Disclaimer

ThetaRules is an educational tool. Nothing on this site is investment, financial, tax or legal advice, or a recommendation to buy or sell any security or option.

Not advice

ThetaRules is not a broker-dealer or a registered investment adviser, and does not know your finances, goals or risk tolerance. Strategy pages, "Fit today" badges, today's read and every other label describe how a structure behaves under stated conditions; they are not suggestions for you to trade it. Decide for yourself, or with a licensed professional.

Options carry real risk

Options can lose their full value quickly, and some positions, such as short calls, short strangles and ratio spreads, can lose more than the money put up. Assignment can come early and at a bad time. Before trading options in the US, read the Characteristics and Risks of Standardized Options from the Options Clearing Corporation.

How the backtests are made, and what they leave out

Every backtest result on this site is hypothetical: a rule engine trading on past prices, not a real account. Past results, real or simulated, do not predict future returns. Specifically:

• Modelled option prices before Feb 2024. Before then, option prices are calculated with Black-Scholes at that day's implied volatility (the VIX for SPY; for other stocks, their realised volatility scaled by the VIX). Real option markets had skew, wider spreads and gaps the model does not capture. From Feb 2024 on, prices are real daily closes, where a quote exists.
• Daily closes and simple fills. Trades fill once a day at the close, 2% of the mid price worse than the mid, plus $0.65 per contract. Real fills can be worse, especially in fast markets or thinly traded strikes.
• No dividends. Neither the strategies nor buy and hold include dividends, so strategies that hold shares and buy and hold are both understated by the dividend yield.
• Capital and returns. Returns are measured on the most cash the strategy ever needed (collateral for short puts, the cost of shares and options), rounded up, with interest on idle cash at the 3-month T-bill rate. A strategy that ties up little cash, such as one built on LEAPS calls, can show very large percentage returns in a strong year.
• Collateral is simplified. Short puts are counted as fully cash-secured (or, where a strategy says so, covered by the width of a spread). The Builder's margin figures for naked positions are Reg T estimates. Your broker's requirements, and margin calls in a crash, can differ and can force a position closed.
• Hindsight. The built-in strategies and their default settings were designed with knowledge of the markets they are tested on. Any strategy tuned on history tends to look better on that history than on the future.
• No taxes. Results are before tax. Frequent options trading can be taxed at higher, short-term rates.

Market data

Prices, option quotes, implied volatility, open interest and earnings dates come from third-party feeds, can be delayed or wrong, and are shown as received. Probabilities such as "chance of profit" are model estimates from implied volatility, not forecasts. Check any number with your broker before acting on it.

Your portfolio

The Portfolio page reads your positions read-only through your broker's own sign-in, which asks only for read access: ThetaRules cannot place, change or cancel orders. The access and refresh tokens are kept on the ThetaRules server, never in your browser, tied to a private cookie; they stay until you remove the account, which deletes them and revokes them with the broker. They are never shared.

Questions about this page: see the home page for the tools, or the backtests for the numbers this page describes.