this is not new new but it's worth reminding anyone who still thinks tastyshit is legitimate
Tastytrade Review + Criticism
- Thread starter Lucas
- Start date
Saw this the other day, cannot vouch for it's veracity but it is interesting.
http://sjoptions.com/spx-bull-put-spreads-taught-by-tasty-trade/
http://sjoptions.com/spx-bull-put-spreads-taught-by-tasty-trade/
They like to leave out 2008 a lot.
I want to address 2008 and also the issue of Tom's reluctance to discuss expected annual returns, drawdowns and other metrics. I doubt he even knows what a Sharpe ratio is, much less a Sortino ratio. Here is an equity curve for selling 1 SD strangles (their standard strategy) from the Market Measures Sept 2nd, 2016 show. Its a good strategy but...
I want to correct those who claim that 1% a day, 4% a month is feasible. Of the many criticisms I have here, one is that they did not show the average annual return and you can't exactly figure it out because they don't tell you the terminal equity $. Can we estimate $60,000 from this graph? By my back of the envelope calculations, that's approx 24% avg annual return BUT here is the catch. This market measure segment was all about the appropriate amount of total equity to allocate to the strategy to avoid a margin call in market crashes -- hence the 30% number in the chart. So if you dedicate $75,000 of capital (3x$25,000), and trade only $25,000 of it as they do here to avoid margin calls then yes, your annual return to this strategy is in the region of 7% annualized. This is indeed superior to buy and hold the market from an absolute return standpoint and especially risk-adjusted standpoint.
Lastly, look at that drawdown to selling strangles in 2008, you give every penny back that you made in the previous 3 years and then some! Karen the supertrader evidently under-appreciated this risk, no surprise since TT has only recently added equity curves to their presentations and still don't provide the key risk metrics. If there is interest, I will post some thought on how to actually get that 7% return up much higher while keeping risk under control. TT don't discus it because with their commision structure, you can't accomplish what I propose, but with lower cost brokers you can. DG
I want to correct those who claim that 1% a day, 4% a month is feasible. Of the many criticisms I have here, one is that they did not show the average annual return and you can't exactly figure it out because they don't tell you the terminal equity $. Can we estimate $60,000 from this graph? By my back of the envelope calculations, that's approx 24% avg annual return BUT here is the catch. This market measure segment was all about the appropriate amount of total equity to allocate to the strategy to avoid a margin call in market crashes -- hence the 30% number in the chart. So if you dedicate $75,000 of capital (3x$25,000), and trade only $25,000 of it as they do here to avoid margin calls then yes, your annual return to this strategy is in the region of 7% annualized. This is indeed superior to buy and hold the market from an absolute return standpoint and especially risk-adjusted standpoint.
Lastly, look at that drawdown to selling strangles in 2008, you give every penny back that you made in the previous 3 years and then some! Karen the supertrader evidently under-appreciated this risk, no surprise since TT has only recently added equity curves to their presentations and still don't provide the key risk metrics. If there is interest, I will post some thought on how to actually get that 7% return up much higher while keeping risk under control. TT don't discus it because with their commision structure, you can't accomplish what I propose, but with lower cost brokers you can. DG
I think your numbers are a little off. For example the DJIA returned 8.5% annually from 1980 to present, with dividends reinvested its 11.9%.
The S&P returned 8.2% with dividends 11.07%.
So as I said, I am eyeballing the terminal equity value from the chart I provided because they don't provide the data (one of my many problems with them) and indeed the returns could be as high as 10% per year depending on what that actually is. The point is that as sure as hell its not 4 to 6 % per month as some posts here are saying. Are we in agreement on that?
I agree with you. Just buy and hold is not that bad.
I am interested in what you would propose...