Is selling options before earning Good Strategy?

[sle]

As a retail trader, you have a number of advantages, some of which you have listed below.
I have written elsewhere that a retail trader can make pretty good returns on capital if his strategy satisfies the following - (a) capacity constrained and either (b) requires work that’s hard to automate or (c) leverages low liquidity.

It’s not impossible to produce the return metrics that were mentioned in this thread on small capital but it sure is very hard. It is nearly impossible to make them in any market space that’s liquid and well known (unless you are an HFT player leveraging a technology advantage). That’s why I am so skeptical.

Like any implied volatility, earnings vol can be rich (more frequent) or cheap (rare but happens frequently enough). You can play it from the vega perspective (unwind before the event) or from the gamma perspective (hold through the event). The “technology” to screen for these trades is available from most good options houses. As long as you don’t expect miracles you can make a few dollars.

How can a small retail player search the 2000 companies and be able to predict better than the market? I go single directional if I can predict better than the market.

As a small mom and pop retail players we do have the following advantages:

1. We can pick and choose when where and how, no need to worry about quarterly results,

2. No boss or company to restrict what we can trade and at what risk level,

3. We can focus on a few companies and know them really well,

4. Few professional/institutional traders care to trade thinly traded instruments...

So, yes if we avoid your playground we do have a chance.

 

[Kim Klaiman]

There are many patterns that repeat themselves even on the most liquid stocks.

Here is one example: The Volatility Option Trade After Earnings in Facebook

The idea is that FB moves after earnings, but tends to trade sideways after stabilizing for the next 45-60 days. We modified the trade, and backtesting shows 100% winning ratio in the last 3 years using 30 deltas IC:

https://tm1.cmlviz.com/index.php?share_key=AJPAMYURnzNu3SYy

This is just one example how our community of traders generates trading ideas and helps to backtest them. Our current FB trade is currently up 20%+ in just 9 days. Previous one was closed for 30% gain.

TLT iron butterfly is another idea from one of our members. Again, highly liquid and widely traded stock, and yet we were able to milk it 4 times already in 2017.

NFLX, GOOG and AMZN pre-earnings calendars are consistent winners for us, cycle after cycle. The key is to identify patterns that repeat themselves cycle after cycle.

We don’t expect miracles. We expect hard work that pays off big time. No automation, no HFT. This is how you make money in options, and this is why our members consider our subscription fee a bargain.

Some of those ideas are fully scalable, some are applicable for smaller accounts only. This is how we get 80%+ CAGR.

 

[ironchef]

This is how we get 80%+ CAGR.

Turning a $10K account into >$350K in 6 year, Impressive.

But let me carry my question to the extreme: For your personal account, I assume you have more than $10K in it so after 6 years you must be a multimillionaire from trading. Why charge so much for your web service? You don't need the money.

 

[ironchef]

As a retail trader, you have a number of advantages, some of which you have listed below.
I have written elsewhere that a retail trader can make pretty good returns on capital if his strategy satisfies the following - (a) capacity constrained and either (b) requires work that’s hard to automate or (c) leverages low liquidity.

It’s not impossible to produce the return metrics that were mentioned in this thread on small capital but it sure is very hard. It is nearly impossible to make them in any market space that’s liquid and well known (unless you are an HFT player leveraging a technology advantage). That’s why I am so skeptical.

Like any implied volatility, earnings vol can be rich (more frequent) or cheap (rare but happens frequently enough). You can play it from the vega perspective (unwind before the event) or from the gamma perspective (hold through the event). The “technology” to screen for these trades is available from most good options houses. As long as you don’t expect miracles you can make a few dollars.

Trading has been my "day job" for a while now so I actually understand and agree with what you said.

Regards,

 

[Kim Klaiman]

Turning a $10K account into >$350K in 6 year, Impressive.

But let me carry my question to the extreme: For your personal account, I assume you have more than $10K in it so after 6 years you must be a multimillionaire from trading. Why charge so much for your web service? You don't need the money.

As I mentioned several times (including answering your own question few posts ago), 80% CAGR is not scalable to larger accounts. You can turn 10k to 18k, but turning 100k to 180k is much more difficult, and turning 1M to 1.8M is nearly impossible using those strategies.

Big money managers like Soros manage billions of dollars and charge hefty fees. I can assume they don't need the money. Why they continue doing it?

So let me carry my question to the extreme:

Why everyone is trying to count my money and decide for me if I need the money or not?

 

[ironchef]

As I mentioned several times (including answering your own question few posts ago), 80% CAGR is not scalable to larger accounts. You can turn 10k to 18k, but turning 100k to 180k is much more difficult, and turning 1M to 1.8M is nearly impossible using those strategies.

Big money managers like Soros manage billions of dollars and charge hefty fees. I can assume they don't need the money. Why they continue doing it?

So let me carry my question to the extreme:

Why everyone is trying to count my money and decide for me if I need the money or not?

Let's not argue any more. You have been a gentleman and have been extremely helpful to some of us, me included. Whether your method has merit, your subscribers are the best judges.

Best wishes to you and your subscribers.

 

[Kim Klaiman]

Let's not argue any more. You have been a gentleman and have been extremely helpful to some of us, me included. Whether your method has merit, your subscribers are the best judges.

Best wishes to you and your subscribers.

Thank you and good luck to you.

I'm more than happy to answer options trading related questions and maintain a civilized discussion.

We might have different views on some strategies - which is fine, this is why the markets exist. I'm always trying to present my point of view and my rationale, but I will never claim that my method of trading is the holy grail, or the only one that works. There are many ways to make money in the stock market.

 

[srinir]

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 are you comparing yourself to money manager or financial adviser? They have fiduciary duties and provide legit audited returns. If they claim illegitimate returns they go to jail like madoff.

Remember you are a education provider, teaching quality education that you learnt from a chapter of Augen's book "How to trade earnings".

 

[srinir]

anonymous cowards

We are not providing any service. We have right to challenge any veracity of your claims.

Those who hide behind unaudited returns because it will expose them are cowards.

 

[srinir]

It takes 4 years to become an engineer, but people expect to learn how to trade in 4 months.

Please don't compare learning from you is like becoming an engineer. They go to legitimate institutions and learn from teachers who went thru' same rigor and process. Teacher's qualifications are certified from institutions or board.

Those teacher's didn't learn from one chapter in a book called "How to build a rocket engine"