Schadenfreude Warning: "Karen the Supertrader"

[Chubbly]

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.

This is getting off topic but I wanted to respond this is utter crap. There are many people who make a living trading options.
If you would like to discuss further start a new thread.

 

[RedDuke]

Duke, I've been in this game for a very long time. The last two years have been so quiet and so dead in the markets. You really can't measure something that small as significant. You generally would like to have about 1000 data points to get meaningful results from anything. If you have been doing this for 2 1/2 years you might have 30 data points which honestly man, is a rounding error. Trust me, the FED has turned this market into an eerily quiet ocean where the storms are off in the distance but completely out of sight. All this means is that when they come, and they will, they will come with such brute force that there will be few survivors.

Hi Mav,

Totally understand. Our model would make us easily survive 2008, with big paper losses, which just as quickly were reversed by the end of the year. The is is theory of course. If such event happens (more likely when), I will post on this forum what happens.

Having a right instrument, distance, premium, leverage and hedge with futures is what should keep us alive. After all, Tony Caine and few others did it.

Regards,
redduke

 

[RedDuke]

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%. ....

Take a look at LJM. They are just fine, there are others as well. Apart from death and taxes nothing is 100% certain.

 

[Maverick74]

Take a look at LJM. They are just fine, there are others as well. Apart from death and taxes nothing is 100% certain.

They were not fine. They lost 67% of their capital in two months in 2008. He personally lost 90% of his investors after that. A large majority of the money in his fund is just his own now. You need to really think about this. For most of us in this business losing 20% of our capital is not acceptable and causes unbelievable amounts of stress. Losing 67% starts to enter the critical stress level. Be careful when you throw around phrases like "just fine". That event was catastrophic for Tony on every level imaginable and he had Phd quants working for him trying to hedge and on top of that, he was not even employing that much leverage.

 

[RedDuke]

They were not fine. They lost 67% of their capital in two months in 2008. He personally lost 90% of his investors after that. A large majority of the money in his fund is just his own now. You need to really think about this. For most of us in this business losing 20% of our capital is not acceptable and causes unbelievable amounts of stress. Losing 67% starts to enter the critical stress level. Be careful when you throw around phrases like "just fine". That event was catastrophic for Tony on every level imaginable and he had Phd quants working for him trying to hedge and on top of that, he was not even employing that much leverage.

You are correct. It was a poor choice of words. I meant to say that they survived.

 

[Surprise]

This story showed the real face of the so called tastytrade .

Avoid like the plague .

 

[CBC]

They put the videos back up!! From my point of view I think that was the only thing credited to TT favor.

Now however, they just put them back up. With a nice little announcement that really didn't cover the main issues.

In their announcement it say NOTHING about her $110 Million in losses. Just said subtly that she had "reporting" problems. They didn't want to discuss losses, amounts, their own apologies, not even the reasons for the investigation. Your saying shes a supertrader!!

TASTY TRADE TAKE THE VIDOES DOWN!

 

[ironchef]

This is getting off topic but I wanted to respond this is utter crap. There are many people who make a living trading options.
If you would like to discuss further start a new thread.

Utter crap.

I think you folks were too quick to dismiss his post. Think about it this way:

1. Zero sum, or more accurately, negative sum after taking out commissions and bid/ask.
2. My guess is, just like day trade stocks, >80%-90% (probably more) of day traders lost $, wouldn't surprise me a similar percentage of option traders lost $.
3. So, for experts, they can make a good living trading options but for most retail traders, eventually luck will run out.
4. A few experts making money does not mean the general public will be profitable.
5. A similar comparison with actively traded mutual funds, hedge funds....Most of them are doing worst than index.
6. xenomorph is addressing folks like me, a small retail trader with not a lot of experience so he is not too off base. And he is doing me a favor: Telling me unless I am really really good and become an expert like you, watch out, I will lose 100% if I keep doing what I have been doing.

OK, enough said, let's get back to Karen or someone will give me a hard time.

Regards to all,

 

[usrx201]

I pretty much agree highly leveraged spreads and being delta-neutral can be risky as one is essentially trying to find a period of consolidation. That said, high delta options can be used to day trade stocks as short term leverage.

I remember Tasty's first interviews of Karen. Some things were alarming and stuck out to me. She said trading "direction" was "too hard" and they didn't care about direction as much. She claimed she primarily traded strangles and sometimes made "adjustments" which could have led to the rolling of the legs with unrealized losses. From what it sounded like, her fund had put on a LOT of leverage on the index options. Far more than a default 10 contracts.

 

[Niten Doraku]

They were not fine. They lost 67% of their capital in two months in 2008. He personally lost 90% of his investors after that. A large majority of the money in his fund is just his own now. You need to really think about this. For most of us in this business losing 20% of our capital is not acceptable and causes unbelievable amounts of stress. Losing 67% starts to enter the critical stress level. Be careful when you throw around phrases like "just fine". That event was catastrophic for Tony on every level imaginable and he had Phd quants working for him trying to hedge and on top of that, he was not even employing that much leverage.

in your opinion and drawing from your experience, do you think these funds are truly hedging their risks?

"Rolling for duration" as Tastytrade loves to preach is simply a martingale strategy doomed to fail as capital and margin disappears.

From what I can tell there doesn't appear to be any hedging at all (using underlying securities or related products to hedge delta, vega, etc.).