Tastytrade are far away from the professional world's standards in reporting performance results of their "studies". You must not use an arbitrary amount of leverage (about 3x to the notional in their SPY strangle selling results) and then use that to report "ROC". I'm sure the research team know this but who knows...Look at the tables in papers of options academic papers to see how options returns are properly reported - esp those by AQR's Roni Israelov and similar (Google it!).
Short strangles via Tastytrade....
- Thread starter tradingpoker
- Start date
This is straight from the CBOE's website. Compare the light green line (PUT) with the black line (S&P 500). This is index put selling measured as "cash secured" which is the correct way to compare it to buy and hold against the S&P because this is apples to apples with respect to risk. Notice how the patterns of these equity curves are similar, especially during drawdowns.
Selling strangles the Tastytrade (TT) way of course adds short calls to the mix, plus some management rules but TT show their results to using 30% of buying power or some similar leverage. That's way riskier than the above and as a result the drawdowns were horrendous during crises.
Most of the juice from selling straddles/strangles comes from the put side, the calls add almost nothing over time so put selling alone has similar results to straddles/strangles (I have data on this but not at my finger tips). Strangle selling does lower the volatility of returns and increases the Sharpe Ratio vis-a-vis buying the S&P 500 passively and if you have the stomach to keep selling premium into steep market meltdowns, then yes, the pumped up IV softens your drawdown versus buy and hold. TT's "ROC" metrics are leveraged returns and therefore flatter the results.
Excellent points.
But, our results, with a retail account, will not be as good because we retails have to pay commissions and suffer slippages. In addition, we are likely not going to be as discipline in regularity.
I did a few backtesting of both Put-write and Call-buy of SPY from 1993 to 2019. I used HV instead of IV because I could not get historical IV data. The outcome, without paying commissions and suffering slippages, was not as good as buy and hold and CBOE Put write but similar. With the inclusion of some commissions and slippages, it wasn't that good.
I know my backtest methods are not rigorous but I think the general conclusions are still valid.
In my book, if I have to work so hard to just match buy and hold, why not just buy and hold especially when I have a 30 year time horizon?
You are missing that this specific trade was what Jim sets up as a longer DTE strangle using the pre earnings IV pump only as somewhat extra juice, but not really an “earnings Trade”. most of thier strangle philosophy involves avoiding known effects of such binary events.
Most of Sosnoff's strangle philosophy ignores most TastyTrade's own research as well
... which means that Sosnoff either doesn't believe his own research ... or too pig-headed to change his strategy ... or both
I believe it’s that he’s too pig headed to change due to his personal history and wealth situation... If he indeed trades personally different (and esp. if it’s indeed obvious to anyone) than the TT “mechanics” suggest, then that’s a plus to me and indicative that he is more honest/transparent/ethical than “haters” say.
TastyTrades research indicates selling ATM straddles outperform selling OTM strangles
.... yet Sosnoff persists in selling OTM strangles ... what is the point in doing the research ... only to ignore it ?
How is he more honest / transparent / ethical ... when
... Sosnoff refuses to discloses profitability ... complete lack of transparency
... Sosnoff still promotes SEC indicted Karen the SuperFraud as a headline act at TastyTrade gigs ... complete lack of ethics
... Sosnoff has removed the video series from the archive of him blowing up his daughters trading account whilst teaching her to trade ... complete lack of honesty
I actually knew you were one of the “haters”, Not sure I have the desire to debate your points which I’ve (and you I know) seen mentioned and counter-pointed many times in past.... Just wanted to explain that one strangle trade the OP asked about.... Happy Trading!
Yet it was you who suggested that Sosnoff was honest/transparent/ethical
... but don't want to discuss when facts suggest otherwise