I come here to learn and to help others learn as we all help to contribute to the body of knowledge. Screw it. Find out for yourself. I’m glad I discovered how to hedge her strategy while eliminating the need for selling calls. This could have been a great discussion. I’m not really sure why the animosity. Undoubtedly it’s the jealousy.
What if Karen the Super Trader had an effective hedge?
- Thread starter Sweet Bobby
- Start date
I see some animosity on a lots of posts here, but this may be the result of cynicism associated with traders. You have to be aggressive to play this game, and even more so to win, which also means you have to think of yourself as being the best. In turn, this often brings out arrogant smart-ass attitude, pointing at failures, potential fraud, etc.
But I think many traders would like to discuss interesting strategies without idolizing specific traders... After all, selling OTM calls and puts is a commonly used strategy, with various papers and in-depth analysis written, especially in respect to SPX and hedging strategies. There are also related consultants and services offered to hedge funds. So plenty to talk about without having to mention Karen
I've seen various hedging strategies and been studying them a while ago, but now building my own backtesting system so that I can truly test all related ideas, and see what works and when, and when it may fail. Still, it will be difficult to model the margin impact, so I'm often testing various ideas by trading.
I only didn't understand your point on "how to hedge her strategy while eliminating the need for selling calls". Isn't that strategy to sell calls and puts, and if you eliminate selling calls then it's no longer the same strategy, but some other strategy that may be used by many other traders?
But I think many traders would like to discuss interesting strategies without idolizing specific traders... After all, selling OTM calls and puts is a commonly used strategy, with various papers and in-depth analysis written, especially in respect to SPX and hedging strategies. There are also related consultants and services offered to hedge funds. So plenty to talk about without having to mention Karen
I've seen various hedging strategies and been studying them a while ago, but now building my own backtesting system so that I can truly test all related ideas, and see what works and when, and when it may fail. Still, it will be difficult to model the margin impact, so I'm often testing various ideas by trading.
I only didn't understand your point on "how to hedge her strategy while eliminating the need for selling calls". Isn't that strategy to sell calls and puts, and if you eliminate selling calls then it's no longer the same strategy, but some other strategy that may be used by many other traders?
Trades like this engender animosity because it’s not really trading—it’s underwriting hurricane insurance. It’s why so many disaster REs go under. Think AIG and CDS contracts where they would sell CDS at ANY price. IOW the underwriting doesn’t involve any actuarial modeling because the sample size, occurrence and magnitude are not quantifiable. It doesn’t require any skill to sell a $3 SPX condor. It takes a lot of skill to trade ATM.
Was the $3 condor a good short if the market drops 10%? A better short at $10 as vol heats up? Doesn’t matter. You’re still busto.
Suppose that you’re a skilled option trader (you’re not)...why trade a $3 credit when you can earn $20 by trading ATM? You wouldn’t.
It’s not jealousy. The argument of every idiot that discovers the iron condor. There should be a 12-step program for you morons.
Was the $3 condor a good short if the market drops 10%? A better short at $10 as vol heats up? Doesn’t matter. You’re still busto.
Suppose that you’re a skilled option trader (you’re not)...why trade a $3 credit when you can earn $20 by trading ATM? You wouldn’t.
It’s not jealousy. The argument of every idiot that discovers the iron condor. There should be a 12-step program for you morons.
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Hello guru,I see some animosity on a lots of posts here, but this may be the result of cynicism associated with traders. You have to be aggressive to play this game, and even more so to win, which also means you have to think of yourself as being the best. In turn, this often brings out arrogant smart-ass attitude, pointing at failures, potential fraud, etc.
But I think many traders would like to discuss interesting strategies without idolizing specific traders... After all, selling OTM calls and puts is a commonly used strategy, with various papers and in-depth analysis written, especially in respect to SPX and hedging strategies. There are also related consultants and services offered to hedge funds. So plenty to talk about without having to mention Karen
I've seen various hedging strategies and been studying them a while ago, but now building my own backtesting system so that I can truly test all related ideas, and see what works and when, and when it may fail. Still, it will be difficult to model the margin impact, so I'm often testing various ideas by trading.
I only didn't understand your point on "how to hedge her strategy while eliminating the need for selling calls". Isn't that strategy to sell calls and puts, and if you eliminate selling calls then it's no longer the same strategy, but some other strategy that may be used by many other traders?
The reason Karen is mentioned specifically is because she is the only person that I am aware of who has generated profits approaching $100 million by trading options. She is also the o my one that I’m aware of where we actually have videos of her discussing the specifics of her strategy. If you know where information can be obtained on another similar options trader, please let me know.
Now if you watch the Karen videos she tells us very specifically how she hates calls. As an options trader, I do too! So I have discovered a way to generate income by selling puts, which avoids the selling of calls AND makes money in the event a major correction takes place with a huge spike in volatility! I’m fact, the higher the volatility, the more successful I will be. There is now no reason to fear the Black Swan.
And then I come here trying to stimulate discussion and immediately I am attacked as I have always been on this forum. I wanted to discuss hedges and I thank you for getting us back on course.
My demise has been discussed for years on this forum as well as Karen’s. But we are still here and it pisses the masses off! Why?
Your demise, Junior?
I answered the question in some detail. You’re simply too ignorant to understand the concept.
Hey Sweet Bobby.
In terms of traders who made so much money, true that I don't know others, but there may be large multi-billion hedge funds that use similar strategies, probably automated/computerized to manage risk. I also see various traders who use such strategies with their own capital. One guy in a Facebook options group posts tons of such trades with a $20 mil account selling far OTM calls and puts without fear, supposedly for many years. Sometimes they expire within couple weeks, often within a week or even the same day, so he sells 5 cent options probably to anyone who needs to close/exit their trades or spreads, or so he explains it.
I'm actively testing variety of related strategies, so I suspect that you're talking about ratio spreads and ratio backspreads. I've used ratio spreads for a while, until I realized that during a market crash like last February I could lose $100K in the morning and then gain it back and $100K more in the evening (as an example). During such events the volatility rapidly explodes and then implodes, often within couple hours. This means that you may have huge margin impact in the first minutes of a day when the market is 5%-10% down, and your account may get immediately closed out by your broker before you have a chance to make all the money you think you'd make. You won't see it on systems like TDAmeritrade ThinkBack (showing historical option pricing) because they only show option pricing at the end of the day.
So just keep in mind that any such strategies need to be carefully tested on minute basis.
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Go to hell you ugly bastard!
Thank you for your input. Yes, it would be amazing to get a glimpse into that world and see exactly what the big guys are doing. With Karen , she was able to open the curtain and show us how she generated $100 million in profits.
There is a lot of stuff on Google if you spend time searching.
https://www.google.com/search?q=selling+SPX+OTM+strangles+hedging+pdf
Keep in mind that large hedge funds may use more risky strategies as a small part of their portfolio, so they may not make more than 10% per year overall. Some smaller hedge funds can take more risk. So in all cases there is always "risk".
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