Karen the Supertrader - TastyTrade Hybrid Experiment

[Sweet Bobby]

Four trades today - one opening trade and 3 GTC orders kicked in closing the positions at 50% profit. On a day when my Net Liq is down a little, it's kind of cool to know that positions are still closing for profits.

Here's a look at the Greeks:

Everybody have a great weekend!

Bobby

 

[galvinlee888]

It's a little early to put this strategy in the grave. I am tweaking as I go and I want to give the experiment at least a year to develop.

I'm sure many hedge fund managers would like to have my performance over the last 3 months.

If this doesn't work, I will be the first to let you know.

Bobby

I don't think one year is enough for you to find out the flaw of this strategy.

I know a guy that have a similar strategy as you - targeting approximate 0.25 to 0.5 % gain daily with the max drawdown down of 15% <in his so called one single black swan event) , and he believes he will survive black swan event with a "recovery time" of 2 to 3 months as he will make back his loss after 30 to 60 days from the 0.25 to 0.5 % daily return.

Well... This guy blow up his account after 2 years of "experiment“, together with some naive investors that follow him. I will let you figure this out in the real world.

All the best, good luck.

 

[JesseJamesFinn1]

I don't think one year is enough for you to find out the flaw of this strategy.

I know a guy that have a similar strategy as you - targeting approximate 0.25 to 0.5 % gain daily with the max drawdown down of 15% <in his so called one single black swan event) , and he believes he will survive black swan event with a "recovery time" of 2 to 3 months as he will make back his loss after 30 to 60 days from the 0.25 to 0.5 % daily return.

Well... This guy blow up his account after 2 years of "experiment“, together with some naive investors that follow him. I will let you figure this out in the real world.

All the best, good luck.

In Buzzy's book "The Pit Bull" he spoke about all Option Traders that would be up six and seven figures YTD only to have a Black Swan event wipe out their entire gain plus a chunk of their Grubstake. After decades of playing this game does anything surprise us after seeing the last bastion of hope turn out to be a fraud? I thought Karen was the person who was different, she would prove everyone else wrong.

 

[F_488]

I don't think one year is enough for you to find out the flaw of this strategy.

I know a guy that have a similar strategy as you - targeting approximate 0.25 to 0.5 % gain daily with the max drawdown down of 15% <in his so called one single black swan event) , and he believes he will survive black swan event with a "recovery time" of 2 to 3 months as he will make back his loss after 30 to 60 days from the 0.25 to 0.5 % daily return.

Well... This guy blow up his account after 2 years of "experiment“, together with some naive investors that follow him. I will let you figure this out in the real world.

All the best, good luck.

Do you know when his Account blew up and what he was Trading, I am interested to see what took him out of the game after 2 years of Trading.

 

[Butterball]

Well... This guy blow up his account after 2 years of "experiment“, together with some naive investors that follow him. I will let you figure this out in the real world.

Short volatility strategies are designed to get destroyed regularly. Doesn't mean they're useless in a balanced portfolio. What some of you guys are doing in this thread is arguing that one strategy is better than the other by design. That's foolish. There are many types of market inefficiencies and selling volatility is exploiting one of them. Are oranges better than apples?

If you go back in history, many of the "carry" type strategies are highly correlated, i.e. it's the same source of beta: FX carry, junk bonds, short vola/put selling and merger arb. They're all quite interchangeable from a risk/reward profile point of view: small gains with the occasional Acapulco cliffdive. I like 20% of these in my account which is primarily long vola (breakouts, trendfollowing).

 

[galvinlee888]

Short volatility strategies are designed to get destroyed regularly. Doesn't mean they're useless in a balanced portfolio. What some of you guys are doing in this thread is arguing that one strategy is better than the other by design. That's foolish. There are many types of market inefficiencies and selling volatility is exploiting one of them. Are oranges better than apples?

If you go back in history, many of the "carry" type strategies are highly correlated, i.e. it's the same source of beta: FX carry, junk bonds, short vola/put selling and merger arb. They're all quite interchangeable from a risk/reward profile point of view: small gains with the occasional Acapulco cliffdive. I like 20% of these in my account which is primarily long vola (breakouts, trendfollowing).

Never disagree. Options selling is only ONE of many trading tools and NOT an edge by itself. You need to use the tools in different situations (long/short options, directional bet on future, buy or short stock, bond and etc) to explore the inefficiency or extreme of the market ( high/low vol, extreme low or high price such as oil price a few months ago, stupidity, and etc). This is the real edge but can only gain from experience, bad news but is a reality to new traders. New traders always thought they can fly immediately after they get their hand on a trading system (such as short vol system as discussed in this thread, chat room, buy a new system from guru andc etc), this is why most of them failed eventually, those who stay for more than 10 years (or shorter time if you are smart or have a "real' mentor) will survive and profitable in long term.

What really stuck me is so many not too smart people thought they can make " consistent" income by doing the same setup day after day. What they don't realize is they are playing with low reward high risk setup, with the high frequency of winning trade that give you false sense of edge, until one day when the "low frequency" loss trade appears...

 

[Butterball]

What really stuck me is so many not too smart people thought they can make " consistent" income by doing the same setup day after day.

Galvin no dispute here, fully agree. There is no "consistent income" in any sort of options trading. When people ask for consistent income I tell them to buy treasury bonds. But that's not what they want to hear. They want to make "income" of 2% per month, every month. That's how Bernie Madoff was able to ramp up $15 billion in AUM.

 

[Sweet Bobby]

The experiment is suffering on the call side. I should have closed several of my calls some time ago. I am accustomed to placing GTC orders, but I can't do stop limit orders on ES options. I wasn't paying attention to how large the price has increased on the calls. If I'm going to sell ES options I've got to do a better job of watching them and closing them if they reach 2 X loss. Live and learn. For now, I'm going to leave them on and try to start getting out of them on down days. This has been a great learning experience.

Bobby

 

[F_488]

Bobby I think if you try and design and adapt this strategy in real time its going to take a long time and there's no guarantee its going to be worth trading at the end of it. Don't you think if you completed some tests with historical data you could reduce the time its going to take.

 

[Maverick74]

The experiment is suffering on the call side. I should have closed several of my calls some time ago. I am accustomed to placing GTC orders, but I can't do stop limit orders on ES options. I wasn't paying attention to how large the price has increased on the calls. If I'm going to sell ES options I've got to do a better job of watching them and closing them if they reach 2 X loss. Live and learn. For now, I'm going to leave them on and try to start getting out of them on down days. This has been a great learning experience.

Bobby

Are you not going to update your p&l while you're in drawdown? To be fair, regardless of what the reasons are, this is really where people will learn the most about what you are doing so you really should update the results and not just say you didn't follow the rules.