HowardCohodas Index Options Credit Spread Trading Journal

[El OchoCinco]

Quote from HowardCohodas:

I have been asked by friends, family and acquaintances to manage their money with a broad range of incentives from generous to insulting. I have not and will not manage other people's money.

• I value money far less than relationships with friends, acquaintances and family. There is risk and I could mess up. They may forgive me, but I could not forgive myself.
• I can see no opportunity-benefit to managing small accounts for other people, even if I were so inclined. It is not good compensation for my time and effort, especially when you add bookkeeping and legal requirements paperwork.
• The account size you mention is the second smallest I have been offered. The smallest was $10,000. The largest shocked me. I'm convinced the ones you mentioned have had similar experiences.

Some advice from experience to further support your points:

1. As you seem to imply in your post, DON'T manage money for friends as it 99% of the time ends of bad. Family too but I think you can make an exception for immediate family if they understand the risks. But friends become pain inthe asses when you manage their money.

2. For Iron Condors, do not manage an account that is less than $50k or so. If someone gives you $10k to manage, you bust your ass to get a 30% return which is good and they make $3000. Assume you get 20% of that as an agreed upon fee then you make $600 for a year's worth of effort, stress and anxiety. When anyone approached me to manage their money and they wanted to give me $10k or $25k I told them it was not worth it to them to pay someone to manage such a small amount, just trade it yourself. I actually had a $100k threshold and it kept away most of the people who were not serious.

3. If you manage 4 or 5 people's accounts then you will probably have to do it in 4-5 separate accounts where they open it up and just give you power to make the trades. Then when you need to make an adjustment or entry in a time sensitive manner, you have to scramble like a maniac over 4-5 internet windows to get the orders in and wait. More often than not, 2-3 will get filled and the others won't. Worst of all when market crashes or surges, 1-2 might get filled and the others will have different pricing in a fast moving market and you will get screwed on half the accounts. Had a friend who against my advice had 5-6 clients where he replicated the trades and when the shat hit the fin, he had some clients lose way more since he was scrambling in 5 screens to get fills and update orders.

 

[HowardCohodas]

Quote from Martinghoul:

Is this entirely accurate, Howard?

I have worked on it, on and off for about eight years. I have probably put a total of one year into it. Not necessarily 2000 hours, but a year's worth of weeks where I worked on it several hours in a given week.

I began back-testing eight years ago. I did some additional back-testing in early 2010. I followed this with 5 months of paper-trading. I then began trading with real money Aug 2, 2010.

I now frequently spend more than 50 hours a week trading, studying, writing, posting and other stuff on options in general and credit spreads in particular.

I know that this seems like TMI for a simple question, my you know why I answer in this detail.

So you tell me. Is it largely accurate?

 

[Martinghoul]

Quote from HowardCohodas:

So you tell me. Is it largely accurate?

I don't know... I am not here to judge you.

 

[El OchoCinco]

Quote from Martinghoul:

Is this entirely accurate, Howard?

I was making a general point, not trying to speak for anyone .

 

[EliteThink]

Quote from optioncoach:

Some advice from experience to further support your points:

3. If you manage 4 or 5 people's accounts then you will probably have to do it in 4-5 separate accounts where they open it up and just give you power to make the trades. Then when you need to make an adjustment or entry in a time sensitive manner, you have to scramble like a maniac over 4-5 internet windows to get the orders in and wait. More often than not, 2-3 will get filled and the others won't. Worst of all when market crashes or surges, 1-2 might get filled and the others will have different pricing in a fast moving market and you will get screwed on half the accounts. Had a friend who against my advice had 5-6 clients where he replicated the trades and when the shat hit the fin, he had some clients lose way more since he was scrambling in 5 screens to get fills and update orders.

The only way to manage many accounts fairly and precisely, in deference to accuracy, is with block order capacity.

 

[falconview]

Maverick

Your point is taken. Also the point comes when size in funds, hinders the capability of trading short term trades, etc. So, yes I´m sure there are factors involved, other than size of the bank account.
For the small retail trader, I often wonder what is the maximum you can handle without getting into trouble, by swamping the market and unable to get fills, etc. Just a guess estimate would be $200,000 to $500,000. But I really do not know and don´t know if any studies, or reports have been factually printed on this subject. It would be interesting to hear what BIG retail traders have to say?

Now Soros and Buffet are different players. Soros in currencies and Buffet in stocks. I don´t know how Soros got his start. But Buffet has for his early years been using OTHER PEOPLES MONEY. This is of course a way to lessen risk and make extra cash, with your management fee, or commission, or whatever you call it. Enough people trusted BUFFET to allow him to get into big time plays of rebuilding distressed companies. That is not the same as perhaps me, and YOU, smaller retail traders and what kind of expectations can we expect.
Which brings me to direction forecasting. If the experts on here say you have to have directional trading skills, then I question the use of all these SPREADS and convuluted trading strategies, without some sort of ball park, Return On Investment figure. Are they doing better fiscally by being smarter, or are they spinning their wheels like the rest of us? Wish I knew. Certainly I would put my energies in the most profitable trading way. Since I have to guess, I´m riding with directional straight buy and sell volatility plays.

 

[falconview]

Option Coach

Just scrolled through some back chit chat I missed and got that miffed comment about professionals do not need to tell us amateurs their ROI figure.
I hope you don´t get mad at me, I wasn´t really using your name derogatory and true you don´t owe me anything. What I kind of lean toward, is some statistical report by a Phd thesis or something, where they quote actual figures. Otherwise one is just guessing. I thought by mentioning it, somebody with experience and background, might refer me to such a study and report. I´ve never found one yet. Other than Market Wizard book, there isn´t really any other reference. That says 40% a year.

 

[El OchoCinco]

Quote from falconview:

Option Coach

Just scrolled through some back chit chat I missed and got that miffed comment about professionals do not need to tell us amateurs their ROI figure.
I hope you don´t get mad at me, I wasn´t really using your name derogatory and true you don´t owe me anything. What I kind of lean toward, is some statistical report by a Phd thesis or something, where they quote actual figures. Otherwise one is just guessing. I thought by mentioning it, somebody with experience and background, might refer me to such a study and report. I´ve never found one yet. Other than Market Wizard book, there isn´t really any other reference. That says 40% a year.

I did not think you were being dergatory but you are putting your efforts in the wrong place. A statistical report by some STUDENT at an academic institution who was taught by PROFESSORS who never traded will give you no insight on trading.

Your looking for some numerical justification to guide you into what area of trading will be most profitable for you. Understanding direction and volatility are key ingredients to trade options successfully and in theory, you can make money with anything if used properly. It comes down to your individual skills and I would recommend you dig into practical studies and avoid academic ones.

 

[thanos750]

Screw reading studies...the best way to learn to trade is by trading. I've been lucky because i started selling naked options last year for an annualized return of roughtly 25%. That is pretty good for an absolutely idiotic strategy. I did have a directional bias each time and I think that is why i didn't get killed. I have recently stopped trading naked as i got more and more educated in other strategies and of course started taking a deeper look into the greeks and understand how to take advantage of current market conditions. My trading has taking off and i trade with a much high level of confidence. I guess the bottom line was I got lucky not getting killed selling options naked and realized that it was actually a really bad risk management trading style and stopped before it was too late. I was actually scared out of selling options naked even while i was making money. It's now all about risk and now i view my trades in the prespective of hedging risk as the number one priority while taking advantage of theta.

I read Option Coach (Phils) book and a good chunk of the thread he was active on back in 2008 a few weeks ago. I like the idea of always rolling your money and taking profit when its giving to you.

right now my bias is to the down side and so put on a RUT call credit spread yesterday on the 860/855 for a credit of 1.65 for a great risk/reward ratio.

Good luck all!

 

[HowardCohodas]

Quote from thanos750:

right now my bias is to the down side and so put on a RUT call credit spread yesterday on the 860/855 for a credit of 1.65 for a great risk/reward ratio.

Good luck all!

If that was in the APR 11 series, that seems a bit close to the underlying with a probability of the short being touched of 64%.