Whenever I hear "directionless trading" I think either grid systems (ugh) or nested martingales (double ugh). http://paintbarfactory.com/PBF-Tent-Trading.php I tried reading it but the sales pitch got to be too much. edit - oh wait, looks like option spreads or something >.<
No one knows? Option guys, I don't know anything about options: can you tell me why this system is flawed and isn't the awesome holy grail they make it out to be?
Just glancing at the graph, more than likely the risk is that a fast, quick move towards short strikes will blow you up. Sure, any short premium move will look like a holy grail if the market moves back and forth in a tight range so you gain theta. But the one time the market heads south quick and dirty, shit bricks. Note, I didn't read the site either. I will later; if he found a way to have an unrealized gain rather than a massive unrealized loss while the market heads towards your short strikes FAST, then it is indeed, a holy grail.
Bump. So this system is just another scam like every other "for sale" system, right? Can someone give me a Cliffs Notes version of why it won't work the way they claim it will?
There's no holy grail, every system has risk. Double calendars work but you have to understand the risk involved to do them successfully. Check out Dan Sheridan's free info on this and lots of other good free material. Just google his name.
There are not a lot of reviews of the PBF Tent Trading class, so I thought I would post one. There are two different class types: Basic and Advanced. The Basic class teaches very basic option strategies. The cost for this class is $2,000. This is a rip off for what you learn in this class. Iâve gone through classes that teach the same thing that cost less than $250. I would do some more searching before committing money to this class. The Advanced class teaches some strategies that the teacher claims are safe, however if you are not on top of these strategies, you could lose everything. It is very risky. So overall, I would NOT recommend this class to anyone. I have traded this risky strategy in my paper account, and I have done very well, but when I started trading it with real money, the results were very different. On the PBF website, he talks about one of his students who made all this money in a very short time period. It is very impressive at first glance, but if you read through all of the details, you will see that the money made was actually paper money, which as we all know is very different from real money. From what I can tell in the google group, there are only two people who make consistent money from this strategy. Now, more about the teacher. He is one of the most arrogant and rude people I have ever come across. All he talks about is money, and how lonely he is. We spent a good thirty minutes during one of our classes listening to him talk about how he would trade the account of anyone who could find him a wife. I didnât pay $2,000 to listen to this; it was very frustrating. He also gets openly frustrated with students who ask a lot of questions. During one of our classes he did everything but insult three students because they were having a hard time understanding the concepts. Isn't he the teacher, and isn't that what students pay money for? Anyway, I felt like it was my duty to share this information. Those of you who are not PBF students are not missing out on anything spectacular. He just does a great job on the sales pitch for his products.
Basically, if you observe the profit vs. loss of the Iron Condors he's setting up, such as this one : http://paintbarfactory.com/images/11-24-2009-QQQQ-Iron-Condor.png, you'll see that a) the profit is $500 vs. loss of $1500 b) the BEPs are +5% and -5% away for QQQQ above, and today's date = 20th Nov, while expiry Friday = 1st Jan 2010, i.e., the underlying should not move more than 5% this way or that within 1.5 months. So most of these spreads will give you some heat. If you make $500 3 times, you'll end up paying back the $1500 once. Or twice?! In summary, this, and many other option spreads are interesting, but do not offer any *inherent* magical edge. They're just a different sort of game. Since I know a bit about your trading style from that other thread (only way to trade fibos), you can definitely consider naked options, and maybe some spreads, as a tool in your arsenal to hedge your SPY position. My suggestion is to play around with TOS and I'm sure you will figure out something.