Anyone else surprised at option-writing CTA success?

[heech]

So, I know option writers have a bad rap... and god knows enough have blown up over the years to deserve it.

But I'm curious what others think of results like this:

http://autumngold.com/ManagedFutures/index_option_equal.php

I mean, quite frankly, that's remarkable. Even with the poor year last year, the strategy has done far better than just about anything else over the past decade and a half.

Or, are these numbers suffering from survivor bias in some way? CTA managers that blow up simply never report the last -90% return that put them out of business?

 

[Div_Arb]

This is totally within the realm of reason with limited amounts of risk. Are you saying this is not possible or something?

 

[PPT]

We all learned from Madoff.

stay away, stay far away

if it seems too good to be true...

if you want to drink the kool-aid, sorry when you are broke

 

[heech]

Yes, I'm saying this is unlikely to be an accurate record of actual results of option writing strategies.

I'm pretty convinced at this point it's serious survivor bias. The top CTA with best YTD results would be CKP Financial Associates, with 210% returns YTD in their aggressive program.

If you look at the disclosure document, you'll see that the managers have been working as CTAs since 1999... but the only two strategies described in the disclosures (and listed on AutumnGold) started in December '08. Coincidence? Doubtful.

Same goes for Ascendent Asset Advisors (who also coincidentally were one of Future Magazine's hot new CTAs in August)... they have two programs with impressive returns this year. If you look at their disclosure document, you'll see they stopped trading on 4-5 strategies that had -90% returns in October/November of last year. I think one actually had a -98% return... now that's impressive.

 

[TraderZones]

Quote from heech:

So, I know option writers have a bad rap... and god knows enough have blown up over the years to deserve it.

But I'm curious what others think of results like this:

http://autumngold.com/ManagedFutures/index_option_equal.php

I mean, quite frankly, that's remarkable. Even with the poor year last year, the strategy has done far better than just about anything else over the past decade and a half.

Or, are these numbers suffering from survivor bias in some way? CTA managers that blow up simply never report the last -90% return that put them out of business?

Is this ALL CTA option writers combined, or just the top one out of many?

Larry Williams once had something like 10,000%+ in a one-year contest. Is it serious for anyone to consider this as their goal or expectation for a year?

 

[dagnyt]

Quote from heech:


But I'm curious what others think of results like this:

I have not looked at the result - because they are immaterial to your question.


There are many people who adopt a given strategy. Some will be hugely successful while others go broke. Yes, using the same strategy.

Just as some mutual funds do well and others fail with a buy and hold strategy, so too will any strategy produce people who have unbelievably good or bad years. That must be the case.

Finding one winner says nothing about the methodology.

Mark

 

[rwk]

Quote from TraderZones:
Larry Williams once had something like 10,000%+ in a one-year contest. Is it serious for anyone to consider this as their goal or expectation for a year?

Larry Williams has always been very open about how he achieved that return, and that he has never advocated that others try it. He was trying to make a name for himself and regarded his starting capital as expendable.

 

[lindq]

Quote from heech:

So, I know option writers have a bad rap... and god knows enough have blown up over the years to deserve it.

But I'm curious what others think of results like this:

http://autumngold.com/ManagedFutures/index_option_equal.php

I mean, quite frankly, that's remarkable. Even with the poor year last year, the strategy has done far better than just about anything else over the past decade and a half.

Or, are these numbers suffering from survivor bias in some way? CTA managers that blow up simply never report the last -90% return that put them out of business?

First, read the fine print and you'll note a number of exceptions and conditions that should raise red flags when reading the chart of results. You've already noticed the first, which is an evident case of survivorship. This is typical of CTA listings.

These are not the trading results of THIS company, but of a selected group of CTAs under who-knows what conditions. A service or website like this can list results under whatever conditions they want. If you want to dig deeper, give them a call. And I can assure you that you'll leave the call scratching your head wondering what the heck they are actually listing.

Second, note that this outfit is run out of an apartment. I know the area as I also live in Scottsdale.

Duh.

 

[trackstar]

There are much better option selling CTAs than this one. CTA results really are not that hard to replicate. You just need to package your system in a way that will attract investors.

 

[lindq]

Also, note that the home page of this firm is filled with sponsored Google links.

What does that tell you about their ability to generate income even for themselves through the CTA programs they are listing?