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  • Gold Retraces 50% Of The 1999-2011 Bull Market [View article]
    TSLA is not a very good candidate for this strategy. Most of your gains came from gamma (the stock move).

    We have been trading it with calendars in the last 8 cycles. 8 winners out of 8. One of our best performers, average gain north of 30%. 41% this cycle.
    Aug 5, 2015. 10:27 AM | 1 Like Like |Link to Comment
  • A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
    "If I am wrong about the oil prices, then the portfolio will not perform as well as if I am correct about oil price direction..."

    You see, now you just proved my point. Your (or anyone else) long only portfolio depends on many factors. In your case, it's oil prices. In other cases, it could be gold prices, interest rates, employment rate, you name it. Also, if the overall market doesn't perform well, I can guarantee you that your portfolio (and 90% of long portfolios) will not perform well. And in case you use options, it will a disaster.

    With my non-directional style, I don't have to worry about all this. You can see how our portfolio performed during 2011 correction - http://bit.ly/1JZP0Xd

    Anyway, I set up the portfolio starting from July 31. Please let me know if you make any changes, in real time.
    Aug 5, 2015. 10:16 AM | Likes Like |Link to Comment
  • A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
    It looks like no matter what I will do, you will always say my calculations are wrong if the results don't suit you. To compare portfolio performance, you always need to start from some date. I just started from the beginning of the year. No I don't want you to provide me the dates because you can always select the dates that suit you when the stock dips.

    I suggested that we do equal allocation, and you agreed, but now you are saying that P and GPRO have 5% allocation each?

    No problem, we will do from end of July as agreed, but I suspect you will always find an excuse if your portfolio underperforms.
    Aug 5, 2015. 09:53 AM | Likes Like |Link to Comment
  • A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
    mikestesla,

    I calculated performance of your 11 stocks portfolio YTD. I used ATM strikes (actually the first available ITM strike), closing prices of Dec.31, 2014, Jan.2016 expiration (July 2015 for AB and ODFL since it was the latest available).

    Are you ready for this?

    Your portfolio return using those options was 20.4% before commissions (20.0% including commissions). You had 5 winners and 6 losers, including one 100% loser (ODFL), one 82% loser (SZYM), and two big winners (SEDG 140% and CTRP 247%), the rest in -+30% range.

    During the same period of time, SteadyOptions portfolio returned 75.2% before commissions and around 60% after commissions, based on 10% allocation (40% in cash) and non-compounded.
    Aug 4, 2015. 11:38 PM | Likes Like |Link to Comment
  • A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
    No problem.

    Since I report my performance based on end of month, I will set up your portfolio based on July 31, 2015 prices. I will use 100,000 portfolio to get equal allocation, and use ATM strikes.

    Sounds good?
    Aug 4, 2015. 06:38 PM | Likes Like |Link to Comment
  • A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
    Why don't we start from Dec.31, 2014? A full year is more representative than 5 months. We can compare YTD performance and do it once a month. It will be fun. Your stock portfolio is up a very respectful 13% YTD, so you get a good starting point..

    And tell me if you want me to use ATM options or ITM options with delta of say ~80?

    "You will see how your performance will decrease with each year going forward if you use the same strategy..."

    Well, so far my performance just gets better and better each year..
    Aug 4, 2015. 04:07 PM | Likes Like |Link to Comment
  • A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
    I see you won't let the facts to confuse you..

    No problem, we can compare performance by year end. But to compare apples to apples, you need to specify which options you would use for your stocks. Correct? And you also need to use correct prices for your cost base. For example, On Dec. 31, 2014, TSLA was $222 and not $199 as you specified. SCTY was $53 and not $50 as you specified. SUNE was $19.5 not $22 as you specified.

    "In your case your results will depend on AI algos, so if you perform 100% this year, the AI algos will see it and adjust"
    I don't depend on AI at all. I trade volatility. And I make those returns since 2011, 4 years in a raw. I would think that algos would adjust by now?
    Aug 4, 2015. 01:38 PM | Likes Like |Link to Comment
  • A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
    Well, my calculation was based on 5 months timeframe. If you take 12 months, my expected return is not 42% but 101%, based on 10% allocation, or 150% based on 15% allocation.

    "So if you make 40% average on your trades, the actual portfolio return is 20%."
    Correct, but my calculation was based on account value including cash. The 8.4% per month return already includes cash.

    I don't let the tax tail wag the investment dog. Even including higher taxes, my return will be still way higher than yours.

    "Yes, I expect 3 out of 10 names not to make 10% it in my formula."
    You mean they will make it higher? Correct, but you also said you expect to hit 7 out of 10 correct, so 3 names will be losers. Now depending on how much they lose and which strike you select, the calls might lose between 50% and 100% and not necessarily offset the trades that went up more than 10%.

    My assumption was that your stocks go up 10% in 5 months on average including losers. Since your portfolio is up 13% in the first 7 months, 10% in the next 5 months is not unreasonable assumption.

    If you want to do a 12 months calculation based on 25% return, we can do it as well. For example, lets see the value of one year TSLA calls purchased on Dec.31, 2014:

    ATM 220 calls traded at $38. If TSLA is up 25% to 275 in one year, they would be up 44%.
    Deep ITM 150 calls traded at $83. If TSLA is up 25% to 275 in one year, they would be up 50%.

    So again, using a one year timeframe, your portfolio of calls would be up around 50%, assuming all your stocks are up on average 25% (including losers), which is a very optimistic assumption. In the same timeframe, my portfolio would be up 101%, including 40% cash, or 150% including 10% cash. And those are non-compounded returns. You have to admit that no taxes can compensate for such difference.

    Also remember that most stocks in your portfolio are high risk high beta names. I don't even want to think what will happen to them during correction.
    Aug 4, 2015. 01:05 PM | Likes Like |Link to Comment
  • A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
    All right, I'll go with you on the strike selection, and pick couple of names from your list.

    TSLA:
    ATM 265 call at $27 and TSLA moves 10%, the trade will be breakeven.
    Deep ITM 200 call at $70 and TSLA moves 10%, the trade will be up 30%.

    CTRP:
    ATM 77.5 call at $9 and CTRP moves 10%, the trade loses ~15%
    Deep ITM 60 call at $20 and CTRP moves 10%, the trade will be up 25%.

    So assuming you allocate 100% of your portfolio to long calls and ALL your stocks move 10% up (which is highly unlikely), and you select your strikes correctly, your portfolio will be up 25-30%.

    Now lets compare with our performance.

    We make on average around 7% per trade after commissions, make around 12 trades per month and allocate 10% per trade, with maximum of 6 trades open. Quick math shows 8.4% return per month (7%*12*0.1) or 42% non-compounded return in the next 5 months.

    So my expected return is significantly higher than yours, with much less risk since I keep at least 40% in cash (you keep 100% allocation) and I don't depend on market direction. If I bump my allocation to 15% per trade (still only 90% allocated maximum), my expected return in the next 5 months is 63% (more than double than yours).

    Did I miss something?
    Aug 4, 2015. 12:22 PM | Likes Like |Link to Comment
  • A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
    "If the big picture market fundamentals change , so do I change and re balance the portfolio accordingly."

    So now you pretend to know in real time and in advance when the market will correct? Well, good luck with that. By the time the market goes down even 10% it will be too late for your long calls.

    "I use call options, and you can calculate what will be the performance from Aug 1st 2015 to year end on your own, you do not need my help to do that"

    I do need your help since I don't know which strikes you use (in terms of deltas). Do you use ATM options (higher leverage)? Or ITM (lower leverage, lower risk/reward)?
    Aug 4, 2015. 11:43 AM | Likes Like |Link to Comment
  • Gold Retraces 50% Of The 1999-2011 Bull Market [View article]
    LP, don't make it more complicated than it is.

    The dollar P/L on ITM or OTM strangles is usually very similar. Since OTM strangle is cheaper, it has higher risk/reward percentage wise.

    For example:
    If you entered 260/270 strangle last Tuesday, the OTM strangle would cost 19.50 and ITM strangle 29.40. Today both are down around $370, but ITM strangle is down less percentage wise (19% vs. 12%). Same would be true if the trade was up (ITM strangle would be up less).

    So if you expect the trade to be up, you would be better with OTM options.
    Aug 4, 2015. 10:17 AM | Likes Like |Link to Comment
  • A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
    "I can go 1 year long naked calls @ 100% allocation at all time because I am confident and if I hit 7 out of 10 correct , you have no chance against me :)"

    You really want to go there? According to your own post, your portfolio is up 13% YTD. You can go to my website and see how ours performed http://bit.ly/1z7jJLP

    As I mentioned several times, one strategy is not better or worse than other. No strategy will perform well all the time.

    But let me ask you a simple question: if the market corrects 20%, how do you think your long calls will perform?

    The bottom line is that even if you pick 7 out of 10 correctly, their performance will depend on what the markets do. Of course in 2013 your portfolio would probably outperform (depending on the leverage you take).

    But I'm ready to do a little mathematical exercise with you. Give me one example how you would construct your long portfolio of calls (name of the stock, option strike and expiration), and what is your estimate of your stocks average performance.
    Aug 4, 2015. 09:42 AM | Likes Like |Link to Comment
  • A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
    Those who buy TSLA are buying the dream. Just be careful to know when to get out when the music stops.

    Again, as a non-directional trader, I don't have that problem. We just closed today our pre-earnings calendar for 40% gain, without taking any directional risk. We have been playing the same setup 8 cycles in a row, booking 8 winners with average return of 30-35%. That's cumulative return of 250%+, with no directional risk. If tomorrow they have a bad earnings report and the stock tanks 20%, I don't care. I will be playing it again next cycle, with the same setup and new price.
    Aug 4, 2015. 12:42 AM | Likes Like |Link to Comment
  • A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
    You are assuming that you can catch the bottom, and that the stocks will always recover after a crash. Are you sure this will be always the case? Look at the Japanese market. 20+ years after the crash, it is still 50% down from the pick. As a non-directional trader, I don't have that problem.

    I would be interested to know how you made 20% in 2008 without shorting, as the market recovered only in 2009. Same for 2000, as the crash lasted 3 years.
    Aug 4, 2015. 12:34 AM | 1 Like Like |Link to Comment
  • A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
    The difference between trading and investing is just a timeframe. For someone like Buffet, 2-3 years might be considered trading. For you it's investing. I was evening to style, not timeframe - buying stocks or trading non directionally.

    No confidence will help you when the overall market crashes. How you did in 2000 and 2008 with your investing?

    As for my returns - they are all on my performance page. Every singe trade since 2011.

    So once again - I don't dismiss your style, don't dismiss mine. Your style works for you, mine works for me.
    Aug 3, 2015. 10:00 PM | Likes Like |Link to Comment
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