see the the price was moving within the range and the range was really really really wide uh since November 15 so you know a bit over a month and a half and again same criteria we could have easily gone for Less DTE and 50% loss Target and the the range would have still been pretty good and even though again the price went down uh we the position has profited in just 18 days same as the gold and this is because the volatility uh went down as well if I remember correctly I'm pretty sure it did so January 2nd right over here so you can see this is a more of a flat volatility but even with a flat lity we do want to enter at the upper range or at least you know somewhere in the middle if we can anywhere but but the lows right so January 2nd was was close to the highs and then volatility went down and obviously this is is how you can uh easily profit uh on those strangles and have a high probability because you enter at the high seal it's soon SE start dropping your stop losses get so much wider and so quickly you you'll be amazed uh cuz the this is the stop loss only when the position was open right they got way way wider way quicker even even if we even when when we decrease the stop loss the the range is still super wide uh and this is I think uh the biggest trick for us is the trade management and the commodity volatility index which is just it's like a Bible for us really without this we will never enter a position and this is how we can handpick our trades pretty much right so this is really really really important and there's also one more thing I want to talk about is when actually not to trade when we don't trade it's really really important um because you might see a good situation but you know you will have one of the following so Natural Gas usually during the winter time this is when the volatility really increases so winter time depends sometimes winter starts in November sometimes it's um it's getting really cold in September and natural gas is used for heating right in in in Europe and North America so this is why that when the demand goes up for for heating because uh the you know the weather out is getting cold this is why there's more volatility in the price because obviously now the supply and demand balance is is being broken right even though uh you know like companies that that essentially provide the their natural gas uh and you know even the country or your city they you know they have estimates but nobody knows really how the weather will will act or react and nobody really knows uh to what point people will crank up the heat or or shut it off or if people are you know on vacations or it it really depends right so you're just going to kind of watch and see so this year it started in November actually so let me show you exactly what happened so this here as you can see in November is actually when the price or the beginning of November when the price started falling down so uh we don't really know if the vola if the price will go up or down right on natural gas specifically because it it depends on again supply and demand in in this year's case the winter was not as cold so there's way less demand than expected and the supply was bigger than you know the expected demand so the price just plummeted down and if we take a look to see what had to what happened with natural gas in November over here so you can see so in November we have you know volatility started increasing up and up and up H it's pretty typical for natural gas so this is why we don't really you know do anything but you know during summertime you can see since May it's been kind of moving completely sideways and up until November which is perfect for trading for neutral trading and actually same thing over here right now I guess since well not may but uh even since uh March has been kind of moving sideways now the price really exploded today uh so we'll see if we have some kind of range or we don't uh for now we don't have anything for natural gas obviously we'll see what what will happen obviously right now we we we also won't have a good range right so we won't enter the position so the second thing is when not to trade is all all the uh the grains so corn wheat soybean uh and soybean meal are the ones that we trade so during May June and July usually there's an increase in volatility due to the seasonality so this is when they plant uh the crops and also um this is also when you have quite a few report of the winter crop itself so you can expect volatility every single time during May June July sometimes it begins a bit earlier sometimes a bit later but these are generally the months and you essentially you need to follow the news uh and and kind of see what's going on to be able to kind of tell uh But A good rule of thumb for us is just not touch this underlyings during these months regardless uh if there's news or or no news right so same thing as with natural gas you do kind of have to kind of follow and see you know is this going to be a cold winter you know what is the forecast um what are the news what are the the headlines so on and so forth so same thing over here and this just will save you just those two points will save you so so many so many losses uh just uh just amazing how uh how how knowledge can really uh influence your trading right uh so next thing is currency and bond features so we don't trade them if there's you know like major monetary reports or events or announcements so you know cbii or fed speaking or anything of that sort or for example if we trade the Euro and we and we know next week on on on the Euro they um in in in the European Union they have their GDP or their cpri report we will not open the position on on the Euro right we will wait and see what will happen same thing we will not we will not open a position if there's a CPI in the US for example because the CPI can really affect uh the US dollar and the US dollar is tied with the Euro so we will not open any of the currency or the bonds and this is actually what happened uh for the uh previous two times so as you can see over here this was a perfect setup so this is a euro and at this point we had this was the 50% L Target on the Euro uh under 40 days to expiration and we have a really really good range everything looks perfectly fine but we know that on April 10th uh we have the CPI report in the US so you know we just wait and see what what will happen and as you can see the price really dropped down right and then uh obviously this would have been a loss with just within a few days so those things can really really save you um a lot of time uh and a lot of money at the end of the day same same thing actually happened on Wednesday so we have this increase in price because of the CPI cuz we were looking at a position on bonds uh right over here and then obviously we had the uh we got the CPI over here so the price really kind of broke out uh but still if the price kind of goes down we might still have a position but you got to be you have to be patient um with with this kind of stuff it's really really really important now again we don't trade the Le he or GF um just because they uh well a few reasons main one is just you know the win rate is just not really good and you have to risk more to be able to actually profit there so the 50% loss Target is not really sufficient there and because these underlyings they're open from like 9:30 to 2 p.m. uh for the most part I think it's 2:20 maybe or like 1:30 some of them you have a lot of pressure because these are really liquid features and so and they have a lot of liquidity in their options so uh when you know when they open there's a lot of pressure because they're not open like all the other all the other Commodities or underlyings where they're open essentially 23 hours a day right these ones they're only open just a few hours a day so this is also a reason why we don't trade them it just doesn't really work out uh too too well with these three underlines and the last thing sometimes the range to the stop loss seems good but it's actually not and the average true range can be used uh to kind of avoid these situations and let me show you an example because this is a really tricky one so over here on this day over here let's get the replay here so this is uh the price of gold and this is the range that we have again with under 40 days to expiration under 45 I don't remember the exact DT we have a pretty good range to 50% loss Target this was May 10th and the price last time broke on April 2nd so almost a month and a half now volatility was not good right so we would have not entered the position either way and again we we we would have waited for U for the CPI report because it can also affect gold uh you know in this case in this kind of environment CPI really affects everything because the market is really sensitive to it maybe a few a few years a few years back it wasn't as sensitive or maybe even a year back but now it is right so you really want to wait out uh if you trade anything that can be related to the monetary policy which gold is is is one of those things currently not always but currently it is but either way you know range looks good but at the same time uh if you really really kind of look closely you will take probably what like two two two big candles and you know and you can also get to the stop loss right like visually the range does not look actually big enough right visually we would maybe we would want the range to be something like this right then you can definely feel more comfortable that the price can go up and down and and or even up a little bit and then we can it can still be within the range but this is our range right now and one way that I found actually just a few days ago that that we can actually kind of measure it is if we go and look at the average range so you can see on that day the average range sorry the average true range was 37.4 so you can just go and see over here that um the amount of bars is actually 165.7 so if we get our calculator and we do 165 .3 divided by the average true range which is 30 uh or 37.4 we get 4.41 and if we divide it by two we get 2.2 so essentially uh we are 2.2 the average range to each side which is not what we want we want closer to three or at least three right so uh essentially our range should have been bigger over here for us to kind of give us a good reading so we want the the price to be able to move at least three times the average true range to the bottom and to the top for us to be able to say okay well this is a good range and uh you know for us it's more visual because I can just visually tell you know this is not a good range just by looking at the size of the candles and the size of the um the range that we have to the stop losses but this is a more I guess a scientific way to kind of look at it and we'll definitely use it in the future so this is some kind you know a bit of a trap but in any case you would have not opened the position because seil is down if the seil would would have been up then by definition you would have you would have had a bigger range uh but overall this is just something really I guess really small but important at the same time so last thing I want to talk about is you know um strategy is just a tool at the end of the day and like I said our strategies just have the story right you can see there's so many things around the strategy itself the news that you have to follow right uh the seasonality you know there there's a lot of things outside of just that that short strangle right there's when to open a position how to open the position and as you do it more and more there's there's many little tricks and and you can really see uh uh you can really tell the difference when you're within the trade the difference between a good and a bad trade because a bad trades they really act differently um you know sometimes not from the get-go but you know halfway through the trade you can see something is off right and again this is just experience uh because any strategy that you find is just you know it's just a strategy you do have you need to have a lot of experience with it you need to optimize it all all the time the management especially how you take profits and how you lower your losses or essentially you know move your stop loss in our case so you know strategy is just a tool and a lot of people make make the mistake of you know trying to uh take the strategy and just use it on all underlines at all times right it just doesn't work right same thing you cannot use the same tool to fix all cars problems right the mechanic has uh specific tools for specific repairs right you can just take a screwdriver and fix all cars or or all car problems you know you would need a jack you would need a drill you would need a lot of many things right and each each tool has its own purpose right so our strategy is short strangles you know you've seen all the entry and exit rules and the management so this is just a tool that we can use on the market and we use it when we have certain conditions right when we have on uh when we have a good range when we have a good seall and when we don't have any seasonality um concerns or winter concerns for natural gas right so this is when we use that tool right uh the only way to kind of do it for futures options is through forward testing uh because you really need to unidentify Optimal market conditions to apply your strategy right so you just need to pick your fights at the end of the day and this takes time uh you know it's not easy but anyone can can develop you know many different many different strategies successful ones obviously so for us this is our main setup but we have other setups that we are working working on right it's all it's all about identifying the optimal market conditions for your strategy right we don't want to just you know some people do the one one2 and then they just do it all the time you know depending on how you do it in one kind of Market it makes sense but again even then there is an optimal Market condition right or or how you do the one2 it or how you manage it really depends on the market condition that you are in so uh training is not easy it's not simple if someone tells you it's simple and it's easy you know they're lying it's there's so much to it uh it maybe it used to be easy and simple but there's so much competition so if you want to have an edge in the market um you really need to have you know a very good detail strategy that makes sense and you need to have a lot of experience and you can gain that experience by you know by by forward testing or by actually you know by actually doing it and there's no other way to uh no other way to kind of be able to make it in this business in my opinion um as it stands right now at least and again and oh actually the other biggest thing is you have to keep optimizing your strategy uh if you don't you just you just cannot maintain your Edge you have to keep optimizing you have to keep seeing how the market is changing and at the end of the day this is also your job as a Trader or as money manager or whatever you are to keep optimizing keep thinking of new ways to improve of new setups and so on and so forth that this is a business you have to treat it like a business and it takes a takes a lot of time to sit and obviously experience can only help you here especially on the on the risk management side so again this is not easy and you can take years potentially took me quite a while to get to a point where I actually manage client accounts actually it all it all happened well not by mistake but definitely by chance I did not plan on manage client accounts but it happened and you know I'm I'm really grateful for for that and again if you have any questions let me know I hope this video was really really helpful it kind of showed you how we trade uh with this with this specific strategy and H I guess the other major thing is that you can also see you know there's a blueprint to developing systems of your own right because everyone is different this strategy works best for our personalities and you know we we you know really like it but for you something else might work so again thank you so much and and I'll catch you in the next one