How to Identify Top Performers in Options Trading

Plus, 20 stocks that tend to double your money the most

Senior Quantitative Analyst
Jan 18, 2024 at 8:00 AM
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In 2023, we saw a surge in options volume, setting yet another record. As Cboe Global Markets, total volume across Cboe's four options exchanges was 3.7 billion contracts in 2023, the fourth consecutive record-breaking year. With options as popular as ever, this week’s focus is on identifying the top-performing stocks for options trading. The analysis involves calculating straddle returns for individual stocks going back to 2023, then ranking them on various return metrics.

The Method to Watch

To determine stocks that have had attractive options, I calculated returns on four-week straddles starting in 2023. A straddle consists of buying a call option and a put option on a stock. The call and put should have the same strike and expiration date. In one sense, this takes direction out of the equation because the position can profit whether the stock goes up or down. The stock, however, must sustain a direction one way or the other for the straddle to pay off. A significant two-week move up followed by an equally significant two-week move down results in a big loss for a four-week straddle. In short, while a straddle can capitalize on movement in either direction, the sustained direction for the holding period is a critical factor for profitable returns.

Profitable Straddle Plays

The data below considers stocks with ample option liquidity that have had weekly expiration dates available at least some of the time over the past year. It assumes you purchased a straddle at the end of every week that had an expiration date four weeks away. Furthermore, it assumes you held the straddle until expiration and closed the position at intrinsic value.

Going by the average straddle return, the table below shows the top 20 stocks for straddle plays since 2023 (using this method). I also show the percentage that were positive, and the percentage which would have doubled your money. The last column shows the percentage of the positive straddles that were positive due to the call option. In other words, of all the positive straddles, it’s the percentage that was positive due to an increase in the stock price as opposed to a decrease in the stock price. Based on this list, banks and finance related stocks have been great for option buyers over the past year.

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Below is another list of 20 stocks that were good straddle plays since 2023. These are stocks that had the highest percent positive. These stocks wouldn’t have earned you the most money with their straddles, but they turned out winners more consistently than others. Abbot Laboratories (ABT) heads the list with 70% of the straddles positive. Interestingly, ABT is about flat year-over-year. Over the past six months, it has a sustained down move then a V-bottom into a sustained up move and recall, this is how you end up with positive straddle returns.

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Finally, here is a list of stocks whose straddles doubled most often. These stocks had options that were most likely to give you a big winner. Use this list if you want to swing for the fences, or balance your safe options strategy with more risk. 

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