I don't know how far back your trading goes but when I got into this business we use to get 2 to 3 10% to 15% corrections a year and they never even got media coverage. Today a 10% correction gets sunday night CNBC specials called Black Monday. They really have conditioned you to think that 10% pullbacks are like a sign of the coming apocalypse. But 10% corrections are normal and usually don't even show up on long term charts as even a blip. It's the fact that the market has been so dead that by "relative comparison" 10% corrections feels like the end of the world.
Schadenfreude Warning: "Karen the Supertrader"
- Thread starter Niten Doraku
- Start date
I don't know how far back your trading goes but when I got into this business we use to get 2 to 3 10% to 15% corrections a year and they never even got media coverage. Today a 10% correction gets sunday night CNBC specials called Black Monday. They really have conditioned you to think that 10% pullbacks are like a sign of the coming apocalypse. But 10% corrections are normal and usually don't even show up on long term charts as even a blip. It's the fact that the market has been so dead that by "relative comparison" 10% corrections feels like the end of the world.
I'm in agreement with you...I started in 1997 and remember my first "taste" of it was in Oct 97 on a day when the Dow dropped 600+ points...Of course the summer of 98 saw LTCM and that was pretty significant as well...2000-02, 2007-08, etc, etc...So I understand where you are coming from and I view last August 24th as the suppression of normal corrections all coming home to roost in a 3 day span...VIX jumped like no tomorrow simply because Yellen went semi-hawkish a few days earlier...These markets are a powder keg.
Well, there are things we have to separate here and they are very important. The "short vol" trade is very crowded. Any kind of small correction can see a very over exaggerated move in vol because the short 5 delta crowd will panic and lift offers like no tomorrow which is one of the reason this trade is so utterly god forbidden stupid by any reasonable measure. But the index itself has been relatively calm. Even on the August correction we had like one bad day and a few little bad days. If you took a 3 day vacation with the family and never turned on CNBC then you completely missed it. The short vol trade in options is very different though because the sheer size of that trade in the aggregate will get margin called very fast. So hypothetically we could get a 5% correction that could see the VIX spike 50% where in 2008 a 5% drop might spike the VIX 10%.
I think the real lesson is, don't trade options period. Even if you are not leveraged the odds that you will blow out your account to absolute zero eventually are 100%. Options were never designed to be traded for profit. They were designed as a hedge against price swings in farming. You have to be right about too many things to trade options for profit. It's not possible to do indefinitely and it will catch up with you eventually. Take trading stocks for example. When trading stocks you need to guess direction. That is incredibly, incredibly difficult with any consistency. But when trading options not only do you need to guess direction, you also need to guess direction within a certain time frame. Ridiculously impossible. Oh yes, many, many options 'traders' will tell you with the right methodology you can eliminate one of these variables or reduce one of them to the point of being inconsequential. No. You can't. Ever. It is a hard lesson every options trader learns in the end. Every options trader eventually sings the black swan song when writing out a check for cash against his credit card to refund his account after a blow out.
Please elaborate regarding how TDA promoted her services.
Thank you for your reply. I wanted to argue but you are probably right.
OK, let me ask you this: If you are correct, going short I will eventually blow up and lose 100%, someone will be making that 100%. What if I take the exact opposite approach? I give up a little at a time to the guy going short but then hit the jackpot and take all the money away from him?
Utter crap.
TDA bought TOS in 2009, and thus acquired the customers of TOS. Tasty Trade wasn't formed until 2011, which is owned by Dough, Inc., a financial content firm.
Although TD Ameritrade did not directly promote her services, it doesn't negate the fact that TDA was the owner of TOS during the time of her interviews. And TOS promotes TastyTrade through emails and advertising.
Perhaps the more accurate statement is TastyTrade promoted her services, specifically, her trading strategy and some financial information regarding her trading account. However, since TT is listed as an "educational" site, they don't provide financial advice and I highly doubt they would be held liable for any of Karen's statements.
Nevertheless, they now place a disclaimer on the videos, probably for legal reasons.
Here are the original videos, with the following disclaimer clearly displayed:
"The following video is an interview of a past tastytrade guest, Karen Bruton. We've become aware that she and her firm are currently under SEC investigation for her accounting and reporting practices. Karen is not affiliated with tastytrade in any way other than as a prior guest on our program, last appearing on the network in 2014. We at tastytrade believe in full and transparent disclosure by money managers and we continue to advocate on behalf of the retail trading community."
http://www.optionstradingiq.com/karen-the-supertrader/
Last edited:
Actually, they did not. Remember, when the first videos came out, they didn't even say her full name or the funds' names. I had to do detective work in the original Karen thread to figure out who she was. Not to mention it is illegal to promote HFs directly to the public.
They knew her because they were her broker from the beginning, and it was a good story to promote TT and option trading, not Karen.
And looking at the SEC numbers, her fund didn't grow significantly after the interviews...
Last edited: