Is selling options before earning Good Strategy?

[Kim Klaiman]

I replied to that already.
tradermahi wrote:
From my first month's experience, 5% return per month on capital, after all expenses seem reasonable. I will take even 1/2 of that on a regular basis anytime. However, the problem is the inability to scale up the operation.
I wrote:
One month (even one year) outstanding return is one thing, but maintaining Sharpe Ratio of above 2 is different matter all together for 5+ years

It is not me taking convenient facts, it is you pretty much you in this entire thread

1) You keep on mentioning that expenses are around 3%, it is pretty much more than 20%+ based on model account you set up for prospective client. Spare the argument of higher balances of your existing customers, when no one can verify. If it is so, set up minimum $50k minimum balance for your service.

A: Commissions are around 2% per month. Members who use Tradier and pay $40/month exclusive rate for our members, have their commissions expenses around 0.4% for 10k portfolio. Subscription fees are not considered part of the performance by most members.


2) As a prospective client, I asked for audited trade records. You seem to ignore basic need to get verified from authority. Your answer is basically we provide other services. Clients are interested in your other services because you posted unverified CAGR of 80%. If you had posted loss of 80% per year, nobody wants to your service.

3) Why are you trying to compare your returns with the market?

A: Not to the market - to fund managers.


4) Kevin schimdt question about whether you are posting profit by front running of your subscribers or Vol ramp, in which case you need 70% win rate to breakeven

A: We always post discussion topic first prior to entering. Vol ramp is relevant to straddles only, as I mentioned (many times), we use many other strategies. We also trade many highly liquid stocks like TLT, SPY, FB, AMZN, RUT etc. You don't seriously suggest I can front run those stocks?


5) Do you have any relationship with the broker?

A: We have an agreement with Tradier to provide our members with $40/month trading. That's the only agreement we have. I is fully disclosed on our website, and since it is flat monthly rate, we don't benefit from larger number of contracts.


6) What is typical slippage of your clients?

A: Depends on the stock. Some stocks it could be 1-2%, some trades could be entered at better prices 1-2 days later. On average, members can achieve very similar results.

There may be few others, I will gather when i have time

 

[tradermaji]

It is really not the trades that I took based on SO recommendations but the real gains are from learning while interacting with other members on the site and understand the basis of those trades. The fact that I made a little something on the side after the commissions and subscription fee is lagniappe.

Yes, it can be frustrating when you miss trades but learning to be patient is also part of learning how to trade. I actually learned something important from one of Kim's posts where some member complained about slippage during entering trades following the alerts... "trading is a business and basically you are negotiating with other market participants about the price of options through the bid/ask system. You have to be patient and if you don't like the price, then you should be ready to walk away." I have paraphrased it even though it is in quotes.

It really changed the way I was approaching the recommendations... It is still hard to wait to get fills at the right prices but it is really a learning process. I have always traded highly liquid ETFs and Mutual Funds, so I have never worried about spreads that much. It is really an eye opener to me and a learning process.

If you want to give SO a try, then instead of arguing with Kim here, just risk the $120. I am sure you have spent many hundreds if not thousands on trading systems, classes, lessons etc. I know I have and many traders that I know have done the same. If you don't like it, then chalk it up to another stupid advisory service that you tried. Truthfully, some systems work for some people and does not work for others. It depends on what your trading objectives and your personality traits are. So you got to try and find out if it fits you. I found SO to be helpful to me even though I am not able to trade all the recommendations.

Another example comes to my mind... options mentoring/classes by Dan Sherman. His website now has lost some luster and a lot of participation. However, a lot of successful traders were mentored by him and they have gone to start their own mentoring services. Some people did not like Sherman's teachings and you can read critical comments/reviews all over the internet about him. However, that does not mean that he did not mentor successful traders.. it really means that his teachings does not suit everyone.

If anyone reading this is in San Diego and wants to talk markets or just talk in general, please let me know. I am always open to exchanging ideas. I attend the local chapter of AAII meetings, so there is the plug... try to attend some of those meetings to meet some local traders and investors. Most people we know in our daily life are buy and holders, so meeting active investors and traders and talking to them is always informative.

 

[srinir]

Another example comes to my mind... options mentoring/classes by Dan Sherman. His website now has lost some luster and a lot of participation. However, a lot of successful traders were mentored by him and they have gone to start their own mentoring services. Some people did not like Sherman's teachings and you can read critical comments/reviews all over the internet about him. However, that does not mean that he did not mentor successful traders.. it really means that his teachings does not suit everyone.

You mean Dan Sheridan?

Thanks for your recommendation.

Thankfully, I learnt finance in proper business school and worked in the industry for some time (not as trader). Atleast i can spot bull shit, when i see one.

 

[TrustyJules]

My question was if you felt that earnings moves are better expressed in SDs multiples of the ambient days or relative to historical earnings moves for that stock. E.g. you see a stock that moves 1% per day normally but is pricing in a 5% earnings move. However, historical earnings moves were 6%. I would say that this event is priced cheap, regardless of how many SDs of ambient vol is priced in.

I am probably obtuse but just to be sure, what do you mean by 'better expressed'? Not trying to be difficult here but I have a feeling we are misunderstanding each other without meaning to (probably my fault). I do understand your example and can concur with the conclusion eventhough I would arrive at it differently.

Here's something I make when I fancy looking at an earnings move:

An analysis of how often a stock - in this case TESLA - has SD moves of a particular type and a list of the SD move on QR day. I also make a chart of that which looks like this (QR events not noted in this case - its just to give an idea):

I would then compare this to the SD move priced into the straddle around earnings for example but it can also be used more generally to detect whether there is a pricing opportunity in a straddle.

 

[srinir]

A: Commissions are around 2% per month. Members who use Tradier and pay $40/month exclusive rate for our members, have their commissions expenses around 0.4% for 10k portfolio. Subscription fees are not considered part of the performance by most members.

Looks like a good deal regarding commission. It is still 4.8%/ year for 10k portfolio. To include subscription fees in performance or not is up to the client. I certainly would.

As a prospective client, I asked for audited trade records. You seem to ignore basic need to get verified from authority. Your answer is basically we provide other services. Clients are interested in your other services because you posted unverified CAGR of 80%. If you had posted loss of 80% per year, nobody wants to your service.

See you skipped when it is convenient for you

Not to the market - to fund managers.

Not sure i follow.
Fund managers benchmark to some index because of their portfolio characteristic is similar to that index. These discretionary trades are difficult to benchmark to any indices.
....
Any way I am done (really this time) with this thread.

Happy trading

 

[Kim Klaiman]

You mean Dan Sheridan?

Thanks for your recommendation.

Thankfully, I learnt finance in proper business school and worked in the industry for some time (not as trader). Atleast i can spot bull shit, when i see one.

Is it bull shit because he misspelled Dan Sheridan name?

The fact that this member joined just a months ago, admits that he had issues entering some of the trades, trades small account and has very limited experience in options trading - but still was able to make a gain after all expenses, speaks volume.

P.S. Graduating from a business school doesn't automatically make you smart.

 

[tradermaji]

You mean Dan Sheridan?

Thanks for your recommendation.

Thankfully, I learnt finance in proper business school and worked in the industry for some time (not as trader). Atleast i can spot bull shit, when i see one.

Yes, Sheridan... not a recommendation but an observation. I did not sign up for his classes so I can't recommend him without trying first myself.

 

[ironchef]

After 17 pages, I still don't know whether I should buy or sell straddle before earning or maybe I should give up and avoid trading around earning all together?

 

[srinir]

Is it bull shit because he misspelled Dan Sheridan name?

The fact that this member joined just a months ago, admits that he had issues entering some of the trades, trades small account and has very limited experience in options trading - but still was able to make a gain after all expenses, speaks volume.

P.S. Graduating from a business school doesn't automatically make you smart.

What? I meant spotting bull shit is your so called unaudited return of 80% CAGR with SR over 2 which involves long vol.

You are right, learning finance in proper manner does not make them bright. Atleast it is easy to spot scammers like you.

 

[tradermaji]

Is it bull shit because he misspelled Dan Sheridan name?

The fact that this member joined just a months ago, admits that he had issues entering some of the trades, trades small account and has very limited experience in options trading - but still was able to make a gain after all expenses, speaks volume.

P.S. Graduating from a business school doesn't automatically make you smart.

Kim,
Sometimes it is not worth trying to logically explain something to a person who has already decided not to believe that explanation... I think I was getting too carried away in this debate, when I just wanted to state my own experience with SO.

I think we all have egos and I am no exception. When I started working in my profession, I was so proud that I had a few degrees in that area. However, I soon realized that there was so much to learn and even after 20+ years, I am still learning everyday. One thing I also learned... my ego is still there and it is difficult to control it... I need to work on it everyday.

At the onset I thought just because I learned how to click buy and sell icons on the screen, read a bunch of books and because I had so many college degrees, I was very smart and will conquer the market in no time. I know how that turned out to be.

I am sure there are charlatans in the trading business but then there are also honest people here... just like any other profession. One just has to go about trying to locate the honest help and that can be done without accusing others or by name calling.