Definition
Average DTE (Wins): The average days till expiration for your winning options trades.
Average DTE (Losses): The average days till expiration for your losing options trades.
Formula
Add up the DTE for winning or losing trades and divide by the respective number of trades.
Average DTE (Wins) = Total DTE of Winning Trades / Total Number of Options Trades
Average DTE (Losses) = Total DTE of Losing Trades / Total Number of Options Trades
Examples
Average DTE (Wins):
- Total DTE of winning trades: 300 days
- Number of winning trades: 10
- Calculation: Average DTE (Wins) = 300 days / 10 = 30 days
- Interpretation: Winning trades have an average DTE of 30 days.
Average DTE (Losses):
- Total DTE of losing trades: 150 days
- Number of losing trades: 15
- Calculation: Average DTE (Losses) = 150 days / 15 = 10 days
- Interpretation: Losing trades have a much lower average DTE of 10 days.
| How It Can Be Used | Limitations |
|---|---|
| Identifying optimal expiration periods for profits | May be influenced by outlier trades |
| Adjusting strategies to focus on profitable DTEs | Doesn’t consider other factors affecting outcomes |
| Understanding time decay impact on wins and losses | May not account for changing market conditions |
In Practice
Comparing Average DTE for wins and losses can highlight if certain expiration periods are more favorable for your trading style, allowing you to adjust your approach accordingly.
