Is selling options before earning Good Strategy?

[tradermaji]

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?

I believe you can do either one or a combination of both... you just have to learn how to spot the opportunities when they present themselves.

If you sign up for a free membership at Optionslam and that will give you a chance to check out some of their previous webinars. They have a recent one on selling premium before earnings. You will need to send the site master a request to view it, but that should be a good starting point.

By the way, I don't get paid by them either, but I have watched that webinar and thought that it may help you understand what is needed if you want to sell premium before earnings.

Good luck.

 

[Kim Klaiman]

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.

This is an excellent summary of what I was trying to say.

It is hard to stay silent when your good name is being slammed by anonymous cowards, but you are right, some people just won't let the facts to confuse them.

No service is for everyone - and SO is no exception. Some people join expecting to make triple digit returns with no effort. Others like you realize that any new venture requires a learning curve. It takes 4 years to become an engineer, but people expect to learn how to trade in 4 months.

 

[Kim Klaiman]

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?

My take:

1. Buying straddle and holding through earnings - bad idea. You might get some occasional big winners, but long term probabilities are against you.
2. Selling straddle and holding through earnings - long term probabilities are favorite, but very risky and unpredictable. Few big losers will erase months of gains.
3. Buying straddle and selling it before earnings - this is what we do at SteadyOptions. Low risk, steady gains of 5-7% on average, but selecting the stocks and the timing is crucial.

 

[i960]

Kim: why run a "trade service" if you have an edge? It cannot be about liquidity in individual products or individual account size because your entire member base nullifies that when they pile into the same trades. Why would it be beneficial to sell the edge when you could simply preserve it and take the trades on your own?

This is the gist of what a lot of people are getting at.

 

[Kim Klaiman]

Kim: why run a "trade service" if you have an edge? It cannot be about liquidity in individual products or individual account size because your entire member base nullifies that when they pile into the same trades. Why would it be beneficial to sell the edge when you could simply preserve it and take the trades on your own?

This is the gist of what a lot of people are getting at.

Asked and answered few times in previous posts.

What I'm curious about is why "people" don't ask the same question their money manager or financial adviser? Why do you even care why I'm doing it and how much money I make? Your only concern should be how much money YOU make, from trading service or your money manager.

 

[sle]

Appreciate

Oh, not THAT again

Why is the absolute returns small? Is it your system or the nature of trading vol?

In general, volatility strategies have a tendency of being more capital intensive. That’s especially true if you delta-hedge. Once you start doing something that has relative value components, returns on capital shrink a lot.
There is also a matter of access - there are many opportunities that I’d have difficulty accessing as a private trader. Ultimate example is OTC derivatives - you cannot get involved in that game unless you’re sitting on a 200mm+ book

 

[ironchef]

What I'm curious about is why "people" don't ask the same question their money manager or financial adviser?

I did, years ago after finding out that my actively managed mutual funds lagged indices and my buy and hold equities, especially after paying financial advisor fees on top. I stopped investing in active funds or indices and since learned to invest/trade on my own.

If I were a small mom and pop retail trader and invest $10K, your sub fee of >$1K-$2K is outrageous as a percentage of invested funds vs a ~1.5% for active funds. My returns will have to be better than all of the wizards in Jack Schwager's books to overcome the huddle. And if your methods are that good, it begs the question why you need subscribers? Even a small mom and pop retail trader like me do not need a subscription service to make a good living trading.

With so many scams around, I applaud those who challenged your claims, but if you are the real deal, time will prove you right.

sle earned my respect for being forthcoming and said he needed OPM to make his returns/payoff worthwhile, no claims of 80% returns on capital.

 

[ironchef]

I believe you can do either one or a combination of both... you just have to learn how to spot the opportunities when they present themselves.

If you sign up for a free membership at Optionslam and that will give you a chance to check out some of their previous webinars. They have a recent one on selling premium before earnings. You will need to send the site master a request to view it, but that should be a good starting point.

By the way, I don't get paid by them either, but I have watched that webinar and thought that it may help you understand what is needed if you want to sell premium before earnings.

Good luck.

Appreciate your response. I will take a look and go from there.

I hope, for you, all the subscribers and Kim that he is for real.

Trading option is a tough business. I know too well.

Good luck to you too.

 

[ironchef]

In general, volatility strategies have a tendency of being more capital intensive. That’s especially true if you delta-hedge. Once you start doing something that has relative value components, returns on capital shrink a lot.
There is also a matter of access - there are many opportunities that I’d have difficulty accessing as a private trader. Ultimate example is OTC derivatives - you cannot get involved in that game unless you’re sitting on a 200mm+ book

Sounds like an exciting and fun business. Perhaps in my next life I will be a finance major and fund manager.

Oh, not THAT again

OK no thank you this time.

 

[Kim Klaiman]

I did, years ago after finding out that my actively managed mutual funds lagged indices and my buy and hold equities, especially after paying financial advisor fees on top. I stopped investing in active funds or indices and since learned to invest/trade on my own.

If I were a small mom and pop retail trader and invest $10K, your sub fee of >$1K-$2K is outrageous as a percentage of invested funds vs a ~1.5% for active funds. My returns will have to be better than all of the wizards in Jack Schwager's books to overcome the huddle. And if your methods are that good, it begs the question why you need subscribers? Even a small mom and pop retail trader like me do not need a subscription service to make a good living trading.

With so many scams around, I applaud those who challenged your claims, but if you are the real deal, time will prove you right.

sle earned my respect for being forthcoming and said he needed OPM to make his returns/payoff worthwhile, no claims of 80% returns on capital.

To sle, I won't say thank you this time.

I always like to be challenged, and I encourage my members to do due diligence.

But as Maji mentioned, sometimes it is not worth trying to logically explain something to a person who has already decided not to believe that explanation...

I believe I provided all required information and answered all questions, more than once. I provided examples of our strategies, with screenshots. If after all this you still believe I'm a scammer - not much I can do about it.

We earned a solid reputation in the last 5 years as the most honest and transparent trading service, with hundreds happy clients. But of course I cannot satisfy everyone.

As for the motivation to run a service - as @sle mentioned: "there is a matter of absolute returns. To match my take-home at a fund, I’d have to be either making unrealistically high returns on my capital or have much more capital."

This is why fund managers and service providers do it. But then again, our members are usually not really concerned about it. They prefer to concentrate on how to become better traders, and learn from our team of contributors and mentors. As Maji mentioned, our forum is a real goldmine of information and filled with very helpful members.

btw, starting a subscription service wasn't even my idea originally. It all started by accident when some of my Seeking Alpha readers started to request that I do mentoring. Read my story for full details.