This post replaces my earlier preliminary research post. The previous version had significant simulation bugs — profits were 3–5× too high and drawdowns 10–20× too low. Everything below is corrected. I also discovered a better exit method during this process called the Trailing Profit Lock.
TL;DR
- 172M rows of real SPX options prices, May 2022–May 2026, 3.4 million simulated trades across 2,362 parameter combinations
- New exit method (Trailing Profit Lock) beats fixed profit target by 8–24% on every metric
- Recommended — 1 contract: 64% threshold, 22% trail, 3.5× stop → $19,793 net / 4yr, $1,902 max DD, 10.4× P/DD, ~$412/month
- Recommended — 2 contracts: same settings → $47,145 net / 4yr, $3,894 max DD, 12.1× P/DD, ~$982/month
- Recommended — 3 contracts: same settings → $74,403 net / 4yr, $5,881 max DD, 12.7× P/DD, ~$1,550/month
- Course recommendations are being updated to reflect these findings.
What Is the Trailing Profit Lock?
The course currently teaches a fixed profit target — close when the spread decays to X% of credit. Simple, but it leaves money on the table when the spread keeps decaying past your exit.
The Trailing Profit Lock is a two-phase exit:
- Phase 1: Wait for the spread to decay to the threshold (e.g. 64% of credit). Until then, manage normally with stop loss active.
- Phase 2: Once the threshold hits, instead of closing, activate a trailing stop. The floor ratchets up as the spread keeps decaying. If the spread reverses by more than 24% of the peak profit, close automatically.
Example — $2.00 credit, 64% threshold, 24% trail:
- Spread decays to $0.72 → threshold hit, profit = $128, floor = $97
- Keeps decaying to $0.20 → profit = $180, floor ratchets to $137
- Bounces back to $0.65 → profit = $135, below floor → exit at $135
On a big decay day you ride toward full credit. On a reversal you exit with a locked profit well above the fixed target. Across 1,430 trades, the Trailing Profit Lock outperforms the fixed target by 8–24% on net profit while also reducing drawdown.
Updated Recommendations
Trailing Profit Lock exit. SL = 3.5× credit. C2 breakeven lock = $0.10. May 2022–May 2026. Commissions $1.09/contract.
1 Contract
| Profile | Threshold | Trail | Net 4yr | $/Month | Win Rate | Max DD | P/DD |
|---|---|---|---|---|---|---|---|
| Conservative | 64% | 20% | $18,734 | $390 | 82.1% | $1,687 | 11.1× |
| Recommended | 64% | 24% | $19,793 | $412 | 82.0% | $1,902 | 10.4× |
| Aggressive | 50% | 24% | $20,283 | $423 | 77.0% | $2,979 | 6.8× |
Minimum account: $5,000–$7,500. Peak single-contract margin ~$3,500.
2 Contracts
C1 closes at the trailing lock. C2 converts to a breakeven stop ($0.10 above original credit) and rides at zero risk. If C1 hits stop loss, both contracts close. Two contracts more than doubles single-contract profit while drawdown increases by less than 2×.
| Profile | Threshold | Trail | Net 4yr | $/Month | Win Rate | Max DD | P/DD |
|---|---|---|---|---|---|---|---|
| Conservative | 64% | 20% | $39,622 | $825 | 81.1% | $5,668 | 7.0× |
| Recommended | 64% | 24% | $47,145 | $982 | 82.0% | $3,894 | 12.1× |
| Aggressive | 50% | 24% | $43,961 | $916 | 77.9% | $5,284 | 8.3× |
Minimum account: $15,000. Peak margin ~$10,661 (C2 riding while new signal enters).
3 Contracts — Maximum Performance
C1 closes at the trailing lock. C2 and C3 both convert to breakeven stops simultaneously and ride at zero risk. When C1 closes profitably, move both stops in one action — three clicks in ThinkorSwim, or one automation rule. NC=3 adds 58% more net profit over NC=2 while the drawdown increases by only 51%. Each additional contract improves the P/DD ratio.
| Profile | Threshold | Trail | Net 4yr | $/Month | Win Rate | Max DD | P/DD |
|---|---|---|---|---|---|---|---|
| Conservative | 64% | 20% | $72,007 | $1,500 | 82.1% | $5,766 | 12.5× |
| Recommended | 64% | 22% | $74,403 | $1,550 | 82.1% | $5,881 | 12.7× |
| Aggressive | 60% | 24% | $67,824 | $1,413 | 80.8% | $7,737 | 8.8× |
Minimum account: $20,000. Peak margin ~$15,000 (C2+C3 riding while new signal enters). Best suited for TAT or Options Alpha automation.
Statistical Edge
5,000 Monte Carlo simulations on the recommended 2-contract config (2% random trade skips, ±2% P&L variance): 100% of paths profitable. p-value <0.005. 99% statistical confidence. K-Ratio 4.53 (Excellent). Equity curve R² = 0.893 — highly linear growth, no prolonged flat periods.
Futures Sync
Futures stop loss mid-session → close C1 immediately. C2 at breakeven is your call — zero risk either way. Futures timed exit at session end → no action needed on options.
What's Next
- Full course update with new exit method and threshold recommendations
- TAT and Options Alpha automation integration for the Trailing Profit Lock
- PM cutoff variation testing (1PM vs 2PM)
Questions and challenges welcome below. — Tom
1,430 Phoenix NQ signals with options data, May 2022–May 2026. $1.09/contract commission. SL 3.5× credit. C2 breakeven lock $0.10. Allow overlap: True. Data: ThetaData professional API.