Discussion in 'Journals' started by Sweet Bobby, May 18, 2016.
A little bit surprising. What kind of deltas are you carrying?
I hear ya there. It's pretty tough all around.
Always negative delta.
Picking up coins in front of a steam roller is very challenging. Watch those fingers and arms!
Trapped and you can't jump out of the way. If you break even before commissions, you got lucky.
There were no big moves, that is the market for Karen. She would be up 6-8% in 4 months.
You are clueless.
It still is difficult because of the extremely low volatility. I am only down because I failed to manage one trade.
I follow tastytrade religiously (since 2013) and I support your trading style. I do something similiar aswell. Let me just give you some advice.
The guys attacking you are partially correct. When the market does goes down in a violent way, the issue won't be just the long deltas you will collect on the way down. Or the gamma increasing.
On a big down move you might buy your puts back, but still lose more then from the move itself, because of slippage. When the market goes down fast and the Market Makers (MM) can't hedge their risk propably - because the underlying they use as hedge against your put moves too quick - they widen the bid/ask spread. A 1-2 cent spread becomes a couple of dollars. You have to give up a lot of edge to buy your puts back when that happens.
The worst case scenario is when the MM step out completly. They don't know what's going on and pull back all the bids. There are literally no bids (Watch documentations on the 1987 crash). You have no choice but keep your short puts, because nobody wants to buy them.
The liquidity from the underlying is important. The less liquid the underlying is the extremer the those issues mentioned above will be.
Watch the first show from Dr. Jim "From Theory to Practice". It is about Negative Skew and Positive Kurtosis. He describes it beautfully. If you watch that, he will also tell you the solution for that problem. You have to carry short "static" delta.
Tom talks about that all the time. He carries short delta 95% of the times as a protection against a sudden market crash. If he loses on the short puts, then he makes profits with the negative static delta (It is about 1-3% of the net liq in short deltas).
The tastytrade haters are wrong when they discredit the tastytrade method as whole. They always attack the vulnerablitly to the downside, but never mention carrying the static delta as protection.
In tastytrade there are some great insights and help for every trader. Need an example? Just ask the next hater if he can buy something for 100 and sell it for 90 for a profit with HIS strategy. If his answer is no, you got him on the ropes.
The tastytrade way is a great way of trading. I would never say it is the best, because I don't think it exists. If you are directionally completly wrong on your trade and still make money, that is just powerful...
Anyway, let's ask Bobby how he did today when the market went down 1.7%?
Probably not that badly as tastytrade has been preaching to be short overall for awhile now.
Separate names with a comma.