Finding the best Strategy; Condors, Lizards, Butterflies
- Thread starter motterpaul
- Start date
In my opinion, the biggest issue is that backtesting this kind of strategies only shows you half of the picture. Yes, after modeling all the additional rules and caveats you might even have positive expectancy
BUT
when the market goes against you and you are staring down into the abyss, do you have the massive balls of steel required to let the statistics play out?
BUT
when the market goes against you and you are staring down into the abyss, do you have the massive balls of steel required to let the statistics play out?
Does it come bundled with your strategy for predicting direction and vol? In that case I might consider it..
OP here, I had not been back in awhile. Thanks for the replies, truly appreciated. I don;t doubt the Sosnoff sincerity, I just often get the feeling there is more to it than what they are telling us. Not because they have anything to hide, but because there is more to it than they even want to admit (and I believe they have done more research than anyone - but it still needs more).
The funny thing is - this "1/3 the width of the strikes" thing is one of the hardest things to understand, because he is referring to the wings but he never says where to put the original strangle. Also - like you said as soon; as the stock moves neutral delta is out the window.
I realize now I have been trying far too hard to manage them. I have overspent on commissions. Plus (worst of all) I actually made a mistake just as the market closed and ended up with a large position that was the opposite of what I intended - the next morning it was against me.
One thing I hear is that they don;t talk about losses, especially on earnings trades, but I not yet seen a foolproof options earnings trade that will pay off unless you really hit the right direction; straddle, strangeles, ICs - they are all flawed.
I did go through the TT way and definitely is not the bible. As others said, you have to mix strategies as none would work forever. Have been assigned and seen how selling could be high risk. I now see the value of buying options (coming over the psychological barrier that buying makes you lose time value etc...)... Actual strategies involving buying premiums give you better sleep and control on what you actually lose. Most importantly, i find it easier to adjust by converting into other strategies as the market moves.
I started recovering my TT based losses by mixing strategies including having some TT advocated ones (i.e selling premium). I was close to fully recover my losses and started aiming higher until the war began!!! This is the part I need to improve - hedge using a proper mix of strategies/industry/product type/etc...
I started recovering my TT based losses by mixing strategies including having some TT advocated ones (i.e selling premium). I was close to fully recover my losses and started aiming higher until the war began!!! This is the part I need to improve - hedge using a proper mix of strategies/industry/product type/etc...
They do tons of good work. But, not more than "anyone," or more anymore than others that is. Not saying I have all the answers. But, there are some very smart, very advanced traders here..even in this thread. Ask nicely, show some humility and they might help you out.
[IMO] IC's are [in most cases] a substandard structure to begin with. The delta/vega exposure is tough to overcome, especially when they're done for a credit...as they're often taught. And this POP nonsense is great if modeling to expiry, but most trades never last that long anyway. That kind of trading gives people a false and very dangerous sense of security. POP is a very poor way to open what is not even a superior structure in the first place. It sells well. But, it's a tough way to keep your kitchen stocked.
Gotta consider where IV is, a), and b) mechanically layering IC's in like clockwork regardless of other factors is just asking for trouble.
Consider Credit Ratio's, BrokenWing Flys and Condors, Calendars, Reverse Calendars...etc, along with modeling the Vol line before you add more IC. Word to the wise, make sure you know how to gamma/vega hedge before adjustments are needed. And one might want to explore other DTE cycles rather than just going to the 30d, and 45 DTE that seems to be so prevalent among so-called "option gurus" teaching IC everywhere these days.
Since Feb '18 we've entered a new Vol environment. Vol is no long <7 anymore. Mucho importante! Hopefully, this is helpful. Good luck!
[IMO] IC's are [in most cases] a substandard structure to begin with. The delta/vega exposure is tough to overcome, especially when they're done for a credit...as they're often taught. And this POP nonsense is great if modeling to expiry, but most trades never last that long anyway. That kind of trading gives people a false and very dangerous sense of security. POP is a very poor way to open what is not even a superior structure in the first place. It sells well. But, it's a tough way to keep your kitchen stocked.
Gotta consider where IV is, a), and b) mechanically layering IC's in like clockwork regardless of other factors is just asking for trouble.
Consider Credit Ratio's, BrokenWing Flys and Condors, Calendars, Reverse Calendars...etc, along with modeling the Vol line before you add more IC. Word to the wise, make sure you know how to gamma/vega hedge before adjustments are needed. And one might want to explore other DTE cycles rather than just going to the 30d, and 45 DTE that seems to be so prevalent among so-called "option gurus" teaching IC everywhere these days.
Since Feb '18 we've entered a new Vol environment. Vol is no long <7 anymore. Mucho importante! Hopefully, this is helpful. Good luck!