Case Study: John Bender's approach to trading options

Our Scanning Paradigm: Using probability distribution to trade options profitably- John Bender Method.

Jack Schwager: How were you able to make consistent gains trading options?

John Bender:To make money in options, you don't need to know what the price of a stock is going to be; all you need to know is the probability distribution. If the Almighty came to me and said,"I won't tell you where IBM is going to be 1 month from now, but you've been a pretty good boy, so I will give you the probability distribution", I could do the math....

John Bender of Soros Fund Management & Quantum Fund from "Market Wizards" by Jack Schwager.

EdgeAnalytix's paradigm:

..On Backtesting....

Minimize curve fitting and over-optimization by using 2-3 filters at most. Each filter has to have a significant effect on the backtesting profile. As an example, if adding filter "x" changes the average pnl of a backtest from $10 to $15 and another filter "y" changes it from $15 to $16, then X is retained for further consideration while Y is tossed out. Once a set of filters is completed it is then subjected to further tests such as walk-forwards, etc.

Evaluate the value of a filter by comparing it to a "baseline fiilter". As an example, if we are backtesting a moving average strategy using a long at-the-money butterfly, we would initially backtest a daily butterfly purchase then compare it with the moving average filter.This comparison "somewhat " isolates the butterfly spread vs. filter performance.


.. On Scanning....

Unlike most scanners that focus only on option data such as implied volatility, EdgeScans uses technical indicators such as RSI, moving averages to match a probability distribution of the underlying with an optimal option strategy. Now, traders can use EdgeScans to discover explosive chart setups for long gamma trades, or soon-to-be dormant markets fit for short premium strategies. A list of tickers that satisfy your criteria are texted or emailed to you throughout the trading day. Email us for pricing.