Exponential growth

Discussion in 'Options' started by Neoxx, Dec 31, 2005.

  1. Neoxx


    Just a simple hypothetical for all the option veterans on the forum...

    If someone had a sound understanding of -

    1) Risk management
    2) Technical analysis
    3) Options

    (let me just add that I don't qualify for the above!)

    - would it be a reasonable expectation to grow your trading capital by 50% over a 3 month period, consistently, swing trading equity options?

    If so, how many years might it reasonably take to achieve this level of proficiency?

    I realise these are completely speculative questions, but please humour me.

  2. The very best professionals investors (EXAMPLE) who exclusively trade options, don't achieve 50% returns every 3 months. But heck, you might be better than them! You also might be willing to accept more risk than them. Or you might be luckier than them. How will you ever really know unless you try your hand at it?
  3. You cannot compare funds with individual investors.
    Funds have to move huge amounts of money, causing slippage (read: giving back parts of the profits) and big drawdowns. Therefore they have to lower the leverage.
    Funds don't trade as often as an individual because they have to be much more careful. They cannot quick jump in and out as individuals can.
    Their trading strategy is based on taking the big moves, so completely different from the small trader who can trade on every occasion he sees.
    Funds don't watch the market as intensively as an individual.

    If you compare a fund with an individual it's clear you don't have any idea at all how a fund works.

    I daytrade futures, i'm not a supertrader, but there is not a single futures funds that can make the return i make. I'm speaking of a period of at least 5 years, not a 6-months period, because i'm regularly beaten in the short term. But never twice by the same fund.
  4. Here's a futures fund that made a compound annual growth rate of 49.2% per year, for the last six years (link1).

    Here's another fund whose compound annual growth rate for the last seven years, is 69.1% per year (link2). Each $1.00 invested in this fund on 1/1/1999 has grown to $39.67 on 11/31/2005, after paying all fees to the manager.

    Interestingly, these funds don't trade options.

    You're welcome.
  5. Well, my monthly returns are even higher.
  6. Neoxx


    So a 400% annual compound growth rate is unattainable for a retail option trader?
  7. bl7077


  8. Well, my returns are even higher then yours.

    Good grief.

    A more useful answer is to look into the various statistical formulas whereby you can compute your "probability of ruin" as largely a function of how much return you are demanding from your money.

    I've made 300% overnight (CME call options a few months ago). I've also lost 80% overnight (ENER Puts last month). The problem is whether you can make money *consistently*.

    There was a long flame war over on Tradestation's message board about this exact issue. One person posted his stats daily that showed 2% ROE per day. Practically everyone else decided he was making it up.

    So, perhaps a super trader can make 2% per day. I'm guessing they're in the top .1% of all traders. Are you that good? If so, then why are you asking us whether you'll be successful?

    To ask "how much do you all make" is only inviting the spike500s of the world to boast that their return is bigger then everyone elses, eventually devolving into a flame war where everyone calls everyone else a liar largely due to jealousy. On the Tradestation boards, the best thing to do is post your equity curve and watch the accusations fly.

    Options don't unlock hidden profit. If you can make 2% per day trading stocks, you can probably do equally well in options. Otherwise, perhaps you're overextending yourself, and setting up for a blowout.
  9. I just wanted to say that there might things possible that sound unbelievable to you.
    If an equity curve is posted it can be manipulated too, so what's the proof of that?
    Secondly there are twe groups : those who believe and those who don't. You will never be able to convince those of the other side you are right. They will always find excuses. So this is an endless discussion.

    A few remarks:
    You apparently have a crystal ball. Without knowing my returns you stated that yours are still higher.

    You judge on me without knowing me or my trading, must be the crystal ball again.

    It's a pity that your crystal ball works for everything except for your own trading as i probably beat you WITHOUT a crystal ball.

    Did i ask you whether i will be successful? After 15 years of daytrading i don't need to ask such a question anymore. And anyone who has the basic knowledge about trading knows that surviving 15 years of daytrading is for most traders never achievable. Consistency is a key element to staying alive after 15 years.

    The fact that you made 300% and lost 80% again overnight is the ultimate proof of your experience as trader. Only newbies can achieve such a performance. I know it is useless, but to give the picture as you say it has to be given: the last 5 years never a losing week and maximum drawdown less than 30% (i think even less than 20%, but i don't have the energy to look it up again for a newbie).
  10. Wow, I tried to make this point tongue-in-cheek in my previous post. Thanks for reinforcing it out of your own mouth.

    If you haven't lost 80% overnight in a single option, you've never traded options. So what are you doing here?
    #10     Jan 1, 2006