Schadenfreude Warning: "Karen the Supertrader"

[drcha]

WTF is wrong with me that I am still following this thread? I know Karen will fail; it's just a matter of time. Why do I think I need to see it happen? I'm usually not the type to follow fire trucks or tornadoes around......anyway, I bought some AMTD a couple of months ago. My way of joining the dark side.

 

[ironchef]

The Shill Financial Network

Tastytrade is working day and night to get mom and pop investors to ditch their tightfisted buy and hold the index fund mentality. You can forget Warren Buffett and the Bogleheads of Jack Bogle. Today on the tastytrade network it is all about the derivative plays, volatility, and the options action. Do you hear the sound of those chips dropping on every earnings play that comes along? "Trade small, trade often" is the often repeated slogan of tastytrade.

Piss Poor Results

Tastytrade has very few documented examples of how well its options trading strategies really fare when implemented. In the few cases we do have, the results have been piss poor.

Thank you for sharing the article.

Yes I was one of those mom and pop investors that ventured into options trading watching them, following the "trade small, trade often" approach.

As for Piss Poor Results, well, their backtesting results of selling options/straddles/strangles were all profitable. It was piss poor only when I tried them (mechanically selling) with real money. Fortunately (or unfortunately) for me, I decided to continue trading but developed my own methodology.

What I like about options trading is, though challenging, intellectually it is very stimulating and there is logic in this madness!

Regards,

 

[Xenomorph]

No, you don't have to blow out. I have been trading them for 10 years, have done probably every kind of trade/combo there is at one time, and have never come close to blowing out an account or even lost that much. If you do not trade naked and you use only a small portion of your account for options, they are a great way to increase your returns a little. With options, a little is good but more is not better. And you are right, you do have to guess something correctly (direction or volatility or both) to make money. You don't need to guess correctly "consistently" but you do be better than chance at your guessing, and you definitely need to manage your money carefully.

I was addressing people who attempt to trade options exclusively. Yes, if you limit options trading to a very small portion of your account you might survive... but very few traders actually do this. So few in fact that the practice has little basis in reality. And, there is no pressing need to trade options with even a small portion of your account. A good trader should be able to make his millions simply trading stocks. There is no need to touch options. For the vast majority of traders, options are addictively dangerous.

 

[RedDuke]

...A good trader should be able to make his millions simply trading stocks. ....

If it was only this easy.

 

[Scataphagos]

I was addressing people who attempt to trade options exclusively. Yes, if you limit options trading to a very small portion of your account you might survive... but very few traders actually do this. So few in fact that the practice has little basis in reality. And, there is no pressing need to trade options with even a small portion of your account. A good trader should be able to make his millions simply trading stocks. There is no need to touch options. For the vast majority of traders, options are addictively dangerous.

I get bombarded with solicitations to buy into "option services". Seems they all want ~$3,000/yr for their advice.

Though the high return percentages on trades advertised are enticing, here's what I think is the reality:

1. You may make 100%+ on many option positions, but you'll have so little of your overall capital into those that you'll need 100 winners to net +1% on your portfolio. IOW.... too busy for not much financial gain.

2. If you're a "conservative" player/buyer, options make little sense unless you lever up your portfolio. You might as well just play the stocks and not screw with the time premium. (Then again, if you hold a portfolio there is some benefit from increasing your yield with writing covered calls, but that's not what expensive option services are touting.)

3. If you do get lured into using options for leverage... well, there's the lever risk... as is with all leveraged vehicles.

4. For the most part, the few making big money on options are those selling the service. Options seem like the days of the gold rush. The real money was in selling picks and shovels to the miners.

I know... I'm going to get tons of responses about how I'm "full of beans". "I turned my $5,000 account into $11,000 last year". I want to hear from the guy who traded his entire portfolio of $500,000 and turned it into $1,000,000 with options. And sure, a few might have done that... but the majority with $500K wouldn't commit their entire portfolio to such great speculation and risk.

FWIW...

 

[Gotcha]

I get bombarded with solicitations to buy into "option services". Seems they all want ~$3,000/yr for their advice.

Though the high return percentages on trades advertised are enticing, here's what I think is the reality:

1. You may make 100%+ on many option positions, but you'll have so little of your overall capital into those that you'll need 100 winners to net +1% on your portfolio. IOW.... too busy for not much financial gain.

2. If you're a "conservative" player/buyer, options make little sense unless you lever up your portfolio. You might as well just play the stocks and not screw with the time premium. (Then again, if you hold a portfolio there is some benefit from increasing your yield with writing covered calls, but that's not what expensive option services are touting.)

3. If you do get lured into using options for leverage... well, there's the lever risk... as is with all leveraged vehicles.

4. For the most part, the few making big money on options are those selling the service. Options seem like the days of the gold rush. The real money was in selling picks and shovels to the miners.

I know... I'm going to get tons of responses about how I'm "full of beans". "I turned my $5,000 account into $11,000 last year". I want to hear from the guy who traded his entire portfolio of $500,000 and turned it into $1,000,000 with options. And sure, a few might have done that... but the majority with $500K wouldn't commit their entire portfolio to such great speculation and risk.

FWIW...

I couldn't agree more. I don't know very much about options, and it initially seems incredible when you see 100% gains... but when you consider that a SPY call or put goes from $1 to $2, and hence 100% gain, this means $100. So then you think ok, just buy a few hundred (never mind the commissions), but then you see the volume on these things, and you wonder, where are the big players?

They are perhaps good for gambling, maybe good for hedging, but as a day trading or swing trading vehicle, I'm not sure sure. Heck, you can even be right about the direction and make not very much because of the whole decay thing.

 

[RedDuke]

There is a way to make money in option consistently, but it is hard and bumpy.

Look at Tony Caine from LJM partners. They are managing several hundred millions and have been doing it now for around 15 years or so. They are in the business of selling options.

 

[MKTrader]

A good trader should be able to make his millions simply trading stocks.

Great. Open a journal here or a hedge fund and show us how easy it is.

As for options, you're oversimplifying things greatly. There are MANY ways to trade them. I agree that buying calls/puts is a lot easier said than done, but it's easy to market ("Make 200% instead of just 8% if you bought the stock"). However, there's option selling (full of pitfalls, but can be done profitably) and tons of ways to combine/manage/hedge/adjust various option positions. Some are safer than simply buying stocks.