If this is what you think about SteadyOptions, I guess you never visited our website.
options training services
- Thread starter Abundance Magnet
- Start date
Being market makers gives you ZERO hedge in options trading. Completely different approach and experience.
To "taste" their so called "studies", take a look at one example:
Buying Premium Prior To Earnings - Does It Work?
For years they have been producing studies trying to prove that buying straddles before earnings doesn't work - and we are proving with live trading that it does. More than 7 years of live track record now.
Yeah, they screwed up in that example
... Not sure how they exactly did their research on that... there are more variables that should be added IMO.
For instance, which maturity did they buy? It should be the closest to earnings, if it's 30 days out... it doesn't really work properly since too far out.
Did they delta hedge to neutral? They should when it starts out ITM.
Usually buying earnings straddles does work, especially when you offset some theta by selling some that expire before earnings...
Yeah, they screwed up in that example
Not sure how they exactly did their research on that... there are more variables that should be added IMO.
For instance, which maturity did they buy? It should be the closest to earnings, if it's 30 days out... it doesn't really work properly since too far out.
Did they delta hedge to neutral? They should when it starts out ITM.
Usually buying earnings straddles does work, especially when you offset some theta by selling some that expire before earnings...
This is not the only one they screwed up.
My main issue with tastytrade and Tom Sosnoff is that they claim that selling premium is the only way to make money with options. And when this is your approach, you will do everything including skewing the studies to reach the conclusion they want to reach.
They did dozens of studies that "proved" that pre earnings straddles don't work.
Yeah, I came across another vid about GS, Google etc...
Here they say you can't make money buying the straddle because, while the IV rises... the straddle loses too much value.
But what a load of crap.... If you would buy that first 205 straddle and roll it each day when you move away from it... you would make something like 20-30%. And here they are claiming you would have lost money, buying for 7 and selling for 4.
Disappointing of TastyTrade. Thanks for pointing that out @Kim Klaiman ...
Or you could just leave it - on July 15 it would show 20%+ gain. So this "study" completely ignores gamma gains, which are important part of the strategy.Yeah, I came across another vid about GS, Google etc...
Here they say you can't make money buying the straddle because, while the IV rises... the straddle loses too much value.
But what a load of crap.... If you would buy that first 205 straddle and roll it each day when you move away from it... you would make something like 20-30%. And here they are claiming you would have lost money, buying for 7 and selling for 4.
Disappointing of TastyTrade. Thanks for pointing that out @Kim Klaiman ...
Not to mention the fact that GS is one of the worst stocks to use for this strategy. Plus you cannot just blindly buy any straddle at any price. You need to compare prices to previous cycles and buy only when the price is right.
As I said, they will do everything to skew their studies to fit their thesis that only selling premium works.
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I have read a lot about why selling options for premiums is the best way to trade options. Tried that and lost thousands attempting to make some monies that way. The miniscule returns from the premiums on option spreads does not mitigate the huge tsunami that hits you when trades move against you! And when that tsunami hits, you lose thousands for the few hundreds you take in premiums! Now, that I know better, I would rather take directional option trades where my maximum risk is limited to the cost of the premium. That is the worst case scenario. The upside is unlimited! They also, say that most options expire worthless, like 80-90% of them. I think that is bogus as most options traders will cut their losses and save the residual premiums if the trade does not work out! So, you put out a call option trade costing $450.00 dollars, XYZ drops and now, the option is worth only $300.00. Why would anyone not take back that $300.00? So, you lost $150.00 which is a 33% loss. No way in hell you lose the entire $450.00, so how did it expire worthless? Nonsense!
If I remember correctly, that paper was based on CME futures data, where 70-80% statistic sounds more or less reasonable. Given a much shallower strike space in single names that statistic (meaningless, IMHO) would look a bit "better" there.
Truly, though, it's irrelevant. If you are trading options as a proxy for volatility, you live in a delta-neutral world and usually disregard the terminal distribution. If you expressing your stock views in options, you care about the cost of leverage and breakeven.
Would you care to make an argument if as a product class, options are overpriced or underpriced?
As mentioned in the article:
According to The Chicago Board Options Exchange (CBOE) here are the facts:
- Approximately 10% of options are exercised (The trader takes advantage of their right to buy or sell the stock).
- Around 55%-60% of option positions are closed prior to expiration.
- Approximately 30%-35% of options expire worthless.
What is relevant is the fact that on average, IV is higher than HV, which makes options slightly overpriced over the long term. Which means that selling options does have a slight edge if used correctly.