A software that I developed myself (based on experience of =~ 20 years working as a software developer and ~= 10 years as a quant for an options-market-maker). Will soon either open source parts of it or offer for free the end product (compiled application). There's also a monetization path I have in mind, if not for anything else because in this world of finance noone places a value on anything unless it makes money.
Supplement retirement income
- Thread starter aplino
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A software that I developed myself (based on experience of =~ 20 years working as a software developer and ~= 10 years as a quant for an options-market-maker). Will soon either open source parts of it or offer for free the end product (compiled application). There's also a monetization path I have in mind, if not for anything else because in this world of finance noone places a value on anything unless it makes money.
Based on what you're looking for (supplement retirement income with low risk, would be happy with a 20% return) and experience (have a trading account and have been trading stocks for years), I think your approach is not unreasonable: learn from various sources and then use your own judgement.
Problem with a 20% low risk return is not that it doesn't exist, but that it's not accessible to retail individuals. Hedge funds that make such figures are closed entities, already having enough money for their profitable systems. I used to work for one that made 50% on options and that only on some $50M of capital. The hedge fund itself had about $1B and had no choice but to place them in stocks, with much lesser results.
And what banks offer as "Asset Management" is a joke. Virtually any bank has such a division, like put the bank name and add "asset management" and you have it. I can see why people will rather trade on their own than lend their money to the "specialists" in the banks, those specialists are in general no better than cats picking stocks ( https://www.forbes.com/sites/freder...ofessionals-at-stock-picking/?sh=4031542e621a ).
The trading strategy that I developed recently seems to be compatible with what you're looking for (high return, low risk or at least known and managed risk). But there's still a few problems with it:
1) I've so far only ran it on backtests.
Detractors and trolls will quickly jump at my throat and dismiss me as ridiculous: only backtests, lol. But youz stupid if you say this because ANY trading strategy starts with theory (strategy outline) and backtests. Backtests are the if and only if condition of any further steps. If it doesn't work on historical data, would you trust a strategy to run live on your own money?
And finding something that DOES work on backtests is excruciatingly difficult because finance is a hugely competitive domain so almost anything you can think about was already tried and arbitraged away. Not the best example since it was mostly used by amateurs but Quantopian (now defunct) had some 20 million strategies designed and tested and still went bankrupt. Think of that when you start your path of high optimism that you'll beat the market in spite of the huge drones of people who failed to beat it before you.
So passing backtests is the first step, also quite depressing because it immediately exposes your "genius guru strategy" that you pick on Reddit or pay money for: you ran it and the numbers mercilessly decimate it.
2) Even if it passes next stage of validation (run live on a virtual account - hedge funds also have this step before going fully in production), the cruel reality is that financial market is a gambling casino and you can't keep beating the casino if you tell the casino how you do it. So the only way to make money is to keep the strategy proprietary and exploit it as long as it works - which in theory could be a long time. But another thing I'm throwing in the face of geniuses who repeat the meme "run it on yer own money". A trading strategy is like any retail product such as a smarthpone. To make money you need to scale: have the phone sell in huge numbers so you make billions of capital for it, have the strategy run on a billion dollars in order to really extract the value in it. If one is already working at a hedge fund that has the capital, they already have the infrastructure for exploiting the strategy (question still remains how much would the researcher of the strategy gets out of it). If one's not having the billions of a hedge fund at their disposal, then the only way to put a strategy to use is to scale by selling multiple copies to retail traders. But the first copy you sell has let the bird out of the box and from then on, there's no telling how much the strategy will hold before it becomes common knowledge and stops working.
Obviously he made a typo on "covered" calls but inadvertently introduced an interesting pun. I mean if there's no such thing as covert calls yet then it ought to be! In fact I'm fairly sure they already are a fact of life and are amongst the most profitable operations one could do with options. It may be that Aplino didn't as much made a typo as a Freudian slip and is getting a scolding from the head of stock market secret operations right now for accidentally exposing what should have remained under the surface!
Obviously he made a typo on "covered" calls but inadvertently introduced an interesting pun
Imagine all the company insiders who consistently sell ATM/OTM calls on their millions of stock options... jeezuz
@Aquarians, the wheel is also referred to as “the triple income” strategy. I assume your back tests don’t account for dividends. If I am stuck holding the underlying, I have paper loss, but with options I always have realized losses. Some will argue that there is no difference, but I prefer to have that option (pun intended).
Indeed, I don't count the dividends. Roughly, with SPY dividends around 1.5% and statistically maybe 50% of the time doing covered calls rather than cash-covered puts, that would add an additional 0.75% per year to strategy's profit. Not much but I'd say enough to cover the cost of commissions, so the good thing with dividends is that you pretty much trade for free (like on a Robinhood account). Yeah, since I am at it, I also don't count commissions - but again, a rough estimate would say they cancel out with dividends so in the end it's the same equity curve. So more work to consider dividends and commissions only to cancel each other out or less work and get the same result
I'd agree with the concept of putting more of your capital in play as VIX rises to take advantage of more opportunities if collecting theta decay is a core strategy. I still have a hard time pulling the trigger on an undefined risk trades but I can see when trading with a much larger account 500k plus this isn't as much of an issue if you're actively managing / adjusting and have risk management and a number of small positions and stay small the tasty trade way. I'm curious if the average Tastywork retail trader beats the 90 percent of retail traders lose 90 percent of their capital in 90 days that Anton Kriel quotes so much.
Do I have to look for covert covered calls now?Obviously he made a typo on "covered" calls but inadvertently introduced an interesting pun. I mean if there's no such thing as covert calls yet then it ought to be! In fact I'm fairly sure they already are a fact of life and are amongst the most profitable operations one could do with options. It may be that Aplino didn't as much made a typo as a Freudian slip and is getting a scolding from the head of stock market secret operations right now for accidentally exposing what should have remained under the surface!