IS this Karen Supertrader story legit?

[jkane]

Who is this Tom Sosnoff clown??

I know he created thinkorswim that TD Ameritrade uses but he seems like a rebel

 

[ACstudio]

@;

I wish you the best. I can't do what you do. IMO even risk defined trades only work in the long run if you gamble a small portion of your account at any given time, thereby handicapping your returns. Few people can maintain that kind of discipline over the years. Eventually the slog bores them and they overreach. Defined risk trades can wipe out an account in hours if you are overweight and THAT day comes when all equity markets gap hard and run away simultaneously. However, a good trend trader with a 24hr automated system could double his account that same day. Of course, there is a much steeper learning curve to coding your own trading system. It can take many months, even years before you might be ready to place your first reliable trade.

Ye I think there are some points you are missing.
The whole point is that you are able to just use small portions of your account across a large number of positions if you want. And limiting your returns is the whole point...limiting profitability increases probability.

Discipline and boredom are a personal handicap.

Anybody can be wiped out trading directionally in highly correlated products. So with options there is a solution....don't. If you have several directional plays that are highly correlated with movement in something like SPY simply hedge the risk by placing offsetting positions in the SPY. You can calculate this by beta weighting your delta risk against whatever you want. You can under hedge, neutralize...do some pairs, like go long SPY and short QQQ...whatever. You can offset your directional risk within the product itself if you want.

As far as doubling account size? Returns are a function of risk and are the inverse of probability. The problem is the further away you get from 1/1 returns the less efficient the probability is. Example....Who do you think make more money in the end...the guy selling lottery tickets or the guy buying lottery tickets? Lottery returns are way out of line with the probabilities....and when the returns do start to come in line with the probability as with progressive jackpots...the likelyhood of the pot being split increases in proportion to that probability...thereby reducing the returns again far below the probabilities. You will see it in horse racing also...horses that have 40-1 odds against winning are not going to win 1 out every 40 races...it is usually more like 1 out of every 50-60. But horses that are paying 3-2 have a win rate much more in line with the probabilities (minus the vig).

So when someone says to me "I've got a system that can double your money overnight"....I say "I'll short that." Because I know that the probabilities will be in my favor.

I realize there is a big learning curve to coding anything (for me). I have to pull up my notes to set a new alarm code. But I also know that MIT students at the top of their class and/or teams of the worlds most brilliant people with billions of dollars at their disposal have built and are probably currently working on systems to break the bank or double their accounts. So more power to them...and you. But I've seen no evidence concerning their success beyond what you would expect from a normal bell curve distribution of success and failure.

Good discussion.

 

[BurtsDog]

The whole point is that you are able to just use small portions of your account across a large number of positions if you want.

Even 'uncorrelated' markets can make large moves in the same direction simultaneously. Most traders are nowhere near as diversified as they think they are.

 

[ACstudio]

Even 'uncorrelated' markets can make large moves in the same direction simultaneously. Most traders are nowhere near as diversified as they think they are.

If you want to go that far then ye anything is possible. But I'm not going to lose any sleep about the possibility that SPY,QQQ, RUT, RSX, USO,FXI, GLD, SLV, TLT, FXE, UNG, and the rest are going to make a 2 standard deviation move exactly in the direction needed to wipe me out on a day when I somehow had all of my account at risk with no delta hedge within the same derivative.

My portfolio is near delta neutral vs the SPY and then spread across various and sundry other derivatives. So I sleep ok. I hold the belief that there is actually more risk in taking no risk than taking risk in a domain you understand and learning how to calculate and manage risk. If I didn't believe that, I would still be working at a factory.

I don't think there is anything wrong with how any one else wants to trade....often these things end up looking like a cheer leading competition about who thing is better than who's. All I'm saying is you are going to have a hard time convincing me that I would be better off doing something else. I'm not sure you quite grasp the scope of what probability trading or long/short portfolio trading involves. No insult there...It's just evident by your analogy that your missing some of the puzzle pieces.

 

[BurtsDog]

It's just evident by your analogy that your missing some of the puzzle pieces.

I'm willing to admit that I may not completely appreciate the full potential of options trading techniques I have seen so far. However, it is true that most billionaire hedge fund managers spend relatively little time trading options and the majority of their time doing things like trend following and mean reversion. There are reasons why they do this. I don't claim to know all the reasons.

 

[lloydbee]

Probability trading

IMO even risk defined trades only work in the long run if you gamble a small portion of your account at any given time, thereby handicapping your returns

You have an 80% chance of making a little money and a 20% chance of destroying your trading account if you are caught overweight during a gappy runaway market.

A good trend trader's system can flip from buy to sell in the middle of the night and already be making a killing long before the options trader even begins his mad scramble to stem the bleeding.

I am by no means the 'be all and end all' of options trading but trading the way I do works for me and works pretty consistently so I am willing to show some results once just to weigh in for probability trading and to show you Burtsdog why I trade options and why what Karen does is 1. no big deal, and 2. that it works.

I'd like to know where you got your 80% and 20% figures from? and the "gappy runaway" days you speak of just create opportunity for those that are flexible option 'traders' imo.

and as for your "Mad scramble to stem the bleeding" as you say... Here is some results of my trades not going according to my plan and the resulting losses whilst my options work their magic on getting the position back too or as close too profit.


This is the results when I use instant positions on random tickers using probability... THAT is why probability trading trumps other forms of trading imo.

 

[ACstudio]

I'm willing to admit that I may not completely appreciate the full potential of options trading techniques I have seen so far. However, it is true that most billionaire hedge fund managers spend relatively little time trading options and the majority of their time doing things like trend following and mean reversion. There are reasons why they do this. I don't claim to know all the reasons.

That's my point...how do you think they hedge themselves? The Blackrocks and Susquehannas of the world are the guys on the other side of every trade you and I make. They could care less about what we think the trend is or our opinion about mean reversion. They'll take the other side of every trade we make and then lay off the risk with other positions....including derivatives, long/short, bonds, futures, whatever....you think they are going to limit themselves other than by liquid markets?

Maybe some guy somewhere said oh ye I trade billions just following trends yadda yadda...but trust me...they are not taking naked risk. The ones that go too big in one area are the ones that get blown up. I'm out of my depth here but I'll bet a box of donuts that risk management is a far bigger aspect of their strategy than market assumptions.

 

[BurtsDog]

That's my point...how do you think they hedge themselves?

A good trend trader trading 24hr markets does not need to hedge his position with options. His system can flip from long to short in an instant, automatically, even while he is sleeping. Or, if he feels the need to hedge he can maintain both a long and short position in the same market simultaneously in different ratios.

 

[ACstudio]

A good trend trader trading 24hr markets does not need to hedge his position with options. His system can flip from long to short in an instant, automatically, even while he is sleeping. Or, if he feels the need to hedge he can maintain both a long and short position in the same market simultaneously in different ratios.

Not sure I get your point. (again) I'm sure there are people sitting around scalping price action in FX markets and doing fine. (again) everybody has there own thing. But if you think that the Susquehannas and Blackrocks of the world are not heavily in derivitives ( " However, it is true that most billionaire hedge fund managers spend relatively little time trading options...") you are sorely misguided. These are the liquidity providers. (again) They will take the other side of every trade we make...because they manage risk. They don't care about our opinions or assumptions about the market.

That is why probability traders will not get destroyed or scrambled or whatever...("You have an 80% chance of making a little money and a 20% chance of destroying your trading account if you are caught overweight during a gappy runaway market.")

Nobody here is challenging your strategy. (It is starting to sound like your trying to convince yourself that your endeavors are worthwhile.) But when you start telling probability traders that they are going to get destroyed you should prepare yourself to be challenged and have some understanding about what it is we are talking about.

And I'll bet another box of donuts (I like donuts...jelly filled and anything w/ maple will be fine) that even you will find a way to manage risk across price action in multiple markets. Maybe you find a correlation between AUD/JPY and EUR/USD and program your little box to do one thing in one and the opposite in the other....who knows. In the options world we might call that pairs trading. Like shorting GLD and going long SLV at 30 deltas and makin' bank either way. HooBoy we're having fun now.

 

[ACstudio]

@lloyd man I can't make heads or tails of those pics. I get the P/L part but under "Net Shares" ...is that the notional equivalent for your option positions or?

 

[lloydbee]

@lloyd man I can't make heads or tails of those pics. I get the P/L part but under "Net Shares" ...is that the notional equivalent for your option positions or?

If I had any shares in the trades it would list the amount purchased or sold there BUT I am 100% options and so it more relates to the Delta of the position.

The only reason I uploaded the images was for BurstDogs viewing after claiming I would destroy my account if things were to go wrong, so here is some trades showing them going wrong and the losses are minimal (P&L Open)

Lloyd

 

[ACstudio]

If I had any shares in the trades it would list the amount purchased or sold there BUT I am 100% options and so it more relates to the Delta of the position.

The only reason I uploaded the images was for BurstDogs viewing after claiming I would destroy my account if things were to go wrong, so here is some trades showing them going wrong and the losses are minimal (P&L Open)

Lloyd

Gotcha...that's what I meant by notional equivalent. Like A 1$ wide credit spread if the short strike was -30 deltas might be the notional equivalent of being short 10 shares of stock if the long strike was +20 deltas. Makes sense now...thanks.

 

[CostaKapo]

Gotcha...that's what I meant by notional equivalent. Like A 1$ wide credit spread if the short strike was -30 deltas might be the notional equivalent of being short 10 shares of stock if the long strike was +20 deltas. Makes sense now...thanks.

Was there any particular literature, dvd, youtube, former job, or what source got you familiar with the way you probability trade? I watched all the TT videos on youtube, and I get the concepts. I still feel like I struggle to justify the spreads I end up picking over other spreads.

I'll calculate a 2SD move on $NFLX or $AMZN and see that - okay on a $NFLX 10 contract I am risking $2200 to make $300 then on $AMZN a 2SD move on 10 contracts will give me a $190 premium while risking $1100 max loss. I will pick the $NFLX spread because it aligns with my risk ratio and gives me more premium, but much outside of this I feel as though I am not doing enough to distinguish which spreads to get in.

 

[ACstudio]

Was there any particular literature, dvd, youtube, former job, or what source got you familiar with the way you probability trade? I watched all the TT videos on youtube, and I get the concepts. I still feel like I struggle to justify the spreads I end up picking over other spreads.

I'll calculate a 2SD move on $NFLX or $AMZN and see that - okay on a $NFLX 10 contract I am risking $2200 to make $300 then on $AMZN a 2SD move on 10 contracts will give me a $190 premium while risking $1100 max loss. I will pick the $NFLX spread because it aligns with my risk ratio and gives me more premium, but much outside of this I feel as though I am not doing enough to distinguish which spreads to get in.

If it were me I would look at which one gave the best ROC (return on capital). And make sure about who has earnings etc. For me it's hard to find anything out at 2 SD that is worth doing but I trade pretty small. So I might look for trades closer to 1 SD or tighter where I might be risking 70 to make 30 or on a bigger scale 700 to make 300...because then I look to take them off at 30-50% max profit. If I was doing something to collect premium at 2 SD I would prob use that to cover something on the other side tighter in. The capital requirement won't change much but you will collect more premium. Then keep some cash ready to manage the deltas.

I've covered a lot of ground but probability stuff is primarily Tastytrade.

 

[CostaKapo]

If it were me I would look at which one gave the best ROC (return on capital). And make sure about who has earnings etc. For me it's hard to find anything out at 2 SD that is worth doing but I trade pretty small. So I might look for trades closer to 1 SD or tighter where I might be risking 70 to make 30 or on a bigger scale 700 to make 300...because then I look to take them off at 30-50% max profit. If I was doing something to collect premium at 2 SD I would prob use that to cover something on the other side tighter in. The capital requirement won't change much but you will collect more premium. Then keep some cash ready to manage the deltas.

I've covered a lot of ground but probability stuff is primarily Tastytrade.

Do you stay in the SPY IWM QQQ EEM - RUT and SPX world or do you use the premium bearing equities like NFLX GOOG AMZN AAPL TSLA PCLN FB?

I am looking at the Bull Put Spread Buy the AMZN Weekly (4 Days to exp) 277.5 Put Sell the 280 put. 50 contracts gets me 2500 premium risking 10,000. What do you think?

 

[CostaKapo]

 

[CostaKapo]

Well I think I already know your answer because $AMZN has earnings on the 23rd.

 

[ACstudio]

Do you stay in the SPY IWM QQQ EEM - RUT and SPX world or do you use the premium bearing equities like NFLX GOOG AMZN AAPL TSLA PCLN FB?

I am looking at the Bull Put Spread Buy the AMZN Weekly (4 Days to exp) 277.5 Put Sell the 280 put. 50 contracts gets me 2500 premium risking 10,000. What do you think?

I've got a call spread for credit on SPY and an Iron Condor on QQQ. Otherwise I have various positions in SLV,EWZ,FXI,UNG,USO,TLT,RSX, an earnings play in IBM and some lottery tickets in AMD and RSH and a few other things. Nothing very big. With several of those positions I'm doing calendars on LEAP calls and just rolling for premium....nothing very risky.

I don't do weeklies at all or take on trades with less than 25 days to expiration (except earnings plays where I look to collect on volatility contraction) for a couple of reasons. One the Gamma risk in the last week is very high. And in weekly options there is usually much less liquidity than the monthly expirations.

If it were me I would sell a strangle at one SD for NOV(280-325). only takes 4k in capital with a 1200$ return and a lot more time to manage the deltas. The vertical spread isn't really manageable if it moves against you...especially at 4 days to expiration.

 

[ACstudio]

Oh ye the earnings....then maybe an iron condor at 1sd on the weekly or with a week to expiration. Or a butterfly...something that takes advantage of the contraction in volatility that will come in after earnings.

 

[CostaKapo]

Oh ye the earnings....then maybe an iron condor at 1sd on the weekly or with a week to expiration. Or a butterfly...something that takes advantage of the contraction in volatility that will come in after earnings.

PM'd you