Is selling options before earning Good Strategy?

[TheBigShort]

What do you mean? Are you disputing the fact that for 95% of the stocks, IV increases as we approach earnings?

No, I am asking you, do you understand why IV increases before earnings? If you did, you would not be implementing this strategy. Or at least from the way you approach it... I will ask again... Where is this extra IV coming from? You are yet to explain how your strategy even works that you sell to thousands of people?

Ps. You are not giving away edge by explaining the "IV ramp" (the base on which your strategy is built)

 

[Kim Klaiman]

No, I am asking you, do you understand why IV increases before earnings? If you did, you would not be implementing this strategy. Or at least from the way you approach it... I will ask again... Where is this extra IV coming from? You are yet to explain how your strategy even works that you sell to thousands of people?

Ps. You are not giving away edge by explaining the "IV ramp" (the base on which your strategy is built)

I understand perfectly well why IV increase is happening. People are bidding the options prices higher due to upcoming earnings, in hope that post earnings move will be bigger than the options prices imply.

Why wouldn't I implement the strategy that consistently produces 5-7% return with very low risk and average holding period of 5-10 days? To me, this is almost the holy grail of trading.

And you are right, I'm not giving away the edge. The edge is knowing which stocks are suitable for the strategy, when to buy and at what price. This comes from extensive backtesting, hard work and collaboration of hundreds of traders in our community. You cannot just buy straddles on random stocks at random prices and hope it will work.

 

[TheBigShort]

I understand perfectly well why IV increase is happening. People are bidding the options prices higher due to upcoming earnings, in hope that post earnings move will be bigger than the options prices imply.

This is very wrong.

I want to make it clear I am not ripping on you for selling courses as others on this thread have snarled at. In fact I think teaching is a noble job and it gets people at least interested in the industry or maybe even helps them realize trading is not for them. I am ripping on you because, you are selling a product you don't even wan't to put the time in to understand. Others have mentioned in this thread why the IV ramp is an illusion and here you are still selling the "IV ramp".

Teaching options is a multi-million dollar business it amazes me how many good educator/traders decide to stay in the shadows and let people like tastytrade/steadyoptions/optionsalpha etc... collect all the money.

But anyways back to the point Kim, at least put some effort into learning what you sell before you spread the disease on ET (maybe think about your clients as well). IV increases before earnings because the event vol becomes closer and closer to the event day. When the event vol is 50 days before the event, it is diluted by the daily volatility (50 days), when there is only 1 day left and the expected move is 10% you will see Very high volatility. The "IV" was always there. So your homework for tonight is to learn how to strip the event vol and the ambient vol (the vol leading into earnings) from the options price. And look at that Kim, I didn't even charge you a dime.

 

[Kim Klaiman]

And how exactly this is different from what I said? Of course there is a normal IV and IV associated with earnings. And yes, IV increases as we get closer to earnings. Exactly what I said.

But then again, you probably know better. After all, my 6 years track record is only 86% CAGR.

But thank you for trying to educate me. And don't worry about my clients. They are doing just fine.

 

[TheBigShort]

But then again, you probably know better. After all, my 6 years track record is only 86% CAGR.

LOL 86% CAGR.

Exactly what I said.

Here are some of my favourite qoutes from steadyoptions.

" IV usually increases sharply a few days before earnings, and the increase should compensate for the negative theta".

"The reason is that over time the options tend to overprice the potential move"

"I usually select expiration at least two weeks from the earnings, to reduce the negative theta."

This stuff does not make any sense. IV increases right before earnings yet you like to buy further out to be compensated for negative theta? LOL.

The options are over priced yet you like to buy them? LOL. Even if you are playing the greater fool theory here (buy high sell higher), you are admitting that the event vol is priced in. IF it wasn't priced in you should hold it all the way through earnings.

The funny thing is all these qoutes were from the same article. You do not understand how this trade works. It's okay to be wrong sometimes. Actually a good teacher is not afraid to admit he is wrong. This strategy works SOMETIMES not 86% CAGR with a 80% win rate.

 

[TheBigShort]

And how exactly this is different from what I said? Of course there is a normal IV and IV associated with earnings. And yes, IV increases as we get closer to earnings. Exactly what I said.

But then again, you probably know better. After all, my 6 years track record is only 86% CAGR.

But thank you for trying to educate me. And don't worry about my clients. They are doing just fine.

This is a low maintence strategy so if you would like to start a trading competition with me I would be interested. If you can demonstrate even 25% on your debits I'll buy a whole year worth of steady options

 

[TheBigShort]

And how exactly this is different from what I said? Of course there is a normal IV and IV associated with earnings. And yes, IV increases as we get closer to earnings. Exactly what I said.

But then again, you probably know better. After all, my 6 years track record is only 86% CAGR.

But thank you for trying to educate me. And don't worry about my clients. They are doing just fine.

Actually if you can demonstrate 25% on Debits I bet there would be 50 people on this site who would buy your membership. Theres only upside in doing this

 

[Kevin Schmit]

LOL 86% CAGR.

The one year anniversary of the Steady Options Hedge Fund is coming up Sept. 1st. Something tells me that 1yr returns will come in much less than 86%. It is much harder to fudge CAGR in an audited hedge fund than on an unaudited vendor puff page.

As for your technical argument with Kim, you're not going to win. He will simply outlast you. He will keep on posting and keep on pretending not to understand your points. He will continue to tout his bogus track record. This has happened before and it always ends with the critic giving up and Kim having the last word.

 

[TheBigShort]

The one year anniversary of the Steady Options Hedge Fund is coming up Sept. 1st. Something tells me that 1yr returns will come in much less than 86%. It is much harder to fudge CAGR in an audited hedge fund than on an unaudited vendor puff page.

As for your technical argument with Kim, you're not going to win. He will simply outlast you. He will keep on posting and keep on pretending not to understand your points. He will continue to tout his bogus track record. This has happened before and it always ends with the critic giving up and Kim having the last word.

I'm sure he's cooking the books there as well. It looks like we got the last word in this time. Mention a trading contest and he's no where to be found.

 

[Kim Klaiman]

The one year anniversary of the Steady Options Hedge Fund is coming up Sept. 1st. Something tells me that 1yr returns will come in much less than 86%. It is much harder to fudge CAGR in an audited hedge fund than on an unaudited vendor puff page.

As for your technical argument with Kim, you're not going to win. He will simply outlast you. He will keep on posting and keep on pretending not to understand your points. He will continue to tout his bogus track record. This has happened before and it always ends with the critic giving up and Kim having the last word.

No actually I'm done here. When someone quotes my articles and takes them completely out of context, something tells me he is not interested in facts, only bashing. He won't let the facts to confuse him.

As for the hedge fund, we never claimed that those results can be replicated in multi million dollar accounts. Our model portfolio is $10k and our recommended portfolio size is $10-100k.