Karen the Supertrader - TastyTrade Hybrid Experiment

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

Thread Status:
Not open for further replies.
  1. Actually, I'm up 15.4%, but who's counting. Perform the calculation now. Snap! Am I still getting beat? You are a funny one!
     
    #691     Sep 23, 2016
  2. atrp2biz

    atrp2biz

    Do the math then.

    1.084^n = 1.091^n x (1 - t), where t is the tax rate and n is time. At what value of n is the RS > LS?

    EDIT: I guess Bobby's clarification makes my question irrelevant now.
     
    #692     Sep 23, 2016
    Sweet Bobby likes this.
  3. Daal

    Daal

    Thats the thing, in order to make the strategy more resilient to blow ups, you go to do things that will decrease the returns. In the end, I find it unlikely that you will be able to beat the index, specially after taking into account taxes and commissions. Of course, dont let me stop you from trying but just keep in mind that S&P500 options are probably the most closely watched and researched options market around. All the big geniuses try to extract profits from it
     
    #693     Sep 23, 2016
    Sweet Bobby likes this.
  4. I accept the challenge. I'm kind of following the Anthony Caine model of LJM. I try to devour anything I can from him and his funds. Great reading!
     
    #694     Sep 23, 2016
  5. Long term cap gains are 20% so you can do the math. 15.4% is taxed higher (30% min perhaps) than current index return to date so the difference is just a few % points. It seems you are saying that the amount of risk being undertaken is well worth the 3-4% absolute boost in returns over buy and hold. I am not sure it is worth it.

    If I bought 3 NQ contracts on April 5th my profit today would be $22,740. My margin for this would be about $12,000 depending on your broker. There are many ways to demonstrate that the risk being taken on is significant so the returns should be relatively higher than simple buy and hold the index before or after taxes, not to mention the amount of margin being occupied for it.

    Bobby has shown that his desire is to trade these monthly regardless of the market conditions. WHo are you going to believe, him who is doing this for the first time, or someone who did it 10 years ago, made a ton of money on it and got out when vols changed and avoided 2008, and who also knows many others who traded similar strategy and no longer trade.

    I always find the rookie trader who gets excited for their returns before a year is even done is counting their chickens before they hatched. I do not wish anyone to have major losses but when someone is warned that their approach ignores the true risk, then you almost have to believe it is needed for the lesson to be learned.
     
    #695     Sep 23, 2016
  6. Daal

    Daal

    With the index you can also defer your tax liability, you dont have to sell. Buffett knows this trick well. With options you are constantly paying tax
     
    #696     Sep 23, 2016
  7. Daal

    Daal

    Word. Thats why its important to calculate your blow up point. Once you understand all you are doing is borrowing against these extreme scenarios, you realize that your profits arent simply profits like that
     
    #697     Sep 23, 2016
  8. Thank you, this was my point that on the options you already took the taxable event where in the index buy and hold you are not creating a taxable event as you are holding. So to undertake a lot of risk you should be doing something much better than simply buying the index. When I realized that the returns were dwindling with increased volatility in the market the risk adjusted returns of blindly selling premium drop a lot. I will sell the occasional straddle but it is a vol play more than anything.
     
    #698     Sep 23, 2016
  9. Pekelo

    Pekelo

    But you do close the position at one point (because, I dunno, you wanna buy food and pay for shelter), so you should subtract the tax if you did it for Bobby's returns. Oh yeah, and by the way the S&P500, a much more watched index only returned 4.7% since Apr 15th, so Bobby outperformed that nicely with or without taxes. I think doubling the S&P's performance was worth the trouble, but who knows, maybe it is too early to tell.
     
    #699     Sep 23, 2016
    Sweet Bobby likes this.
  10. Daal

    Daal

    Thing is, it might not be right just to compare the results with the S&P500 return. His strategy has a degree of leverage and risk that being 100% long SPY doesnt. You will pretty much never lose 100% being long SPY, but you can lose 100% running a $600K notional risk on $150K. So there is some leverage in his strategy, if you apply some leverage to the S&P500 (either with futures, margin or deep ITM calls), then the returns will increase as well
     
    #700     Sep 23, 2016
Thread Status:
Not open for further replies.