Will this beat the market?

dcwriter2 · Jan 4, 2020

Yea, it's a bragging rights thing, and it's not 100 percent but close and then if you lose the first time around, shut it down and try again, the survivorship bias thing.

dcwriter2 · Jan 4, 2020

richDude said:
he is asking if he can get free alpha to beat the spy by selling a call. And I am saying there is no free lunch aka alpha. Because selling option has no intrinsic edge. You may get away with the premium 9 times and it’s that 1 time where tha market will spike past your strike and cancel all the gains you made in the previous 9 times.

I am capable of answering the question lol just didn’t expect I had to explain this shit in detail lol.
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Didn't ask about alpha. I presume we all know option writing isn't alpha.

dcwriter2 · Jan 4, 2020

Will ponder. Tks.

guru · Jan 4, 2020

dcwriter2 said:
Yea, it's a bragging rights thing, and it's not 100 percent but close and then if you lose the first time around, shut it down and try again, the survivorship bias thing.
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Since we’re talking theory, indeed with that kind of performance and bragging rights you’d make a killing. Would just need to charge investors competitive fees, like 1% of NAV for management & 15% on performance

Magyar77 · Jan 4, 2020

Magic said:
Mostly pft vol goes down, the skewness of your PnL distribution will decrease further, and it's going to be pretty much based on sequence of market returns whether you actually make more money. A month like Dec coming in when you're close to expiry is probably going to set you back a loong time before your paltry calls will earn back the losses. The only way you're going to beat the market with this is with a long time horizon and employing some leverage to monetize the slight increase in sharpe. And even then it's going to be marginal at best.
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We will always continue to look for the Holy grail. Keeps Us going I suppose

Amun Ra · Jan 4, 2020

guru said:
I think it’s an interesting approach, I mean possibly selling some deep OTM call, but not sure whether you’d add more than 0.003% to SPX gain, basically collecting free $10 per $300K capital. Not of much use except bragging rights of beating S&P 500. Though even then not sure whether it would’ve worked every time in the past.
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Worst bragging rights ever. Imagine telling this story at dinner.

"Yeah, the S&P went up 28.9% in 2019 and I beat it!"

"Wow, what was your return for the year?"

"28.903%!!!"

"But isn't it likely you'll lose that .003% when you sell due to slippage?"

"DOH!"

Magyar77 · Jan 5, 2020

LOL