Karen the Supertrader - TastyTrade Hybrid Experiment

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Flynrider said:
In the case of selling strangles (as the study), Isn't the "premium" (I.e. Sum of options extrinsic + intrinsic value) all "theta" (I.e. Extrinsic value decay)? Stated another way, since the OTM option premium sold is all extrinsic and theta is extrinsic decay, I don't understand the distinction you're making.

Also, your formula shows 18% annual return on capital (I.e. Return on account value), which I think is calculated correctly but don't understand what is has to do with "premium" vs. "theta" ?
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However, I don't believe Bobby's numbers takes into account buying back positions and the $49k is just the gross premium sold. I could be wrong on that though.

On the second point, ignore the return on account for a moment. The study is just saying that the strategy can expect to retain 25% of the daily theta.
 
atrp2biz said:
However, I don't believe Bobby's numbers takes into account buying back positions and the $49k is just the gross premium sold. I could be wrong on that though.

On the second point, ignore the return on account for a moment. The study is just saying that the strategy can expect to retain 25% of the daily theta.
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There should be some way to figure this out, but right now I've got a baby in each arm.

As I recall, I have the formula calculated in my notes regarding the amount of premium I must sell to generate (on average) a particular move. I will try to find it tomorrow in my trading lab.
 
Flynrider said:
I'm curious what change you're referring to? Is it the use of system P&L "expectation" vs. avg. trade P&L (which I'm guessing can still be a long term negative net expectation???). Something I've been pondering...
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That and it's the moving goal posts of many studies.

Imo the early slide gives the most information. It's been morphed into average winning $, then average win $ per day, now median P&L which tells nothing about net expectations. The largest loss is good info but where do the lesser losses cluster?

IMO, it's always just enough to titillate, not trade.
 
The experiment performed well this week. Net liq was up $4,032.75 for the week and is up $29,859.26 since April 5, 2016 (19.90%).

Theta is 310, delta is -666, and vega is -2205.

Have a great weekend!

Bobby
 
So since this is the weekend, I am reading Karen's lawyer's Motion to Dismiss the case. Not through yet just randomly picking pages, but he is full of shit.

On page 30 it says "she didn't act with scienter or negligence because the funds had discretions to adjust the trading activities to respond to changing market conditions."

Well, guess what? There was no changing market conditions, but there was a huge change of incentives (they disappeared) with the losses, so she had to create them and that is exactly what happened with the "scheme trades".

I still have to read the rest, it looks like they are using the "we fully disclosed everything" defense, and that is actually true. The fine that Karen had to pay earlier might prove to be an excellent investment, because after the fine they did include everything in the disclosure, so investors can't accuse her of blinding them. The actual blinding happened with the scheme trades, those had no other purpose than creating fees for Karen.

Anyone who has no life or retired and wants to read legal papers:

https://www.yumpu.com/en/document/view/55949892/mtd-briefinsupport-09012016

Here is the SEC's Opposition to Dismiss:

https://www.yumpu.com/en/document/view/56010098/mtd-opposition-10032016

So if it goes to trial, the fight is going to be around the scheme trades: Did they have a chance to create profits for the investors (a big no) or were they just for incentives' sake (of course)?

Oh, I wanna be a fly on the wall in the deliberation room when one juror asks:

"So what are these futures thingies again? :)
 
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I don't know about OP but I've been back to selling monthly unleveraged 2% strangles on SPX for the US equities part of the portfolio for a few months and this month is perfect so far, some volatility (already there at the time of selling options the last monthly expiration day) but the SPX hardly going anywhere. I don't vouch for the next 10 days but this monthly cycle is so far so good for atm sellers on US indexes (getting hammered on long equities positions in other markets though).
 
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