As I wrote, include some with strikes that were near the money a week and two weeks ago. Then graph the two week straddles (intraday, not closing prices). They were ATM back then and by looking at their performance over the past week or two so if there are any gamma gains, they will be evident if underlying price has moved. If you want to prove the efficacy of your system and silence naysayers, after you alert your subscribers to a position, post the trade details here after a reasonable delay. For example, we bought an XYZ straddle at $5.40 1/2 an hour ago and then readers can evaluate in almost real time going forward. Without that, it's just your word and not many will accept that as proof positive in a world full of internet scammers. And if you picks do succeed, I bet that you will get more subscribers as well.
I had a similar discussion with tastytrade. What they do is randomly selecting few stocks, time to buy and time to sell, and do a "study" proving that the strategy doesn't work. We debunked their studies many times. We also debunked their studies advocating selling premium before earnings on high IV rank stocks. Here are few articles that might help: How We Trade Straddle Option Strategy Buying Premium Prior To Earnings - Does It Work? Can We Profit From Volatility Expansion Into Earnings? How We Made 23% On QIHU Straddle In 4 Hours It is good to have different opinions. This is why the market exists. If everyone believed that buying straddles before earnings is a profitable strategy, nobody would sell them. So we are actually grateful to tastytrade and all naysayers for providing us a fresh supply of sellers for our straddles.
There are several reasons for it. First one in my case is health insurance, unfortunately. I have a pre-existing condition which would make it impossible for me to get coverage otherwise. Second one is economy of scale with respect to infrastructure At the fund i have a lot of things taken care of such as historical data (quality historical data globally is hard to buy and maintain), prime brokers etc. Finally, there is a matter of absolute returns. To match my take-home at a fund, I’d have to be either making unrealistically high returns on my capital or have much more capital.
Do you think it is fair to our members who pay a subscription fee? Frankly, I don't need to prove anything. All the proof is on our performance page. And if anyone wants to verify it, there is a 10 days free trial to do it. I always offer a guarantee that our track record is accurate and complete. Anyone who finds a single discrepancy between our track record and what is posted on the forum in real time will get a lifetime free subscription.
This is one of the main reasons for most fund managers and subscription based services. You understand it - and yet you are questioning my motivation for running a subscription service.
Very interesting thread. Can you please explain why you calculated vol using those equations? I'm not sure about the meaning of the numbers such 252, 4, 5 in this case. Can you please provide a link to the original equations? Also, why is this "vol ramp" not tradeable if it is reflected as an options price change? Thanks!
Don't you have the same issue if you have, say, 100 members, each having 100k in their account? If you members try to use the same strategy, collectively they will face the liquidity issue and cause the performance to degrade.
Why, your motivation is pretty clear. You’re running a service to make money on the subscription fees I do, however, question the ability of your clients to make money based on your subscription alerts (described somewhere before). That’s the key difference between you and an OPM trader. An OPM trader only makes money if his clients make money (*). Conversely, you mostly don’t care how your clients do, especially if you can replace them fast enough by using aggressive enough advertisement. (*) not to say that an OPM trader can’t game the system from the risk perspective but it’s gotten much harder to do in the last few years. PS. I did ask why would you be running a service while having a holy grail strategy. On one hand, a 2-Sharpe strategy that has no obvious capacity constraints should allow to raise funds. On the other hand, by running a service you are potentially giving away your alpha.
It’s simple. 252 is just a number of business days in a year, but it’s just an annual factor. Imagine that you have a stock that normally moves 1% per day but also has an upcoming earnings that normally is 10%. If there are 10 days left to expiration, your implied vol would be A = (1%*sqrt(9) + 10%)/sqrt(10) Now one day passes, it becomes B = (1%*sqrt(8) + 10%)/sqrt(9) As you can see, even though event pricing is the same, it’s relative weight has increased and thus optically the implied volatility is higher. The way an option price works, it is scaled by the square root of time too. So the two cancel each other and you end up with no price increase Opt(10d) = 0.4 * A * sqrt(10) Opt(9d) = 0.4 * B * sqrt(9) If you substitute A and B into the equation, you will see that the price change will be equal to one day worth of regular theta.