Anyone can help me learn their method? Pm me please
TastyTrade Method
- Thread starter Chris Paciello
- Start date
How can you say that implied vol is not overstated versus actual? Where's your proof? There's plenty of proof proving otherwise, which Tastytrade advocates. Just check out some of those market measure segments. Personally, I've backtested it and trade it live (4+ years). It's how I make a living, selling premium on my own account. Why? It's overstated. I sure can't pick direction.
Overall, I know there are some doubters about Tastytrade and their point about selling overstated volatility, that's fine. If you can make a dollar trading otherwise, I tip my hat to you. Selling premium is much easier than picking direction...just be careful when the market goes against you. Don't get too big.
The proof is the fact that selling naked options will at some point get "too big" (Big Loss). There is no way to avoid it if your selling naked options. It doesn't take an earnings trade on NFLX or AMZN to teach you what happens when things move in one direction quickly and for an extended time.
When Karen "Burton" the Super Trader (Tastytrade advocate)
suggested she made money every month for five years, I back tested what she was doing based on three detailed interviews and there was zero chance to replicate her profits. People can say their profitable when booking profits and letting small losses get too big and not close out the trade - which is exactly what she did (based on indictment) but your mark to market is your whole position value not what has been closed out. That is the point, the model says don't get too big which is the unexpected tail events which you cant avoid with naked positions. The market can stay irrational longer than you can stay liquid.
If you avoid getting too big by trading limited profit trades, the commissions and spreads will eat your lunch.
Follow the money:
If Tastytrade approach was profitable, they would be setting up an asset management company to invest your money and collect fees based on profits vs setting up a broker to take commissions on "trade often".
If you have found a way to avoid these tail events and made a profit after commissions than congrats. Well done..
When Karen "Burton" the Super Trader (Tastytrade advocate)
suggested she made money every month for five years, I back tested what she was doing based on three detailed interviews and there was zero chance to replicate her profits. People can say their profitable when booking profits and letting small losses get too big and not close out the trade - which is exactly what she did (based on indictment) but your mark to market is your whole position value not what has been closed out. That is the point, the model says don't get too big which is the unexpected tail events which you cant avoid with naked positions. The market can stay irrational longer than you can stay liquid.
If you avoid getting too big by trading limited profit trades, the commissions and spreads will eat your lunch.
Follow the money:
If Tastytrade approach was profitable, they would be setting up an asset management company to invest your money and collect fees based on profits vs setting up a broker to take commissions on "trade often".
If you have found a way to avoid these tail events and made a profit after commissions than congrats. Well done..
If vol were overstated, why do they advocate managing winners early? Because they are afraid if when vol is not overstated. When vol is understated it can be understated by a great magnitude, when overstated you pick up your nickels.
This is no big secret. If you follow any of their shows which involve live trading, you can see their P&L and its always showing losers. Tony had a show with one of the girls and Tom with his daughter Case and they all lost their account balance on a couple big losers while picking up nickles and claiming the market vols were overpriced. If you ask Tom about big losers, he says not to think about as there is nothing you can do.. "it's like getting hit by a bus on the way to work". So you shouldn't think about it and when it happens - pow... your profits for four years are gone. But people do get into accidents and as unexpected as they are, what would you pay to protect yourself - it's worth something - not zero...That is where the strategy fails and profits disappear. But the broker gets to keep the commissions.
When people call in and ask why they are losing money even though their winners are 70%, Tom's reply is that he only shows how to win more vs lose and not how to make money. You have to figure that out for yourself - he never promised profits just winners more than losers.
Technically he is not lying since he won't show you his P&L and so you don't know how much he is losing...
When people call in and ask why they are losing money even though their winners are 70%, Tom's reply is that he only shows how to win more vs lose and not how to make money. You have to figure that out for yourself - he never promised profits just winners more than losers.
Technically he is not lying since he won't show you his P&L and so you don't know how much he is losing...
Good points by Stymie and DTB2, but I would still much rather sell premium than buy an underlying. IE. sell a PUT ATM every month. It will have a higher return with a lower standard deviation versus buying that particular stock and holding. Why? Premium / extrinsic value of the option. Again, I am assuming two things: 1. The trader is being mechanical; 2. This is over the long run...meaning, years. Obviously, buying IWM since the election would have been better than selling Puts, but over time, selling Puts will outperform the buying strategy.
That's the Put perspective. If you add the idea of selling Calls, it can perform as well, but I wanted to use the Put idea first since to me, "buy and hold until your old" (passive investing) is an inferior strategy.
Regarding TT's P&L, I don't really care about it. The key takeaway is the info they provide. Figure out the type of risk you want to take and go for it. They aren't there to spoon feed you.
More importantly, TT is sure better than what you get from any other financial network. We can al least all agree on that. Suerte!
That's the Put perspective. If you add the idea of selling Calls, it can perform as well, but I wanted to use the Put idea first since to me, "buy and hold until your old" (passive investing) is an inferior strategy.
Regarding TT's P&L, I don't really care about it. The key takeaway is the info they provide. Figure out the type of risk you want to take and go for it. They aren't there to spoon feed you.
More importantly, TT is sure better than what you get from any other financial network. We can al least all agree on that. Suerte!
If the info doesn't lead to long term profitability what is the point?
Here's the difference between a TT study and a real study. http://www.ruf.rice.edu/~yxing/straddle_201305_03.pdf
and not surprisingly, a completely opposite takeaway.
Good luck Johnny.
http://www.cnbc.com/2016/04/22/the-goldman-strategy-thats-returned-105-in-days.html
Investors who bought call options on the first 13 percent of the S&P 500 companies to report earnings have seen a return of 105 percent on the premiums they laid out, Goldman's Katherine Fogertey, John Marshall and Vishal Vivek said in the report. They looked specifically at calls with striking prices that were close to the price of the stock and set to expire in the near future.
Investors who bought call options on the first 13 percent of the S&P 500 companies to report earnings have seen a return of 105 percent on the premiums they laid out, Goldman's Katherine Fogertey, John Marshall and Vishal Vivek said in the report. They looked specifically at calls with striking prices that were close to the price of the stock and set to expire in the near future.
Well, Look at the statistics from CBOE on their PUT index returns, PUT=put/write:
The absolute return of covered call is less than "buy and hold until you are old" and the cash secured put is only marginally better than "buy and hold until you are old". Don't ask me about the Sharpe ratios, I don't know, as a long term investor I am only interested in long term absolute returns, i.e., when I want to cash out in 20 years, how much am I getting. And don't forget, once you subtract paying bid/ask and commissions, your returns, either PUTWrite or CoveredCall will be much less than "buy and hold until you are old".
To get better return, you need to go naked and on margins. As Stymie said, when you do that, your risk of blowing up increases exponentially.