TastyTrade Method

[tommcginnis]

...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)

"...No way to PREDICT..."
And yet we use Normal and logNormal distributions, EACH AND EVERY DAY.
We DEPEND UPON "IID" -- Independent & Identically-Distributed -- EACH AND EVERY DAY.
BROWNIAN MOTION and WIENER PROCESS and the whole damn family of Levy & Co.

But ("Uh-ohhhhhhhh!"), anytime they get used in a stochastic process, there is a component (call it "TREND" if you need help), that carries us from one snap-shot instance to the next. But learning about trends, and violating flippant use of "random" gets messy quickly! Mr.s Durbin & Watson come to the fore, "time-series decomposition" gets learned ("or not!"), and people who perhaps shouldn't be trading via TT-"lessons" get glassy-eyed and turn away -- not realizing how their ignorance will cost them money. TT has just given them license to ignore mkt trends, ignore news, ignore the host of empirical tools cuz Hey[!], It's All Random!!

Big ol' FAIL on TT every time they do it. Reversion-to-Mean trading DEPENDS on having a statistical expectation for the MEAN -- and REALITY recognizes that that mean changes over time. (Unless, of course, you drink a LOT of the KoolAid...)

 

[sss12]

"...No way to PREDICT..."
And yet we use Normal and logNormal distributions, EACH AND EVERY DAY.
We DEPEND UPON "IID" -- Independent & Identically-Distributed -- EACH AND EVERY DAY.
BROWNIAN MOTION and WIENER PROCESS and the whole damn family of Levy & Co.

But ("Uh-ohhhhhhhh!"), anytime they get used in a stochastic process, there is a component (call it "TREND" if you need help), that carries us from one snap-shot instance to the next. But learning about trends, and violating flippant use of "random" gets messy quickly! Mr.s Durbin & Watson come to the fore, "time-series decomposition" gets learned ("or not!"), and people who perhaps shouldn't be trading via TT-"lessons" get glassy-eyed and turn away -- not realizing how their ignorance will cost them money. TT has just given them license to ignore mkt trends, ignore news, ignore the host of empirical tools cuz Hey[!], It's All Random!!

Big ol' FAIL on TT every time they do it. Reversion-to-Mean trading DEPENDS on having a statistical expectation for the MEAN -- and REALITY recognizes that that mean changes over time. (Unless, of course, you drink a LOT of the KoolAid...)

My two cents on TT....if you are new to trading their videos, etc are ok in teaching the MECHANICS of spreads, etc. What gets totally glossed over are the nuances and in depth knowledge to actually do it profitably with real world risk management. Not to mention the difficulty selling prem in a 10 vix environment.

 

[Benihana]

I in general like what they are doing educating people, but there are some small annoyances that I have with them. The 2 major ones are saying it's free to close trades and acting like span margin isn't a thing.

Yes, technically it is free to close the trade, but you can think of it as the commission is just front loaded. Do people really get duped by that?

I've watched their shows, and it drives me crazy when I hear them talk about treasury spreads and quote the margin as if it isn't a spread trade. I've heard them say the NOB spread takes 8k margin countless times when that is so far from the truth. The spread is $1,251.25. This Friday, they talked about the FOB spread and said it uses 7.7k margin, when it only takes $1,333.75. There is literally no reason for experts to be getting this wrong.

 

[Macca1]

1.- 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)

If the Efficient market hypothesis was true then you couldn't make money selling premium or using any of the TT strategies! The whole show would be a waste of time. Sosnoff needs to check his premise when advocating for the Efficient market hypothesis. I remember a few years ago they had some finance professor on who was trying to explain this to them, Sos ending up cutting him off mid-interview, and I believe the video was removed from youtube.

If some other brokerage wants to take a slice of the pie and offers EVEN CHEAPER rates and commissions I welcome them too and would no doubt bring my business to them

https://www.interactivebrokers.com/
https://www.lightspeed.com/

 

[markuzick]

If the Efficient market hypothesis was true then you couldn't make money selling premium or using any of the TT strategies! The whole show would be a waste of time. Sosnoff needs to check his premise when advocating for the Efficient market hypothesis. I remember a few years ago they had some finance professor on who was trying to explain this to them, Sos ending up cutting him off mid-interview, and I believe the video was removed from youtube.



https://www.interactivebrokers.com/
https://www.lightspeed.com/

I would think that an efficient market would entail compensation for option sellers being built into the premiums; without this motivation there would be few options available for anyone to trade. You wouldn't expect option sellers to write options without some built in edge anymore than you would expect insurance companies to offer policies at prices that over time made no profit; or casinos to offer odds that gave them no edge.

 

[DTB2]

If the Efficient market hypothesis was true then you couldn't make money selling premium or using any of the TT strategies! The whole show would be a waste of time. Sosnoff needs to check his premise when advocating for the Efficient market hypothesis. I remember a few years ago they had some finance professor on who was trying to explain this to them, Sos ending up cutting him off mid-interview, and I believe the video was removed from youtube.



https://www.interactivebrokers.com/
https://www.lightspeed.com/

The Dr. Maymin video is still around, I love it!

https://www.tastytrade.com/tt/shows/what-else-ya-got/episodes/dr-philip-maymin-skew-10-22-2014

 

[Benihana]

The last 5-10 minutes is the important part of the video if someone doesn't want to watch the whole thing. It seems like Tom is saying there is a built in "house" edge to selling options which is why you can still make money selling options even with the efficient market hypothesis.

 

[Dolemite]

The last 5-10 minutes is the important part of the video if someone doesn't want to watch the whole thing. It seems like Tom is saying there is a built in "house" edge to selling options which is why you can still make money selling options even with the efficient market hypothesis.

There is an edge in the equity options markets since the majority of the money that goes in the market is long. They have to protect returns somehow, which is why you see a premium present in puts. However, you are competing with professionals that are smarter and have resources you can't match. Just simply selling otm options is not a "house edge"

 

[sss12]

There is an edge in the equity options markets since the majority of the money that goes in the market is long. They have to protect returns somehow, which is why you see a premium present in puts. However, you are competing with professionals that are smarter and have resources you can't match. Just simply selling otm options is not a "house edge"

There is no edge in selling prem. Theta is just one of the factors. Just like gamma is not an edge in buying premium. If you want to focus on one Greek, get the direction of delta right and you will be set. Easier said than done though.

 

[Dolemite]

There is no edge in selling prem. Theta is just one of the factors. Just like gamma is not an edge in buying premium. If you want to focus on one Greek, get the direction of delta right and you will be set. Easier said than done though.

I disagree, there are many funds that trade options based on this edge. Direction has nothing to do with their trading.