As a weekly option seller, I am most concerned about the statistics for a Friday to Friday timeframe. A backtest conducted in 2019 (which included 2x leverage from its Oct 2011 inception to the reduced 1.5x leverage starting Feb 2018) quantified the probabilities for selected outcomes that I could use to inform the style of trading I wanted to maximize. I shared the spreadsheet of those end results on Twitter
Initially I was focused on the spike risks (degree and frequency), but the MaxPain column has since yielded new insights. I had quickly forgotten the meaning of the MaxPain column until someone had quizzed me on this. I then recalled that the numbers represented the extremes and medians of intraweek price movements. This could inform a trade to ride the weekly changes as opposed to simply waiting out the EOW expirations.
I usually round the results for simplicity’s sake (easier to remember and because trading is too messy to for that degree precision to have any meaning)
Inter-week Results
- Median change in price: (50% above and 50% below) -5%
- Long term weekly drop (for long DTE plays) -2.5%
- Up weeks: 1 in 3
- Down weeks: 2 in 3
- Chance the UVXY doesn’t trade higher than Friday’s close: 15%
Intra-week Results
- Median price spike: 10%
- Confident spike: 5% (66% probability)
The Fri/Mon column was there to look for opportunities in a weekend effect but didn’t find anything significant.
A trader who only traded monthlies, quarterlies, or LEAPs would want to backtest to produce relevant statistics. For me, taking advantage of the maximum theta decay for an option’s final week, led me to pursuing these metrics. Yahoo has free daily, weekly, and monthly historical data to download if you’d like to take a run at crunching these numbers for yourself.