Schadenfreude Warning: "Karen the Supertrader"

[Chubbly]

Does the so called yahoo boys group has a verified track record ?

I don't know about them but I have done my own backtesting various points on the curve using spreads and got similar results. I also did live trade this period

Although once I add in a safe amount of real hedging the return does drop off.

 

[ScalperJoe]

Perhaps the early family and friends investors were designed to reel in Mr. Big?

Thanks to F_488's review of the videos, that appears to be the case.

The SEC complaint doesn't specify the exact date when "Mr. Big" joined, other than suggesting that he was the largest and primary investor of the HDB Fund, and remained its single investor since approximately 2013.

 

[ironchef]

The thing people always fail to realize is the bell curve that option prices are modelled on is not a perfect reflection of the distribution of prices. I can tell you the tails are much fatter than the model/prices predict.

May I digress and ask you this: I thought to first order volatility skew (higher IV for OTM and ITM) is how people/MMs take care of tail risks? You are saying they are still insufficient?

Thanks.

 

[CBC]

I feel sorri for ol Karen,

If she had of pulled her chips of the table when she was up in profit she would probably be sipping mojitos in the caribbean as we speak.

Probably her biggest regret.

 

[Springs Trader]

I've read this site for 5 years and constantly get the dire warnings about selling naked otm options- that eventually you will surely suffer catastrophic loss. Does this mean you will ultimately secure spectacular gains with a constant strategy of buying out of the money options?

 

[Chubbly]

May I digress and ask you this: I thought to first order volatility skew (higher IV for OTM and ITM) is how people/MMs take care of tail risks? You are saying they are still insufficient?

Thanks.

MM's hedge risk completely different than retail traders because they have to and because they can. Remember what the role of a MM is, it is to make markets. They are obligated to by the rules of the trading floor to do so and are compensated for their role.
MM's make sure they are flat at the end of each day. That is why SPX closes for retail but stays open for another 30 min for MM's

MM's don't just take the other side of positions and just sit on them. They are constantly managing their book to keep it flat. It is a bit in depth for this topic but you can google on how exactly they do it, but I think you would need a more in depth understanding of options tbh.

The tail risk in the SPX is actually lower than a lot of other stocks or products. In some futures markets a 10% move is a daily occurrence. NatGas is called the 'widowmaker' for a good reason. Many good men have been carried off the trading floor on their shield trying to tame this beast.
Look at the VIX it moves 10% in a day quite often. Look at UVXY it moved 400% after the Aug 2016 dip and VXX moved 200%. Imagine being the MM on that product..... they trade approx 40 million and 60 million shares/day respectively so there are a lot of MM's working these products. SVXY and XIV also made similarly massive moves.

It always make me laugh when people complain they can't trade in this low volatility environment, they just aren't looking at the right products. Pros trade volatility products because they are volatile. Stay away from these products until you have expert knowledge on how exactly they work or you will have your face ripped off.

 

[Chubbly]

I feel sorri for ol Karen,

If she had of pulled her chips of the table when she was up in profit she would probably be sipping mojitos in the caribbean as we speak.

Probably her biggest regret.

Agreed but you have to remember that her interviews were around 2013-2014 everything she was saying could have been bullsh*t.

Tom sold ToS to TD in 2009, after that he lost access to view all the trading accounts. So the last time Sosnoff actually viewed her account was 2009 so he has no idea if she was telling the truth in 2013-14

For all we know she was a con artist the entire time and was never legit. All the TT interviews may have been part of the scam to pull in more big fish. We have no idea what she was doing, all we know for sure is what the SEC has accused her of.
Madoff was always described as being a really nice guy and hung with celebs

 

[Xenomorph]

I recommend anyone interested in this story go to Amazon and buy all seasons of 'American Greed'. You will see example after example after example of this kind of fraud. Many are outright scams from the beginning. Others begin with people who have no real trading skill, who were stunned by losses, stopped trading completely, and began fabricating returns. My guess is that Karen the 'supertrader' began taking losses fairly early on in the life cycle of her fraud, managed to sidestep accountability by juggling the paperwork, took even larger losses, then actually stopped trading completely. Her story is not uncommon. It is very common.

 

[Jreality]

Stop relying on that bullshit backtest talked about earlier. It's bunk. If you sell gamma far OTM you will get fucked eventually, otherwise everyone and their dog would be doing this.

In other news:

https://www.tastytrade.com/tt/shows.../episodes/talkin-with-tom-and-tony-06-06-2016 <--- jump to 18 minutes in (still sellin' that dream!)

Yeah, he really acts like everyone else is an idiot, and that he and Karen were helping to enrich the general public by getting them involved in options trading. He believes that Karen's videos caused 1 billion dollars of the general public's money to get get involved in options trading...and he believes this is a good thing....never mind if that 1 billion (or whatever) totally evaporates over time, and the general public eventually wish they never heard of options in the first place! Why do I get the feeling that those people would be better off dollar cost averaging into an index fund....or even just stuffing their cash inside a mattress!

 

[Texas Johnny]

Stop relying on that bullshit backtest talked about earlier. It's bunk. If you sell gamma far OTM you will get fucked eventually, otherwise everyone and their dog would be doing this.

In other news:

https://www.tastytrade.com/tt/shows.../episodes/talkin-with-tom-and-tony-06-06-2016 <--- jump to 18 minutes in (still sellin' that dream!)

Regarding your argument against selling options, I live off selling naked options especially strangles and straddles mechanically using the TT way on indexes. The results are based off of live money...not back testing data. I've been doing so since 2014. I have PM. What's the secret? I just keep my trading size intact. Don't get too big. That's key. Where did I learn all this? Simple...Tastytrade.

Disagree if you want, but they have some good trading nuggets especially in the market measure segments. Yeah, they have blown up some accounts (ie. Case and Katie's), but ironically that was due to size. You can't go big on highly leveraged future positions.

Size...such a reoccurring theme here. Karen fell into that trap.