Karen the Supertrader - TastyTrade Hybrid Experiment

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

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  1. #481     Aug 5, 2016
  2. #482     Aug 5, 2016
  3. Pekelo


    It is not a %.....


    " the United States is somewhat unique because capital requirements are not seen as the primary means of risk analysis in the industry.


    Only the last stage in the U.S. risk prevention process involves reserve ratios. These are described as backstops or risk-based capital, or RBC rules. An insurance company must always hold capital in amounts that exceed the minimum regulatory levels or else it may be forced to stay business operations until in compliance.

    Each state has its own insurance regulatory body. These regulatory commissioners sometimes work in tandem to promote uniformity among the various national insurance companies. The National Association of Insurance Commissioners, or NAIC, created its own RBC formula to establish a hypothetical minimum capital level.

    The NAIC uses the RBC calculator to decide if and when to take specific actions against companies that have assumed too much risk. There are no hard-and-fast rules about what reserve ratios or reserve compositions constitute actionable thresholds, however."

    #483     Aug 5, 2016
  4. I was just asking for an empirical estimate, rather than what is implied by the actual methodology. Now that I've been taught how to google, I've found some.
    #484     Aug 5, 2016
  5. Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime. That google thing may be useful in other areas as well !!
    #485     Aug 5, 2016
    Amalgam likes this.
  6. Indeed, you're truly an inspiration!

    Just of curiosity, can you actually answer my question?
    #486     Aug 5, 2016
  7. ironchef


    Yes, that is similar to why my cash secured puts did not produce outsize returns: Dragged down by the cash I needed to "secure" the puts I sold.:banghead:
    #487     Aug 5, 2016
  8. Maverick74


    I think your question went right over their head. :)
    #488     Aug 5, 2016
  9. Maverick - I thought I understood big words like convexity and gamma risk but maybe I didn't - so enlighten me where I'm wrong or if you just throw the words out there trying to confuse the initial post.

    If I sell one straddle my buying power reduction is 1/10 of selling 10 straddles.
    That's pretty linear and that stays that way with both of my brokerages, IB and TD.

    Now if that straddle (single straddle) loses 300$ - the loss on 10 of them is 3000. Also very linear at expiration.

    In the interim my 10 straddles will always have 10 times the margin requirement (that's based on the underlying,volatility ....) of my 1 lot straddle.

    That's my understanding of linear and margin calculation.

    Gamma as you said is non linear but it affects 1 straddle the same way (1/10) of selling 10 straddles. While moving one point away (or towards) the strikes is non linear - that's not what we're discussing here - we're not discussing that landing 5 points from the short strike is the same as 5x landing 1 point from the short strike - we are talking about the net return and the margin required to hold the position.

    Help me better understand this - without confusing the initial post though
    #489     Aug 5, 2016
  10. BINGO! Insurance is a profitable biz, but it's not all that profitable for a very good reason.
    Appears that way, indeed.
    #490     Aug 5, 2016
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