That's okay. There are lots of inconsistencies in your system. They are obvious but no one has pointed them out to you... why do you think that is?
A free Trading System that guarantees at least 180% p.a.
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That's okay. There are lots of inconsistencies in your system. They are obvious but no one has pointed them out to you... why do you think that is?
You tell me.
Which inconsistencies have you found that you make such a statement?
Update: The PnL is even higher: it's 218.32% p.a. because we only need $5000 - $460 credit as investment, ie. the basis for PnL calc is $4540:
Code:
The PnL is even higher. Here the updated formula and results:
MonthlyPnL = 460 / (10,000 / LeverageFactor - 460) * 100 = 10.13%
AnnualPnL = ((1 + 10.13/100)^12 - 1) * 100 = 218.32%But, as was said in previous postings: the stock position should not be too big because it must be easily closable and re-openable. I would say max $50k.
For big money one would use multiples of such constructs.
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You don't need me to tell you what they are. You clearly have it all figured out.
Here's the latest version (v1.2) of the text with some fixes and additions. The PnL had to be corrected again: now it is 201% p.a.:
Code:
AN OPTIONS SELLING SYSTEM THAT GIVES A GUARANTEED PROFIT OF 201% PER YEAR
Author : botpro at www.elitetrader.com
Version: v1.2 - with updated PnL and margin calcs, and additional comments
Date : 2016-04-17-Sun
Rules of the options selling system with simple hedging:
1) The system consist of 2 parts:
1.1) sell a call option of European Style, and
1.2) go long the stock
2) The option position is kept till expiration
3) Simple hedging (not delta-hedging):
3.1) if stockprice drops below the initial price then close the stock position immediately
3.2) if stockprice crosses from below the initial price then re-open the stock position immediately
Example: assuming InitialStockPrice=100, HistoricalStockVolatility=40%, using monthly options (ie. Expiration=21 business days)
Selling 1 Call:
Spot=100.00 Strike=100.00 ExpDays=21 HoldDays=21 EarningsYield=0.00% DividendYield=0.00% VolaPct=40.00% --> Call=4.60 Put=4.60
Going long 100 shares of the stock:
Spot=$100.00 --> CapitalNeeded=$10,000
Since it's an option of European Style, an early assignment cannot happen, which is good in this case.
At expiration date:
Regardless what the CurrentStockPrice or the CurrentVola is: we will keep the credit fully.
We will not make any profit from the stock position; all profit of the stock, if any, goes to the counterparty.
Profit:
We used the usual 2:1 overnight margin of the broker. So we have a leverage factor of 2.
Meaning: of the $10,000 only half of it minus credit / 2 is our own investment (this is the basis for the PnL calcs).
CreditReceived = $4.60 * 100 = $460
MonthlyPnL = 460 / (10,000 / LeverageFactor - 460 / 2) * 100 = 9.64%
AnnualPnL = ((1 + 9.64/100)^12 - 1) * 100 = 201.73%
From these numbers the commissions paid has to be subtracted.
Remarks:
- It's up to you to apply this system in the market(s).
- To get the hedging correct, one would need to monitor and if necessary trade the stock nearly 24/7
by using multiple exchanges around the globe. Ie. by this, one has to eliminate any overnight gaps in the stock price.
- If applied correctly then the given guarantee holds, ie. 201% profit per year.
- Using more volatile stocks and/or a shorter timeframe than the above used 1 month will give even more profit.
- Regarding margin: you have to do the math to get the 2:1 margin. Ie. in this case you would initially
keep only $5000-$460/2=$4770 plus commission in your account. The broker grants you 2:1 overnight margin (or 4:1 intraday margin).
- The system is freely scalable to any investment amount. But the stock position should not be too big,
because it must be easily closable and re-openable; I would say the stock position should not be more than $50k.
- For big money one would use multiples of such constructs, but then one should of course use different stocks.
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Can you find any other inconsistencies in the latest version (v1.2)?
Please change your name to douchepro
Extension #1 to the system: Profit booster: How to make more than 8000% per year with this system:
The smaller your own part of the invested total money is, the more the profit% will make up:
Example:
- let's say your own money is $1000
- borrow the rest ($3770) cheaply from friends or take a 1 month loan
- let's assume you have to pay 1% interest for the 1 month loan, ie. $37.70
Now, your basis for the PnL calcs is your own $1000 plus the interest for the loan, in total $1037.70:
MonthlyPnL = 460 / 1037.70 * 100 = 44.3288%
AnnualPnL = ((1 + 44.3288/100)^12 - 1) * 100 = 8070.26%
Since compounding gets used, each month the above absolute numbers would of course change, but the relations (ie. the percentages) would stay the same.
It's all simple maths, folks!
The smaller your own part of the invested total money is, the more the profit% will make up:
Example:
- let's say your own money is $1000
- borrow the rest ($3770) cheaply from friends or take a 1 month loan
- let's assume you have to pay 1% interest for the 1 month loan, ie. $37.70
Now, your basis for the PnL calcs is your own $1000 plus the interest for the loan, in total $1037.70:
MonthlyPnL = 460 / 1037.70 * 100 = 44.3288%
AnnualPnL = ((1 + 44.3288/100)^12 - 1) * 100 = 8070.26%
Since compounding gets used, each month the above absolute numbers would of course change, but the relations (ie. the percentages) would stay the same.
It's all simple maths, folks!
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So the system is selling covered calls and your hedge is just getting in and out of the stock position if it crosses your entry? What if it goes a penny below your entry, a penny above, back and forth...soo much spent on the spread and commission potentially.
It's obvious this guy is a tool shed. Hopefully no one is taking this serious. He's prob selling mentoring on PM.
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