Tastytrade Review + Criticism
- Thread starter Lucas
- Start date
I had to repost this...problem with my phone.
The idea is to see if you can gain anything of value to help in your trading. If not, well, turn the channel. I sure don't gain much watching Bill Gross, George Soros, John Paulson, the Cohens, etc. They have definitely had their fair share of home runs along with strike outs. I prefer to listen to a trader who has a strategy just to get to first...single, walk or hit by pitch.
The whole Rising Star concept is BS.
They take a snapshot in time where some guy is doing well. Big deal, a six month decent run. I wonder why they never revisit the previous Rising Stars and see how they've done since their episode aired. No I don't, I have a pretty good idea why they don't do it.
I actually really like the concept of the rising star, but I agree it's being marketed wrong. What they should be doing is looking at somebody who's had great returns for the past 6 months or 1 year, and then using the show to try to poke holes in his systems BEFORE they happen.
That would be useful. All too often people get lost in short term results, not realizing how dangerous or flat out lucky they were, until of course it's too late. A flaw in their system appears when they least expect it, and their account is blown up.
Rising stars should be a testing ground. Ok smart guy, great returns for 6 months, but here's what we (the cast at Tasty Trade) think could happen to you under these conditions.
If a trader and his system can get past that scrutiny, they'd be better off for it and they might have a long and prosperous future trading.
But 6-12 month big returns are dime a dozen, nothing to celebrate.
Agreed.
Unfortunately, most are following the tt mantra making it tough to critique.
The only one that they've critiqued extensively is Karen. Yet she is surely their greatest success story.
Additionally, tt boast of 50-60,000 viewers and only has a dozen or so Rising Stars. Hmmm.
Maybe TJ can get them to follow up on some of the previous Rising Stars since he seems to have their ear?
I don't think they've critiqued Karen at all. Her strategy is so clearly bullish, she's basically just long the market. So someone long the market did well during one of the biggest raging bull markets in history? you don't say.....
The only thing amazing about Karen is her ability to raise money, massive amounts of investor money, for basically being long the S&P. She's a true spin artist, putting most of the financial industry's best and brightest (or put another way sleaziest and greediest) to shame.
Go Karen !
The whole Tastytrade mantra is focused around "high probability strategies". however Just because a strategy takes lots of high probability trades(eg <90%), doesn't mean that's it's going to be a "profitable" strategy- The best way to look at a strategy's profitability is to look at it's expectancy, which never gets mentioned. There's no point having a 90% probability when those 10% of loses are 10x greater( in $ terms)... There's people calling up the show all the time in these kind of positions where they're forced to roll or cop in sweet, some just have no clue what's going on and can't understand how a 1 lot has left them +1k in the red. The reality is to manage an active portfolio like the King, where you're a discretionary futures scalper who can roll positions into the grave, you really need a portfolio margin account( <100k) and not some 5-10k "bite" sized account that lots of viewers have. Sure you can get lucky with a small account, however small accounts take on so much more risk trading the TT methodology.
How does Daddy do it?
p.s
I've got a great idea for a new show... SOS vs BAT, 10k starting account, first one to a Million.
That contest would be over quickly, with neither getting much traction. I see the Mission Impossible fuse as the graphics for that segment.
The thing I dislike about TT is they keep pounding these "high probability" 1 to 2 SD OTM plays as what everyone should be doing. Their universal answer for fixing things is rolling, and while they "scalp futures" they don't seem to involve much of any directionality considerations in their option plays. It's just IV rank, IV rank! Meanwhile people depend on these 1:10 reward:risk plays hoping that all they need to do is somehow be right about "mispriced" volatility (in a ridiculously low vol market) all the while being exposed to nasty gamma and vega risks.
How about getting a bit closer to the money guys? Stop taking on so much risk for chump change premium.
How about getting a bit closer to the money guys? Stop taking on so much risk for chump change premium.
I think the idea with selling otm premium (and thus generally putting the probability of expiring out of the money always in your theoretical favor), is simply to allow people to live long enough to figure something out. They've surely seen new accounts dying spectacular deaths by buying OTM premium, so their mantra is essentially trying to keep newbies alive and give them a fighting chance.
I think if you stick to their basic rules (I paraphrase here, could be mistaken, happy to have Tom or Bat correct me), your account may live awhile:
1. Sell otm (pref delta ~ .3) options - cash secured or as a credit spread(s) - 50-30 days out
2. Stay small (they don't specify but I would be concerned about risking more than a few % per trade in normal circumstances, certainly no more than 10% cash should a naked underlying position have a serious black swan scenario and go to zero, or double in the case of short calls)
3. Make sure IV rank is > 50% (basically higher than 50% of the measured IVs for the last 365 days for you none TOS/TT people)
4. Make sure both the underlying and the options are liquid (personally I only care that the underlying is very liquid for short naked positions but your mileage may vary, certainly any spread or anything you plan to exit before expiration needs to have liquid options).
5. Ideally have your portfolio as a whole close delta-neutral (essentially a long/short strategy so that it is insulated from broad price shocks, in theory...)
Is there an edge in there just from the above? Hmmm not so sure, probably some edge in SPX as we know there is a put premium in there that "seems" to be generally mis-priced since 1987 (not a coincidence I suspect...). For instruments as a whole, I wouldn't bet that just the above is going to bring home the bacon.
However, if you add some additional criteria that gives you a directional edge and is of a nature than generates a lot of scratches and small gains/small losers, with very little outliers on either side, then you have something where the above could be more useful/profitable than simply going long/short the underlying...
I think if you stick to their basic rules (I paraphrase here, could be mistaken, happy to have Tom or Bat correct me), your account may live awhile:
1. Sell otm (pref delta ~ .3) options - cash secured or as a credit spread(s) - 50-30 days out
2. Stay small (they don't specify but I would be concerned about risking more than a few % per trade in normal circumstances, certainly no more than 10% cash should a naked underlying position have a serious black swan scenario and go to zero, or double in the case of short calls)
3. Make sure IV rank is > 50% (basically higher than 50% of the measured IVs for the last 365 days for you none TOS/TT people)
4. Make sure both the underlying and the options are liquid (personally I only care that the underlying is very liquid for short naked positions but your mileage may vary, certainly any spread or anything you plan to exit before expiration needs to have liquid options).
5. Ideally have your portfolio as a whole close delta-neutral (essentially a long/short strategy so that it is insulated from broad price shocks, in theory...)
Is there an edge in there just from the above? Hmmm not so sure, probably some edge in SPX as we know there is a put premium in there that "seems" to be generally mis-priced since 1987 (not a coincidence I suspect...). For instruments as a whole, I wouldn't bet that just the above is going to bring home the bacon.
However, if you add some additional criteria that gives you a directional edge and is of a nature than generates a lot of scratches and small gains/small losers, with very little outliers on either side, then you have something where the above could be more useful/profitable than simply going long/short the underlying...