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RETAIL OPTION TRADER Makes $105MM PROFIT in the NDX, SPX & RUT
- Thread starter faust
- Start date
It was posted here on ET in June, 2012.Quote from Pekelo:
Of course this is total bullshit. I don't think I would have missed a video like this (right now there are 2 threads discussing it
Here is a link to the original post on 6/2/2012:
http://www.elitetrader.com/vb/showthread.php?s=&postid=3542192&highlight=sosnoff#post3542192
It was also discussed in serveral other threads at the time. I bookmarked the YouTube link on 6/29, so I think I heard about it on one of those other threads.
Either the post with her name in it was deleted, or I got the name via pm. I don't remember.
I do remember being surprised at how far Tom Sosnoff had fallen.
I agree with Surf on this one, any time you see God invoked in a fund's marketing material, run away as fast as you can.
Maybe I am missing something, but why wouldn't she just do this strategy with weeklies instead of trading every 56 days? Seems like much less risk of a whipsaw/crash. Plus, you can collect premiums once a week (instead of every 56 days) and reinvest those, effectively compounding your balance much more often. Of course the premiums are larger 56 days out, but would the net difference be that much when she would be able to collect on the smaller premiums 8 times more often?
Again, maybe I have missed some really obvious detail, but just wondering.
Again, maybe I have missed some really obvious detail, but just wondering.
She is taking advantage of the fact that portfolio margin does not properly measure risk for large numbers of short options that are far out of the money. With short dated options like weeklies you would have to sell options relatively close to the money to get any premium. She sells a ton (which is crazy by the way) of far out of the money options. The whole basis of selling options far enough out of the money to not affect your haircut too much doesn't work with short dated options.Quote from scotta65:
Maybe I am missing something, but why wouldn't she just do this strategy with weeklies instead of trading every 56 days? Seems like much less risk of a whipsaw/crash. Plus, you can collect premiums once a week (instead of every 56 days) and reinvest those, effectively compounding your balance much more often. Of course the premiums are larger 56 days out, but would the net difference be that much when she would be able to collect on the smaller premiums 8 times more often?
Again, maybe I have missed some really obvious detail, but just wondering.
As I understand it though, thinkorswim/TDA has now started running risk out to a 20% move, and you have to cover at least half that, so I don't know how much that will affect her ability to do what she has been doing.
Quote from opt789:
She is taking advantage of the fact that portfolio margin does not properly measure risk for large numbers of short options that are far out of the money. With short dated options like weeklies you would have to sell options relatively close to the money to get any premium. She sells a ton (which is crazy by the way) of far out of the money options. The whole basis of selling options far enough out of the money to not affect your haircut too much doesn't work with short dated options.
As I understand it though, thinkorswim/TDA has now started running risk out to a 20% move, and you have to cover at least half that, so I don't know how much that will affect her ability to do what she has been doing.
I see what you're saying, but I still think there is quite a bit of money to be made if she sold weeklies. On TOS right now the SPX weekly puts that are around 5% chance of ITM are going for .70 right now.
Of course she probably sells way more usually, but for simplicity's sake lets say she sold 100 of those weeklies every week for a year.
($70*100)*52 = 364,000
Now I am looking at SPX puts 51 days from now (close enough to 56) that are 5% chance in ITM and they are going for 2.30 right now. If she trades every 56 days, that means she will be trading 6 or 7 times a year.
($230*100)*7 = 161,000
This doesn't even account for the amount of reinvesting she could do if she did weeklies....
If you don't get how being a couple hundred points farther away affects your portfolio margin haircut, as well as your overall daily trading, then I am not really sure what else to say.Quote from scotta65:
I see what you're saying, but I still think there is quite a bit of money to be made if she sold weeklies.
More on the wonders of this "fund"... from a May 2012 interview with one of the three employees of the firm.
http://www.vanderbilt.edu/magazines/vanderbilt-business/2012/05/second-act/
I'm actually wondering if perhaps $105mm in profit isn't the "net" number, but instead the gross one. Like, she's sold $105mm in premium... just ignore the $104.95mm in losses also out there.
http://www.vanderbilt.edu/magazines/vanderbilt-business/2012/05/second-act/
Well... that's wonderful. They managed to pay their "startup costs" earlier this year. Most funds with $105mm in profit don't usually consider that very challenging, but.. go figure.Our company, Hope Investments LLC, based in Brentwood, Tenn., trades options and futures on the broad-based stock indices. We have been profitable since the first month and have now paid off our startup costs.
I'm actually wondering if perhaps $105mm in profit isn't the "net" number, but instead the gross one. Like, she's sold $105mm in premium... just ignore the $104.95mm in losses also out there.
Quote from atticus:
Yeah, I didn't check PM haircut. TOS did not offer PM on $100k accounts at the time in question
I'm relatively new to Options. I don't see the term "PM haircut" mentioned in any of my lierature or books. Nor does a Google search find that term (in the context of options trading) either. For my education could you explain PM haircut. Thanks