Quote from Multioption:
So, are you insinuating that my trading success is rooted in luck; right? I've been trading for living since 1996, first Futures, later Options. And fyi: I don't usually sell options, I buy instead!
if this trade is any indication of your approach, then, yes, your success is most likely attributable to luck. buying or selling is irrelevant to reckless trading.
But what if my picks hardly lose money? What if my options play have 90% success rate? Would you maintain that traders would go broke following my advice?
even if you were successful 90% of the time (a highly dubious claim - which would put you at about 10 standard deviations above the average success rate of traders), your stated method is still remotely likely to bust out at sometime.
how? risk of ruin. you risked $2000 (based on your 40 contracts and an initial stop loss of $0.50 - that of course you did not follow, which means your record would be even more suspect). you start with $10K as a base, that means you likely risk 1/5th of your bankroll on each trade.
in terms of risk of ruin that means you would bust out if you had 5 consecutive losers. a 90% win rate means you have a 10% loss rate. 10% ^ 5 (the calculation for determining the likelihood of 5 losses in a row) is .00001. that means you are statistically likely to bust out once in 100,000 trades. it's a rare possibility given these parameters but all anyone has to do is change the values in the equation slightly to see how risky this kind of trading is. for instance by not following your stop loss, it suggests to me that your method is undisciplined so your likely average loss is probably greater than 1/5th your bankroll. also the suggestion of 90% success is ludicrous. so i'll be generous and guess that you risk 1/3rd your bankroll and you are successful 70% of the time. with these parameters, the calc drops to a likely bust once in every 64 trades.
If I may ask, how long have you been trading; and what's your success rate? How much have you made since you started? I have some screenshots that could blow away any trader's mind!
i've been trading since '85. i was a market maker on the CBOE for 4 years and now trade professionally for my own account. until i traded as a pro, i lost money for ten years. since then i average about 23% annual return (with a couple losing years tossed in the mix as well). i could show some awe-inspiring screenshots but what would be the point? it doesn't change the fundamental recklessness of your methods.
i have no beef with you or any successful trader. whatever works, works. but in fact if someone wants to gamble, your method is the preferred one. basically take all your capital, toss it on a few 100 to 1 shot bets and if you win pyramid a few more times. if you are lucky enough to be ahead of the game after a couple iterations, retire and enjoy your good fortune. if you want to have long term trading success with options, there are many more sensible methods to pursue.
