How are the wallstreetbets guys so successful?

T

tradelosses

https://old.reddit.com/r/wallstreetbets/

just pages upon pages of guys making anywhere from a couple hundred k to a millions of dollars with puts and risking little capital. People risking just 5-10k and making 200k+ more. Few people losing money. Yeah I know there is survivor bias and that this crash has been exceptionally severe, but you see this over and over with Tesla or Disney and so on. It would seem like these people have found a sort of holy grail that we , or at least most of us, are oblivious to. A decent manager can maybe beat the market yet these people are even making Jim Simons look like amateur with his "only" 30-50% annual gains. I have never in 2 decades of following this stuff seen such consistent, huge profits from a group of traders like this. It chops every single expert, from victor niederhoffer, to Buffet,to Soros, etc. to size.

It is like the turtle trader guys of the 80-90s but way more successful it is all transparent, although we don't know the method. What I do know is: it involves buying OTM options on a certain set of a couple dozen stocks and index funds , never selling naked options or selling spreads. I know Taleb has written about OTM options being very lucrative and cheap but I have never been able to get it to work, and obviously there is the skew which makes the puts expensive. But that is very vague obviously. The position size matters a lot too .
 
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Before the recent volatility there were plenty of WSB people losing money. They basically buy OTM options and most of the time they expire worthless. They got lucky in the last few weeks. They are students gambling their loans and eating noodles if they lose.
 
Its a reporting bias. If someone buys far outside of the money options, 999/1000 time they expire worthless and dont post about it.....but that one time, they might cover there losses.....and if they are exceptionally lucky they get a 10k:1 pay off.

More often then not though....these guys go "tits up", to use the parlance of WSB.

I actually LOVE wallstreet bets.
 
It's BS sim and photoshop. The only legit method is to post the net liq in realtime with quotes and news showing. Nobody will do that bc they are a bunch of incel photoshop queens.

There are a few that actually post legit positions but as IAS states, it's a reporting bias. They don't post their blowouts.
 
tradelosses said:
https://old.reddit.com/r/wallstreetbets/

just pages upon pages of guys making anywhere from a couple hundred k to a millions of dollars with puts and risking little capital. People risking just 5-10k and making 200k+ more. Few people losing money. Yeah I know there is survivor bias and that this crash has been exceptionally severe, but you see this over and over with Tesla or Disney and so on. It would seem like these people have found a sort of holy grail that we , or at least most of us, are oblivious to. A decent manager can maybe beat the market yet these people are even making Jim Simons look like amateur with his "only" 30-50% annual gains. I have never in 2 decades of following this stuff seen such consistent, huge profits from a group of traders like this. It chops every single expert, from victor niederhoffer, to Buffet,to Soros, etc. to size.

It is like the turtle trader guys of the 80-90s but way more successful it is all transparent, although we don't know the method. What I do know is: it involves buying OTM options on a certain set of a couple dozen stocks and index funds , never selling naked options or selling spreads. I know Taleb has written about OTM options being very lucrative and cheap but I have never been able to get it to work, and obviously there is the skew which makes the puts expensive. But that is very vague obviously.
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Like you / other guy said you hear about majority of successes and few of the failures. A lot of it really is that simple. Or sometimes people just say f it and go all in willing to accept the risk, than of course if it works, they will explain to you why they did it and how it worked after the fact

There's a simple way for you to separate it. If they are just making one post about one trade, what's the big deal? If they have these returns monthly on a consistent basis for years, than there is something there to question and wonder about.


Also, I don't know any successful day trader that looks to people like Warren Buffet for advice or comparison in any form. Give Buffet a 40k futures account and have him trade these markets, I'd be willing to bet his account would be $0.00 in no time.
 
They are buying far OTM put/call tails in the hopes off making a big bang. They will have more losers than winners, but hope the winner will offset all losers.

As others are saying, the actual % of people making these outrageous returns is relatively small as you won't see them post about it. Some get lucky and hit the jackpot in one of their first attempts, whereas others get broke even before they hit their big winner.

What is the case though, is that the delta between realized vol and implied vol has decreased over the years, i.e. tail premiums are lower (I expect as there are more option sellers these days vs say 10 years ago), making this a more attractive strategy.
 
tradelosses said:
https://old.reddit.com/r/wallstreetbets/

just pages upon pages of guys making anywhere from a couple hundred k to a millions of dollars with puts and risking little capital. People risking just 5-10k and making 200k+ more. Few people losing money. Yeah I know there is survivor bias and that this crash has been exceptionally severe, but you see this over and over with Tesla or Disney and so on. It would seem like these people have found a sort of holy grail that we , or at least most of us, are oblivious to. A decent manager can maybe beat the market yet these people are even making Jim Simons look like amateur with his "only" 30-50% annual gains. I have never in 2 decades of following this stuff seen such consistent, huge profits from a group of traders like this. It chops every single expert, from victor niederhoffer, to Buffet,to Soros, etc. to size.

It is like the turtle trader guys of the 80-90s but way more successful it is all transparent, although we don't know the method. What I do know is: it involves buying OTM options on a certain set of a couple dozen stocks and index funds , never selling naked options or selling spreads. I know Taleb has written about OTM options being very lucrative and cheap but I have never been able to get it to work, and obviously there is the skew which makes the puts expensive. But that is very vague obviously. The position size matters a lot too .
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When you say OTM options, those are lottery plays. I trade options as a buyer and avoid those. Sure you can get lucky and hit a homerun but, how many times do you strike out? To hit one of those, big money makers, you would probably, lose 80-90% or 8 or 9 trades out of ten. Can you handle such losses? You know who I am impressed with? The hedge funds, banks and brokers. When you have a win rate in the 80-90% you certainly, know what the hell you are doing. That said, hedge funds, banks, brokers are the sharks of Wall Street. They have the capital in the hundreds of millions and billions that we retail traders do not have. You and I are mere sardines. Do not be one, like the ET trolls who think they are a whale when, they are a sardine. The Wall Street sharks will eat you every time!
 
Snuskpelle said:
Far out puts were underpriced because 11 years since last crash have made people and algos alike forget.
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The OTM put strategy means you will bleed out on the weeks. months,years etc. in which the market does not crash. So you have to somehow engineer the strategy to keep the bankroll positive or only down a little during the interim. The market has memory so even if it recovers the IVs will remain inflated for longer. I think there is def. merit in buying OTM puts when the IVs get very low, but need to find the optimal strikes and time, etc.
 
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