I was asked a few times over the weekend how to check the performance of our VXX puts within the VTS Tactical Volatility Strategy. Although options are a little different than holding the ETF directly the performance calculation is more or less the same.
We just need to know what price we paid for the option and what it’s currently trading at. Any trading software from any of the brokers will give you the options quotes for VXX. I execute trades through Interactive Brokers for lower commissions but I always use my ThinkorSwim from TD Ameritrade software to show publicly because it’s so much nicer to look at. Here’s what that looks like:
– We open up the September monthly options (yellow circle)
– Check the 45 PUT strike we bought (green circle)
You can see currently the bid is 15.05 and the ask is 15.25. This will change throughout the day but that’s what it’s at right now. Typically if you’re executing a live trade you’ll get something near the mid-point so around 15.15 would be more or less accurate.
Now the official buy price the Tactical Volatility strategy paid for this option on July 9 is 14.375. That’s because I execute all trades at market close for consistency. However most of you who executed the trade during market hours will have gotten a much better price then that, probably something closer to 14.00. As it happened the markets moved upwards that day and closed at the high so the official trade got the worst price of the day. Remember with trade execution the time of day won’t matter in the long-run. We win some and lose some as markets move around daily, but it’ll all average out in the long-run. It’s best to consider intraday pricing a random walk and not try to time it.
Buy price: 14.375
Current price: 15.15
((15.15 – 14.375) / 14.375) *100 = 5.39%
This trade is up 5.39% as of right now. If for example you executed your trade when the signal was given and paid 14.00 you’d be up about 8.2% right now.
So how do you calculate your own profit?
((current price – your price) / your price) *100 = Profit
The calculation for options trades is just as straightforward as holding the ETF directly. We just need the price paid and the current value and we can easily calculate what it’s at.
Current VTS Total Portfolio Solution Allocations
6.7% VTS Conservative Vol Strategy – Volatility strategy for lower risk tolerance investors
6.7% VTS Aggressive Vol Strategy – Volatility strategy for higher risk tolerance investors
6.7% VTS Tactical Volatility Strategy – Volatility strategy using stock replacement through options
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