TastyTrade Method

[tommcginnis]

https://www.tastytrade.com/tt/shows/best-practices/episodes/iron-condor-comparison-11-07-2016
Not to beat up on TT or anything, but I happened upon this (Nov07) "segment" right about the time it was posted, and thought "Wow -- yet another example of sloppy, rush-it-out-the-door 'research' -- and if you have to 'correct' it or update it later well, that's just another excuse to film yourself." The thing is, there are all these loyal tastytraders out there who, lacking the acumen of sharp research standards, take all of TT on faith, and when something glaring comes up, they write it off to their own ignorance, BUT THEN TRADE on it.

So, in the cited video, there's the usual grand (and grandly troublesome) statements, but on that closing graphic, there's one consideration missing. AND IT'S REALLY BOTHERSOME because one of the *good* things about TT (seriously!) is that they pay heed (sometimes) to capital efficiency -- looking at the account and asking (in the voice of Ms Jackson) "What have you done for me lately?" What is my (expected) profit ON A DAILY basis? And when you see your daily expectation decline, and decline *past* where other uses-of-capital might pay, you pluck it from one use, and devote it to the other. AL SHERBIN was all about this (at TT as research head some years back), and the tune has echoes there yet.

But look at that last graphic. Hear them go on about risk, and reward, and la la la. And realize that that whole segment was not just Sosnoff, nor Battista(?), BUT THE WHOLE CREW, speaking. And then you realize what's missing. What got by *everyone.*

Why not take two smaller ICs and make the capital at-risk equivalent? Result??
What happens when you make them equivalent??
Well! Guess that'll just be another show!!
(And if you sold ICs with greater legs than prudent, or lost income because you could only afford a lesser amount at-risk? Well, tough nuggies.)

That I know of, TT is still "the best around" -- only because the rest are outright thieves.
And it's their collective EGO that does 'em in.
And hurts the TTers, with real money, savings, *retirements*.....
Damn.

 

[Pedro77]

The naked strange 200+ days to expiration can handle very big market correction because the premium is so huge. maxing out your account on iron condors is how people blow up

Tradelosses - when you sell naked strange 200+ days to expiration, do you sell it on indexes or on individual stocks?

200 days to expiration is very long time. I don’t have much experience with such a long time to expiration. I nearly always sell options with 30-60 days to expiration (naked put...).

What would you do with the positions when market goes against you? Would you roll your position to next months?Or would you close your position?

Thank you.

 

[marwanco]

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.

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.

I agree with you Johnny, I started myself selling IC , I'm aiming at 2-4% per month, so far so good.

 

[CBC]

I don't know why they have opened up a brokerage, kinda sounds to me like they aren't profitable trading.

 

[vegamedic]

I don't know why they have opened up a brokerage, kinda sounds to me like they aren't profitable trading.

greed? I used to watch the show every day but with all the cherry picking "studies" and refusal to show P/L's or portfolio snapshots I can't help but think it's just a way for them to sell a service, which is now commissions.

 

[sysdevel99]

greed? I used to watch the show every day but with all the cherry picking "studies" and refusal to show P/L's or portfolio snapshots I can't help but think it's just a way for them to sell a service, which is now commissions.

I agree - they are still fun to watch though - you just have to know how much of it is BS and like you said "cherry picked" to support the overall message. Too bad if you follow them blindly and dream of good profits by collecting time decay - usually things will turn south just when you get comfortable and step up the size
The best "trade" they have ever made was to sell thinkorswim to tdameritrade for more than they all ever made trading combined.
https://dealbook.nytimes.com/2009/01/08/td-ameritrade-to-buy-thinkorswim-for-606-million/?_r=0
That on top of collecting commissions and running a profitable business while others take the risk seems like a winning strategy to me.

 

[DTB2]

I see one of the TT supporters has been on other forums looking to code all sorts of indicators as a means of when to buy and sell.

 

[Flynrider]

I see one of the TT supporters has been on other forums looking to code all sorts of indicators as a means of when to buy and sell.

Who is this?, AFAIK, the only TT indicator is IV Rank ( or better "percentile"), and perhaps percent underlying change w/in 2 weeks, and perhaps historical vol increasing/decreasing. I'd be interested to know what else there is...

 

[Stymie]

I don't know why they have opened up a brokerage, kinda sounds to me like they aren't profitable trading.

It's not hard to figure out. They are always short delta as the market drifts upwards over time.
They talk about their trades every day and grumble about how much they are down. When lucky, they get out for break even. They need new viewers to keep the scam alive and collect commissions. If the markets ever do go down, they will be Long delta and lose much more. They need other revenues to cover their trading losses.

 

[TradingDemystified]

It's not hard to figure out. They are always short delta as the market drifts upwards over time.
They talk about their trades every day and grumble about how much they are down. When lucky, they get out for break even. They need new viewers to keep the scam alive and collect commissions. If the markets ever do go down, they will be Long delta and lose much more. They need other revenues to cover their trading losses.

This might be true, or might not true (stating the obvious) based on the timeframe you decide to base it on. While it is true that the new tastytrade brokerage (called tastyworks) will be a revenue stream for them, a few things stand out and I would like comments on this from anyone here:
1.- The information provided on tastytrade is free for us. As far as I can see there is no scam since absolutely no money is ever requested and as a matter of fact no single trade is even recommended since they are not an advisory service. All they try to teach is their methodology which is based on three basic premises, all of which I agree with: a) Implied Volatility overstates actual movement (over the long term), b) Managing winners improve overall return on capital and c) There is no way to PREDICT market movement since everything is priced in as of that point in time (i.e. Efficient Market Theory)
2.- Tastyworks has a bit of a different business model as compared to other options brokerages because it relies more heavily on payment for order flow. All i have seen is that their fee schedule and overall commisions and rates are about 40% less than the competition. So if they decide to go into this business and make more money for themselves... so what ! as long as the end consumer is reaping the benefits in the form of less commisions I think I am ok with that. If some other brokerage wants to take a slice of the pie and offers EVEN CHEAPER rates and commisions I welcome them too and would no doubt bring my business to them