Karen the Supertrader - TastyTrade Hybrid Experiment

Discussion in 'Journals' started by Sweet Bobby, May 18, 2016.

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  1. My trading strategy is mine. It is a combination of Tastytrade, Karen, along with my own rules. It is a real account, being traded in real time. Don't think (based on the title of the thread) that is it just tastytrade or just Karen. Most importantly, the account is up on the year while Tom, Tony, Liz, Jenny and Little Bat are down.
    #1131     Jul 14, 2017
  2. Market dropped more than 25% in Sept 2008 and VIX was shot up more than 30 points.

    As Daal mentioned, what will happen to your account if this event happen again ? let say SPX dropped from 2450 to 1600 ? Are you account survive ?
    #1132     Jul 15, 2017
  3. You guys are all very worried about Sweet B's account. Over these 114 pages he heard these comments many times. If he says he's comfortable he's good to go in my book - isn't that what markets are all about? Who cares if he blows up - it is not my money.
    #1133     Jul 15, 2017
    Sweet Bobby likes this.
  4. i960


    Let us not forget that less than 2 years ago VIX went from 15 to 50 in the span of 3 days around 8/24/2015. It's the same ole game every cycle though. Someone talking about some high win rate trading method in a low vol or bull market, then something happens and you never hear from em again (or not for a very long while).
    #1134     Jul 15, 2017
  5. I did see a lot of premium sellers that claimed to find holy grail in ET before 2008, sadly all of them disappear after that.

    Sometime it is hard to advice someone to avoid disaster until he experience it himself in real life, see what happen if you try to advice a 18 years old don't drink and drive..
    #1135     Jul 16, 2017
  6. Maybe you all would like to join a live streaming session where we use TOS analyze tab to show you how I stress the account. It's all about keeping the size small. You can never think you've found the holy grail. If 1987 happens again, I'm still in business.
    #1136     Jul 16, 2017
    MACD likes this.
  7. MACD


    I would like to join the live streaming session. Thanks.
    #1137     Jul 16, 2017
  8. I'd join too cause I don't think I'd share that view - I think there's a good chance the account would be toast.

    Here's a quick summary where I get lost in the math how you would survive. Feel free to point out wrong assumptions on this calculation - it's a back of a napkin but it still illustrates the constraints.

    Let's say you've 15k in your account. (multiply with the real number - the ratio is the same)
    Let's say you sell 1 SPY 20 delta straddle - to stick with the analyze tab that would be aug/18 expiration 252 calls 239 puts. On 15k a 1 lot seems pretty small on SPY the initial margin without portfolio margin is about 2k. So realistically you'd sell more than a one lot but let's carry that example through.
    This produces a theta of 4 bucks ~ so with 250 trading days you're looking at a potential profit of ~ 1k/year depending when you're rolling (and I realize that theta accelerates as you get closer but so does gamma and that non trading days also slightly contribute to theta) - so let's stay with this example. That's less than 10% annual return. The way to increase that return is closer to expiration options or more leverage - both increase the risk - so let's ignore that for now.
    Now let's stress this 1 lot on the analyze tab and simulate a 22% drop and a volatility spike to 152 (I grabbed those numbers from here https://www.tradingview.com/chart/SPX/WwN6HHVe-Revisiting-October-1987-Stock-Market-Crash/)
    So I adjust volatility on the Analyze tab to 150 and the stock price to 191.
    Here's what happens:
    The P&L loss is 8644. The margin requirement goes from 2k to 9420.
    So your 15k account would be down roughly 3k (as in 15k at the end of the previous day -18k that you'd be responsible for the end of that trading day). You'd be pushed out of your positions at the worst price/spread and you'd hate your brokerage forever. Here's what happened to the ES spread (look at the bid/ask of the e minis) https://www.youtube.com/watch?v=0X3UFmhlyuE
    I traded through this (listening to it now still gives me goose bumps) and got lucky. Hear him quote the spread at 4.40 so in the middle of the video) - when the e minis had a 10 point (not 10 tick) spread the option bid/ask was about 50 points. You don't see the option spread but you hear him quote the pit spread. At that time also TOS was completely overwhelmed and my platform shut down - IB handled it ok since they don't work with tick data but sample the quotes. Without IB i'd have lost six figures - with IB and mostly luck I managed to contain the loss to less than 20k. Anyway - that day slightly traumatized me but going back to the spread - That's about 25 ES points per side (or another 2bucks 50 per SPY contract) that you'll pay off the mid price when you're eliminated that isn't factored into the above calculation.

    Bottom line is I like your spirit and I don't care much for your money (I don't share profits or losses with you) but just be aware that the analyze tab isn't as mighty as it may seem and this is a systemic risk with tastyworks as a brokerage cause you and many other followers will either bring the firm down or all be liquidated around a similar time since their styles are very similar and most of the risk algos run across all accounts.)
    Last edited: Jul 16, 2017
    #1138     Jul 16, 2017
    iprome, trader42, ironchef and 5 others like this.
  9. i960


    Yep! But according to Bobby he's got it all figured out. But for him to say something like "hmm, yeah maybe you guys do have a point and there are some serious unknowns here" would be for him to drop the ego, and we know how that goes.
    #1139     Jul 17, 2017
    DTB2 likes this.
  10. Asshole of the day!
    #1140     Jul 17, 2017
    Chubbly likes this.
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