The Volatility Strategy
This strategy identifies opportunities that exhibit a combination of both unusually low options volatility and Elliott Wave corrective patterns. A Strangle option strategy is used to capture profit from increasing option volatility during the ensuing break out from the consolidation pattern. Where a sufficiently low level of volatility in options pricing exists, we can have a reasonable expectation of an increase in volatility to historical levels.
The Volatility Strategy
This strategy identifies opportunities that exhibit a combination of both unusually low options volatility and Elliott Wave corrective patterns. A Strangle option strategy is used to capture profit from increasing option volatility during the ensuing break out from the consolidation pattern. Where a sufficiently low level of volatility in options pricing exists, we can have a reasonable expectation of an increase in volatility to historical levels.
Volatility features
Overview
Strategy commenced
– October 2017
Primary strategies used
– Strangles
Capital Required
– Suggested $10,000
– Minimum $5,000
Trade Frequency & Duration
– 3 to 4 Trades Per Month
– Avg. trade duration 50 days
– Maximum 10 open positions
Profit regardless of market direction
Markets obviously don’t trend and consolidate at the same time. Therefore, each strategy provides trading opportunities at different times during the markets’ cycle through bullish periods, consolidations and bearish periods. In summary, the Volatility Strategy, allows you to cover the market in both directions and gives you more opportunities to profit.
Take advantage of implied volatility
The Volatility Strategy provides a built in hedge or risk management that the Impulse Strategy doesn’t naturally provide. In summary, because the Volatility Strategy is non-directional, it typically has Calls and Puts in every position. This means that if there is an unexpected large move in the market, either to the upside or downside, the EWO Volatility Strategy positions become profitable.
How much capital do I need to start?
We suggest starting with USD$10,000, however this strategy can be traded with a minimum USD$5,000.
How will I manage risk?
Risk management is our primary consideration when it comes to our trade alerts service and educating you on our trading strategies.
In general, our risk management guidelines recommend that you risk no more than 5% of available trading capital in any position. We therefore never exceed an initial position value of $500 per trade for our premium services.
How much capital do I need to start?
We suggest starting with USD$10,000, however this strategy can be traded with a minimum USD$5,000.
If you have a larger account size, you may be interested in a “High-Value” subscription which includes trade alerts for opportunities that exceed risk management criteria for our recommended account minimums.
How will I manage risk?
Risk management is our primary consideration when it comes to our trade alerts service and educating you on our trading strategies.
In general, our risk management guidelines recommend that you risk no more than 5% of available trading capital in any position. We therefore never exceed an initial position value of $500 per trade for our premium services.
See the volatility strategy in action
EWO Volatility Strategy in action! In this trade review for JD (JD.com) Rob provides a great example of a volatile stock that tends to move both up and down a lot. When the stock consolidates, it becomes a great candidate for one of our unique Strangles that can capture a move in either direction. [...]
EWO Volatility Strategy in action! In this trade review for SLV (IShares Silver Trust), Rob details the basics of our rules for setting up Strangles with consolidation patterns and that when our indicators line up, one can experience a nice breakout move with a better than average gain. This specific trade returned 106% in [...]
Elliott Wave - Triangle within a Triangle! In this Trade Review for Nucor (NUE), Rob explains how the rather unique pattern of a "triangle within a triangle" was a great setup for one of EWO’s unique Strangle positions. In addition, Rob explains how he uses the ADX as an indication of when a stock [...]
Volatility Strategy Performance
Summary Statistics
Figures Assume $5,000 Starting Capital.
Note this track record was updated May 30, 2023. Details available here>
Results as at: 30 September 2023. How we report performance >
Performance Summary
| Period | Total Trades | Winning Trades | Win Rate % | Cumulative Return | Monthly CAGR % | Avg. Trade Size | Avg. Days per Trade | Avg. P/L per Trade | Win:Loss Ratio | Max Draw- down | Max. Consec. Winners | Max. Consec. lossers |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| All | 163 | 106 | 65% | 291% | 2.0% | $426 | 28.1 | 21% | 1:1 | -18.0% | 10 | -4 |
| 2018 | 48 | 34 | 71% | 112% | 6.5% | $419 | 32.0 | 28% | 2:1 | -18.0% | 10 | -4 |
| 2019 | 41 | 23 | 57% | 59% | 3.9% | $427 | 24.4 | 17% | 1:1 | -8.6% | 4 | -2 |
| 2020 | 29 | 22 | 76% | 73% | 4.7% | $416 | 22.7 | 30% | 3:1 | -8.2% | 8 | -2 |
| 2021 | 26 | 13 | 50% | 21% | 1.6% | $422 | 24.4 | 10% | 1:1 | -9.5% | 7 | -4 |
| 2022 | 12 | 8 | 67% | 11% | 0.9% | $467 | 35.6 | 10% | 2:1 | -5.9 | 3 | -2 |
| 2023 | 8 | 6 | 75% | 15% | 1.5% | $453 | 43.1 | 21% | 3:1 | -1.7 | 5 | -1 |
Monthly Portfolio Returns
Non-compounded returns based on starting capital, reset each year. Results attributed to the month and year the trade was marked as closed.
| Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2018 | -5.1% | 31.4% | 11.9% | 0.6% | 0.0% | -16.6% | 7.0% | 13.0% | 0.0% | 25.4% | 23.2% | 21.2% |
| 2019 | 6.8% | 6.9% | 3.0% | 2.2% | 31.1% | 0.6% | 2.1% | 7.5% | 3.5% | -2.9% | 1.4% | -6.1% |
| 2020 | 5.4% | 9.0% | 7.7% | -4.0% | 11.8% | 6.0% | 0.6% | 2.3% | -2.7% | 6.9% | 3.5% | 8.8% |
| 2021 | 20.2% | 0.0% | -2.1% | 2.5% | 9.6% | -9.1% | 0.0% | -3.9% | 3.8% | -1.6% | 2.8% | 0.0% |
| 2022 | 0.8% | -1.8% | 15.3% | -5.0% | 0.0% | 0.0% | 0.0% | 0.0% | 1.4% | 0.0% | 0.0% | 0.0% |
| 2023 | 5.9% | 4.2% | 0.0% | 2.3% | 3.5% | -1.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
Monthly Trade Returns
Returns based on initial entry debit or net initial margin requirement if a credit position.
| Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2018 | -21.4% | 56.4% | 48.4% | 1.6% | 0.00% | -45.0% | 35.4% | 69.8% | 15.2% | 29.50% | 53.6% | 49.8% |
| 2019 | 34.5% | 71.1% | 9.8% | 8.9% | 80.5% | 2.5% | -7.5% | 50.6% | 23.8% | -38.5% | 9.2% | -19.2% |
| 2020 | 24.4% | 108.4% | 52.9% | -83.0% | 46.4% | 40.7% | -4.1% | 0.6% | -13.8% | 16.0% | 48.6% | 43.6% |
| 2021 | 21.5% | 0.0% | 21.0% | 29.6% | 55.0% | -25.1% | 0.0% | -44.1% | 26.5% | -28.9% | 5.2% | 0.0% |
| 2022 | 3.8% | -8.0% | 56.4% | -30.8% | 0.0% | 0.0% | 0.0% | 0.0% | 7.8% | 0.0% | 0.0% | 0.0% |
| 2023 | 65.6% | 38.2% | 0.0% | 17.9% | 42.7% | -6.5% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
Individual Trade History
Example Historical Trade Format
Trade ID: 216
MHK
Long Strangle
EWO Volatility Strategy
WIN
1 x Contracts
21Aug20
60 Put/105 Call
Entry
May 22, 2020
4.45 Db Fill
Exit
May 28, 2020
7.20 Cr Fill
5 Days in Trade
61.8% Return in
Capital
$275 P&L
