Andre Falde - Falde 60/40/20 Fly

topdrudge

Member
The first half of this video is highly optional ... Ryan Simmen's intelligent back test part starts a little more than halfway through.
 

Ron Bertino

Administrator
Staff member
Some data from Steve Speer:

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Here's the 60/40/20 with 50%/50% SS delta exit and 30 DIT for trade entries 11/3/16 - 8/18/17 ... DTE on entry average 65. SPX chart below, to see how it struggles in up markets.



Units = SPX points per one fly
 
Is anyone trading these? From what I can see in the optionlab backtests this Falde trade gives better risk adjusted returns than their BWB tests.
 

Ron Bertino

Administrator
Staff member
Is anyone trading these? From what I can see in the optionlab backtests this Falde trade gives better risk adjusted returns than their BWB tests.
Steve has posted some charts showing that since 2018 this strategy has been grinding down through to the current time period (July 2020).
 
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Thanks for sharing. That is always a fear I have. If you start a new strategy that backtested well how do you know when to stop trading it vs. just working through a drawdown period?
 

Ron Bertino

Administrator
Staff member
It's not unusual to see trading performance degrade when a strategy is released.
This appears to be the case above, since the Falde trade came out roughly around the time when performance started to degrade.
I doubt that it's due to many people flooding the market with this trade, and an edge being arbed out.
It's more likely that the market dynamics changed, and the trade was no longer effective in these new market dynamics.

Another common thing that can happen, which is more applicable to automated trading strategies, is that the trading strategy may have been created in a way that it was curve fit to the historical data. This results in a beautiful equity curve, but then when you start trading the system live (now with new and unseen data), the system falls flat on its face.

There's no way of telling the future, so you'll never know if any trading strategy will end up performing well in the future.....but there are certain things you can try to do in order to minimize the chances of seeing problems.
One of these is to see the performance of a strategy AFTER it was released to the public or the course became available.
 

Vijay

New Member
I remember him saying that the market has changed and strategy started performing poorly at that time. I believe it is for the very same reasons lots of ATM BWB and RTT type of strategies stopped performing.
 

topdrudge

Member
I realize that almost nobody cares about this, but just in the interests of reconciling the last chart Bertino posted above to any back tests done by others, including the ones posted directly above by FrankTheTank:

1.
That chart showing the zig-zag p&l downtrend was not actually a 60-40-20 trade plan ... rather, it was a juice test I was doing for general purposes, not to back test any of the Falde variants. It was a 60-40-20 structure, but just held 30 DIT and hedged once per day at end of day. So the difference is, that back test was hedged and had no Falde exits.

2.
It turns out there is a big cumulative difference over time when hedging once per day versus more frequently ... if you hedge with reasonable frequency then the hedged 60-40-20 shows more of a flat trend than a downward trend.

3.
The same is true of the actual Falde trades with their various exit algorithms ... more of a flattening than a downtrend.

To illustrate those points, the top image below (2014-2020) shows a version of the downtrending chart above (end-of-day hedging, red line) against the same thing hedged more frequently (blue line). The green line is an update of the red line showing more recent performance, which has been strong along with most other income trades of any description.

The bottom image (2004-2020) shows a recent update of a typical Falde trade plan (no hedging) ... this happens to be the 28/52 SS delta exit.
070620_60_40_20_hedge_variants.JPG070620_60_40_20_hedged_versus_Falde.JPG
 
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