Is it possible to make >=20% expected geometric mean returns per year with options? Why?

I agree with you 100%, which is why I'm a little confused as to why your comment is directed towards me... isn't Schwartz's trading record published somewhere or confirmed by some trustworthy source? If not, it's all "speculation"...
 
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A rudimentary search of "schwartz audited trading record" revealed gives the following links below. Hardly definitive sources. Schwager has also claimed, in writing, that Schwartz showed him the audited trading records. 25% per month. Of course it said he kept that track record for several years, but didn't specify how long. Again, this is not compounded. A guy trading $1M capital base is making $125,000 a month at 25%. That sounds about right for one of the "greatest ever".

http://www.meetpips.com/members/TonyIommich/blog/28869-how-to-be-the-25-a-month-man

http://blog.traderwave.com/jack-schwager-market-wizards-seminar-1/
 
BrandNewTrader said:
I agree with you 100%, which is why I'm a little confused as to why your comment is directed towards me... isn't Schwartz's trading record published somewhere or confirmed by some trustworthy source? If not, it's all "speculation"...
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It is in Schwager's book, Market Wizards, I think.
 
VTS said:
And good traders usually also pay attention to facts and truth. I realize there is no shortage of people who repeat audacious claims about what Schwartz did as a trader, but they are just that, claims and stories.

While his record is incredibly impressive, one of the all time greats no doubt about it. His record of course does not come close to the ludicrous claim of 20% a month and only in a single month in 87' did he take a significant loss. That's just silly.

The mans a legend, and his TRUE record should speak for itself. No need to embellish it to the point of insanity.
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Talk about paying attention: I never wrote that Schwartz had only one losing month. I wrote that the most he ever lost in a month during his tracked record was 3-4%. October '87 was a scratch month, as far as I know.
 
Bry said:
Talk about paying attention: I never wrote that Schwartz had only one losing month. I wrote that the most he ever lost in a month during his tracked record was 3-4%. October '87 was a scratch month, as far as I know.
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Some things go without saying for brevity my friend. You claimed he was making over 20% a month and never lost more than 3-4%, which I wrote to be more concise that he didn't lose. Of course it doesn't mean literally didn't lose. It just means in the context of 20% a month, if every month is 5 times larger than your biggest loss, essentially you never lost. It just wastes time unpacking things when you make people spell everything out for you.


Anyway, getting back to it. There are zero credible sources that Schwartz made 20% a month for more than a few good years. That's his legend, which is more or less verified. He did actually go on a few year run that was epic.

For you guys to try to extend that track record another 25 years is just disingenuous. He most certainly did NOT make 20% a month for over 25 years. Don't be ridiculous.

As I said, his incredibly impressive track record is good enough on face value. He's a legend based on the truth. You don't need to embellish it to ludicrous levels.
 
Timetwister said:
Could you prove that what you are saying is true, that selling options is intrinsically superior to buying them for the reason you mention?

I "feel" you are right, but I have never seen any study that convinced me, as they usually ignore events like 1987's Black Monday, or returns aren't noticeably higher than just buying and holding (specially after considering taxes).
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what if we take realized volatility of N period and compare with IV N days ago and do this for the entire data set, if on average HV < IV you will be better off as a premium seller over the long term right or wrong?
 
tradewiz said:
what if we take realized volatility of N period and compare with IV N days ago and do this for the entire data set, if on average HV < IV you will be better off as a premium seller over the long term right or wrong?
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I actually calculated something like that. The only problem is that I know historical VIX values, but the VIX doesn't tell me the IV of a particular option, but of a group of options. And in practice I don't sell so many different options (for many reasons), but just those near the ATM. And those near the ATM have lower IV than the VIX.

So selling ATM options is less profitable than it would seem if you just compared the historical differences between the VIX and realized volatility.
 
Timetwister said:
I actually calculated something like that. The only problem is that I know historical VIX values, but the VIX doesn't tell me the IV of a particular option, but of a group of options. And in practice I don't sell so many different options (for many reasons), but just those near the ATM. And those near the ATM have lower IV than the VIX.

So selling ATM options is less profitable than it would seem if you just compared the historical differences between the VIX and realized volatility.
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Realized vol is almost always lower than implied vol (except on rare occasions) and realized vol should never be used as a measuring tool IMO. What you need to look at is where implied vol is compared to its average. You sell options on stocks who's implied vol is higher than the average implied vol of said stock. I use the 1 year implied vol for this. Vix itself can only give you indications but you need to be more stock specific.
 
heiasafari said:
Realized vol is almost always lower than implied vol (except on rare occasions) and realized vol should never be used as a measuring tool IMO. What you need to look at is where implied vol is compared to its average. You sell options on stocks who's implied vol is higher than the average implied vol of said stock. I use the 1 year implied vol for this. Vix itself can only give you indications but you need to be more stock specific.
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If realized vol is predictably lower than implied you just invented a money machine, no?
 
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