Karen the Supertrader - TastyTrade Hybrid Experiment

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

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  1. atrp2biz


    95% of my calendars are with non-index underlyings. I constantly monitor the term structure of a number of underlyings. Eg. AAPL is set up for a calendar as I type which isn't helping my current position :)
    #611     Aug 31, 2016
  2. August 2016 is in the books and the experiment is up 2.47% for the month (up $3,785.43) and up 4.89% since April 5 (up $7,334.19).

    Happy trading!

    #612     Sep 1, 2016
  3. It was an unusually busy day today, especially for a guy that only enters 1 - 2 trades a day. Seven trades today!

    Four of the trades were GTC orders taking profits (the two put trades and the strangle closed for 50% profit and the ratio straddle closed at a 25% profit).

    Here's a look at the Greeks:


    I wanted to post these Greeks because it is probably as close to an ideal situation according to my parameters for this experiment. Ideally, I would like to have a Theta of 1/10 of 1% of the Net Liq. So, my goal would be a Theta of around 158 and my Theta is currently 164.

    I want to maintain a Delta/Vega relationship of -1 to -2. So, I'm pretty much spot on - 683 / - 1350.

    The one metric that I'm falling short in is my Theta/Vega relationship. Ideally I want to keep this at between .20 to .30. Currently, I'm at around .12. I would appreciate experienced traders comments about what I might do to increase this ratio a bit. I certainly realize the easy answer is to increase my theta and decrease my vega. I think I could do some calendars which might help to accomplish this. I'm certainly open to learning from others.

    The account is up $640 for the day and up $8,377 since April 5.

    Happy trading!

    #613     Sep 2, 2016
  4. Dolemite


    So you are ok with your neg gamma being that much higher than your theta?
    #614     Sep 6, 2016
  5. Correct.
    #615     Sep 6, 2016
  6. JackRab


    You can't just compare theta/gamma like that... well.. you can if you compare with similar level of underlying. But to just say my gamma is higher than theta and therefore I do or don't like it, doesn't make sense.

    For instance...

    1- Say you have a stock of $100, 100x short ATM call with 10 days to go at IV 24.
    Theta is +800 and gamma -1000...

    2- Compare with a stock of $200, short 50x ATM call with same IV and maturity (only 50x because stock is double, so exposure would be the same).
    Theta is +800 and gamma -250...

    Which position is preferred? Initially you would say the 2nd, but they are totally the same in risk reward.

    1% move would cost $500 due to gamma in both positions, +800 theta is net result +300.

    1- 1000 gamma short over $1 move is average 500 gamma short x 1 = -$500
    2- 250 gamma short over $2 move is avg 250 short x 2 = -$500

    So... to do a risk assessment based on theta/gamma you should be indexing the gamma to say 100 via: (stock price/100)^2

    Which means:
    1- indexed(100) gamma = -1000
    2- indexed(100) gamma = (200/100)^2 = -1000
    #616     Sep 6, 2016
  7. Dolemite


    Forget about the ratios for a minute. Are you saying that having -264 gamma against 164 theta in the SPY is not a risky position? 3 pt SPY move down (give or take) and your position is delta positive and vega negative, double whammy. You are not earning enough theta to offset the risk you are taking in this low vol environment.
    #617     Sep 7, 2016
  8. Sweet bobby, is it true that Karen is a fraud?
    #618     Sep 7, 2016
  9. I read the entire complaint. I think it is clear that she was trying to cover up losses and trying to get the gains back before her investors found out. Doesn't sound good at all, however, at this point my strategy barely resembles anything she was doing and is still a work in progress. What I credit Karen with is getting me involved.
    #619     Sep 7, 2016
  10. JackRab


    I didn't say it wasn't risky... ;)

    3 points down is not that bad, 700 delta short covers the loss on short gamma and short vega.
    -700 d x 3 = +2100
    -265 g x 3 = -1200 (assuming gamma stays the same)
    So if the IV rises by less than .70 it's still okay.

    Up is the pain because you get hit with 3300 loss and I wouldn't bet that the Vol will drop by more that 1 point... And then @Sweet Bobby is short 1500 delta's.

    Beyond that it really starts to hurt.

    But good point, @Dolemite ... he can only take about a 1-2% move. But that said, if he's okay to sit on eggs for a few days... might be fine...
    #620     Sep 8, 2016
    Dolemite likes this.
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