I'm not a trader, but have made a few trades over the years that turned out very well. This year I was cautious and just bought a fair size position in COP near $50 and sold the 2010 ATM LEAPS near $1000. If the options are executed, 20% return. Would the full time traders here consider a 20% return a good year or do you expect to average a much higher percentage? For example, with a $250,000 account would you expect to make $100,000 a year or so?
Would 20% return annually be enough?
- Thread starter tomsmith
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It is all statistics.
You could ask the same question about weekly performance expectations. Just increase leverage and flip a coin.
The problem with your question is that you can superimpose performance on any timeframe, and realize it is always comparing apples to oranges. I can double a $5000 account in a few days with the right run of luck. But just as often, I'll lose it.
Same goes for lower magnitudes of risk - if you aren't levered, you usually must settle for lower returns. If you are position trading, you must let your good trades perform enough to offset all of the bad ones. With that said, performance targeting will just as likely add another barrier to success (or at least a complication). If you were high beta going into mid-08 with 100% exposure, the odds are you lost 75% of your money. You need 300% just to get back to square one. 20% performance targets just don't cut it with that type of drawdown.
The point is simple: even if you never had that 75% drawdown, there's nothing stopping that from happening next year.
The whole thing falls in the realm of statistics and common sense -- if you are able to make 40%/yr on 250k without drawdown, then you have a special sauce that falls outside the parameters of this discussion. But if you make 40%/yr b/c your risk is beefed up and you can't precisely quantify why you've done so well, you have no advantage, and will always be on the precipice of failure. It's just a matter of time.
A very, very well thought out and explained reply.
kudos to the reply.
when you decide that such and such % is what you need . do you think the market will agree with you.
Its all about the potential of a given trade at a given time.
I did lots of covered calls .deep ITM. when I could decide my ROI. and kept it safe. but many blew up in 2008
it was almost as if I was seeking the x% return and trying to find the trade. and not looking at the actual potential of the trade.
just find the opptys and hit them. and then at the END of the year figure out you P/L.. and yes, my Profit for capital/time deployed is higher than 20%
and also dont over analyse. /and get paralyzed..
I wanted to hit SLT. in jan. a june 5 strike covered call was giving me 48% ROI. buy it for 4.59 and sell the call and get 1.3. and that was good enough protection. i did it. while my friend was saying that selling the call will take away the top side profit( which is true it is 9$ now).. but he did not trade and was over analysing. waiting for some technical indicatior..
while it flew.. atleast i did trade and bagged the 48% ROI in 6 months.
when you decide that such and such % is what you need . do you think the market will agree with you.
Its all about the potential of a given trade at a given time.
I did lots of covered calls .deep ITM. when I could decide my ROI. and kept it safe. but many blew up in 2008
it was almost as if I was seeking the x% return and trying to find the trade. and not looking at the actual potential of the trade.
just find the opptys and hit them. and then at the END of the year figure out you P/L.. and yes, my Profit for capital/time deployed is higher than 20%
and also dont over analyse. /and get paralyzed..
I wanted to hit SLT. in jan. a june 5 strike covered call was giving me 48% ROI. buy it for 4.59 and sell the call and get 1.3. and that was good enough protection. i did it. while my friend was saying that selling the call will take away the top side profit( which is true it is 9$ now).. but he did not trade and was over analysing. waiting for some technical indicatior..
while it flew.. atleast i did trade and bagged the 48% ROI in 6 months.
I'm not a full time trader either - but I would compare my return to a benchmark. If you're selling Leaps vs a position its not taking up much of your time. But if you were trading actively, made 20% and the S&P was up 20% for the same period - you've wasted your time. You would have done better in a mutual fund. That's my thought anyway.
It is all statistics.
You could ask the same question about weekly performance expectations. Just increase leverage and flip a coin.
The problem with your question is that you can superimpose performance on any timeframe, and realize it is always comparing apples to oranges. I can double a $5000 account in a few days with the right run of luck. But just as often, I'll lose it.
"Same goes for lower magnitudes of risk - if you aren't levered, you usually must settle for lower returns. If you are position trading, you must let your good trades perform enough to offset all of the bad ones. With that said, performance targeting will just as likely add another barrier to success (or at least a complication). If you were high beta going into mid-08 with 100% exposure, the odds are you lost 75% of your money. You need 300% just to get back to square one. 20% performance targets just don't cut it with that type of drawdown.
The point is simple: even if you never had that 75% drawdown, there's nothing stopping that from happening next year.
The whole thing falls in the realm of statistics and common sense -- if you are able to make 40%/yr on 250k without drawdown, then you have a special sauce that falls outside the parameters of this discussion. But if you make 40%/yr b/c your risk is beefed up and you can't precisely quantify why you've done so well, you have no advantage, and will always be on the precipice of failure. It's just a matter of time."
Good answer, but I'm just looking for some simple comments about how traders here fare as a % of their accounts Just curious to know that if the traders here wanting to make a fair salary of say $100,000 or so , and accepting the fact that the supposed best minds in the business that run big funds might only have returns of 20% or so, do you figure you need a $500,000 account to start with, anticipating returns equal to the better fund managers, or do you feel that even with a smaller account you can outperform them and get a much higher return, say 50% or more annually?
You could ask the same question about weekly performance expectations. Just increase leverage and flip a coin.
The problem with your question is that you can superimpose performance on any timeframe, and realize it is always comparing apples to oranges. I can double a $5000 account in a few days with the right run of luck. But just as often, I'll lose it.
"Same goes for lower magnitudes of risk - if you aren't levered, you usually must settle for lower returns. If you are position trading, you must let your good trades perform enough to offset all of the bad ones. With that said, performance targeting will just as likely add another barrier to success (or at least a complication). If you were high beta going into mid-08 with 100% exposure, the odds are you lost 75% of your money. You need 300% just to get back to square one. 20% performance targets just don't cut it with that type of drawdown.
The point is simple: even if you never had that 75% drawdown, there's nothing stopping that from happening next year.
The whole thing falls in the realm of statistics and common sense -- if you are able to make 40%/yr on 250k without drawdown, then you have a special sauce that falls outside the parameters of this discussion. But if you make 40%/yr b/c your risk is beefed up and you can't precisely quantify why you've done so well, you have no advantage, and will always be on the precipice of failure. It's just a matter of time."
Good answer, but I'm just looking for some simple comments about how traders here fare as a % of their accounts Just curious to know that if the traders here wanting to make a fair salary of say $100,000 or so , and accepting the fact that the supposed best minds in the business that run big funds might only have returns of 20% or so, do you figure you need a $500,000 account to start with, anticipating returns equal to the better fund managers, or do you feel that even with a smaller account you can outperform them and get a much higher return, say 50% or more annually?
I've asked a similar question in the past. Once you filter past the bravado and look at the realistic responses from people who've been in the field for some time...
... it looks like we should all accept we're human, and accept normal market results. 20% a year *consistently* is an excellent result, period.
To become one of the richest men in the world, all Warren Buffet had to do was deliver annualized returns of 22% a year for 20+ years.
... it looks like we should all accept we're human, and accept normal market results. 20% a year *consistently* is an excellent result, period.
To become one of the richest men in the world, all Warren Buffet had to do was deliver annualized returns of 22% a year for 20+ years.