Karen the Supertrader - TastyTrade Hybrid Experiment

conduit · Jun 2, 2016

in the grand scheme of things both expose you to very similar risks, ratio spreads are risk-capped one sided, short strangles/straddles expose you on both sides. It is a horrible way to trade options long-term, in fact I have not seen a single options trader who survived with such approach alone. Most who sell premium are very good at protecting themselves at the wings when it is needed.

optioncoach said:
It is selling short calls and puts on the indexes whereas spreads involve a long and short side and trader might sell more puts than calls but not sure what ratio if any. These are pure naked trades I believe.

RRY16 · Jun 2, 2016

Sweet Bobby and his BBFF Surf are taking the afternoon off to attend the Versace summer fashion show in South Beach.

Macca1 · Jun 2, 2016

i960 said:
No, wrong. The strategy is *not* sound. Ignore this at your peril.

Additionally, I'm very suspect of that backtest:

1. The TOS software is not accurate for backtesting other than EOD type stuff. It doesn't test intraday numbers at all.
2. As a result, I highly doubt it takes into account any adverse intraday IV changes which might have caused her to jump ship on huge losses.
3. On top of that, it's unlikely to even account for bid/ask spreads or other liquidity issues which will be present in high vol situations.

Don't trade these bullshit strategies folks.

Exactly, even Sosnoff will back you up here.

OddTrader · Jun 2, 2016

i960 said:
Where are the "hedge positions" in the log that you posted earlier? Are you accounting for their eventual losses in your P/L? GTC orders are a half-ass form of risk control, particularly when you're trading SPY and SPX - you will get smoked on a gap down like 8/24/2015.

"US EQUITY MARKET STRUCTURE: LESSONS FROM AUGUST 24":

https://www.blackrock.com/corporate...t-us-equity-market-structure-october-2015.pdf

StarDust9182 said:
My rule of thumb is that for every successful trader (that I know) there is about one successful options trader. I know well over 100 failed traders and less than 5 I would deem successful over a couple of market cycles. Options require an enormous amount of knowledge and self control to work. (They are just a tool and not an edge as so many think.)

Many lucky traders think it must be them and wham, then along comes a bear market. In any trading activity, if it is too easy, then something is wrong. As I have mentioned before in the past I had to run an R test to be sure it was me and to relax a bit more.

Sweet Bobby · Jun 2, 2016

I had a whole entire discussion typed out on risk, the analyze tab, making this all safer, etc. before Windows 10 gobbled everything up. I'm too tired to re type my entire post so I'll leave it to another day. I'm working full time and taking three graduate courses this summer. I'm exhausted.

One of my GTC orders kicked in today closing the SPX 8 JUL 16 2225C(2)/1900P(1) for a 50% profit after 9 days.

I sold to open the SPY ratio strangle 15 JUL 16 215C(3)/184P(2) ratio strangle with 43 DTE.

The experiment is up $168 on the day. Theta is 104, delta is -222, and vega is -630.

Now, here's the most important thing that I wanted to get across today. ARE WE SAFE ENOUGH?

Please watch the tasty trade market measure segment from 03/22/16. Here's the link:

https://www.tastytrade.com/tt/shows...lationship-between-spx-and-the-vix-03-22-2016

This study found that over the last ten years, a 12 point drop in the SPX resulted in a 1 point increase in the VIX. Again, I typed a lengthy discussion about this, but I will repost another day. I think this is important in considering the risk that we are putting on. I would love to hear your thoughts.

Happy trading!

Bobby

tradexxx0001 · Jun 2, 2016

DTB2 said:
I think as this unravels we will find there was very little profit at any point in her story. New money paying old monies. The pressure to try and keep it going resulted in her being where she is right now, in a lot of hot water.

Bbbbut she seemed so nice.

Yep, new money paying old money. But there's another supertrader lady in the town as I'm typing:
https://www.sec.gov/litigation/complaints/2016/comp-pr2016-106.pdf

Bbbbbut she seemed to be so profitable..

Sweet Bobby · Jun 2, 2016

I'm thinking out loud here and constructive comments are appreciated. I've been thinking about a possible tweak to the strategy to mitigate some of the risk.

My current theta is 104. My goal is theta of 105 to 150 per day. On a date when my daily profit is in excess of my daily theta, what If I used a portion of that to buy puts?

For example, today my daily profit was $168 which is $64 above my daily theta. What happens if I use all or a portion of the $68 to buy puts? Now I will play with this a little. Which puts should I buy? Which expiration? Should I buy wings to an existing short put? On days that I have a loss, I do nothing?

This may be the dumbest suggestion ever, but I look forward to your thoughts.

Bobby

conduit · Jun 3, 2016

translation: On a nasty Friday (or insert any other day) vol pops >5 points and our annual pnl is eaten up in a single day. Those are my thoughts...

Sweet Bobby said:
I had a whole entire discussion typed out on risk, the analyze tab, making this all safer, etc. before Windows 10 gobbled everything up. I'm too tired to re type my entire post so I'll leave it to another day. I'm working full time and taking three graduate courses this summer. I'm exhausted.

One of my GTC orders kicked in today closing the SPX 8 JUL 16 2225C(2)/1900P(1) for a 50% profit after 9 days.

I sold to open the SPY ratio strangle 15 JUL 16 215C(3)/184P(2) ratio strangle with 43 DTE.

The experiment is up $168 on the day. Theta is 104, delta is -222, and vega is -630.

Now, here's the most important thing that I wanted to get across today. ARE WE SAFE ENOUGH?

Please watch the tasty trade market measure segment from 03/22/16. Here's the link:

https://www.tastytrade.com/tt/shows...lationship-between-spx-and-the-vix-03-22-2016

This study found that over the last ten years, a 12 point drop in the SPX resulted in a 1 point increase in the VIX. Again, I typed a lengthy discussion about this, but I will repost another day. I think this is important in considering the risk that we are putting on. I would love to hear your thoughts.

Happy trading!

Bobby

El OchoCinco · Jun 3, 2016

I think you can find safer ways to make $440 in one week.

isotope · Jun 3, 2016

Sweet Bobby said:
One trade today. I sold to open the 15 JUL 16220C(3)/194P(2) ratio strangle with 44 DTE.

The experiment is up $65.04 today.

Theta is 129, delta is -75, and vega is -714.

With all this stuff about Karen, I kind of feel the same way that I did when I was a kid and I witnessed the death of Darth Vader. What now? What do I do? Sure, Indiana Jones is cool, but he's no Darth Vader.

I guess this is how Dorothy felt when she found out that there was no real Wizard of Oz. If only I had a pair of ruby red slippers.

Happy trading!

Bobby

Today the market opened down. I usually don't sell iron condors. But since I can't get my safer butterflies filled for days, I broke my own rules and put on these two trades this morning as encouragement of your experiment.

SOLD -2 VERTICAL SPX 100 (Weeklys) 10 JUN 16 2115/2120 CALL @1.10
SOLD -5 VERTICAL SPX 100 (Weeklys) 10 JUN 16 2050/2045 PUT @.50

The PUTs are priced at 11.5% vol and the CALLs are priced at 8.1%. If the realized vol within the next 7 days exceeds the vol prices, then I shall be screwed.