Re: [SuperTraderKarenStudy] Re: Back Testing


Jul 29, 2015

 


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#4534 Jul 29, 2015

I do a lot of backtesting, so let me take a stab:1- Does it just take into account a certain historical period or does it take all contingencies into account ? For instance , when Tyler said his system , would never get him .into a margin call , is that only in the historical period that he tested all things being equal , or he will really .NEVER get into a margin call ? .

I can't answer for tyler. Generally I look at the worst periods and stress test current portfolios as if the worst-case were to happen today. I don't think anyone could say they would never get a margin call unless they are appropriately size their position or they were hedged. If they are not, its hard to say that given the very few sample size of the extreme movements we have *while we have good option backtest data*.

2- If so. , can we be rest assured , that once a system is back tested , that it will continue to do so in the future ?

No one in their right mind would think this.



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#4536 Jul 29, 2015

Great answers ... Very informative ... Thank you Dustin

From: "Dustin Hunter cosmicnonplusation@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> To: supertraderkarenstudy@yahoogroups.com Sent: Wednesday, July 29, 2015 10:21 PM Subject: Re: [SuperTraderKarenStudy] Back testing ... True or most probably true ?

��I do a lot of backtesting, so let me take a stab:1- Does it just take into account a certain historical period or does it take all contingencies into account ? For instance , when Tyler said his system , would never get him ��into a margin call , is that only in the historical period that he tested all things being equal , or he will really ��NEVER get into a margin call ? ��

I can't answer for tyler. Generally I look at the worst periods and stress test current portfolios as if the worst-case were to happen today. I don't think anyone could say they would never get a margin call unless they are appropriately size their position or they were hedged. If they are not, its hard to say that given the very few sample size of the extreme movements we have *while we have good option backtest data*.

2- If so�� , can we be rest assured , that once a system is back tested , that it will continue to do so in the future ?

No one in their right mind would think this.



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#4540 Jul 30, 2015

When I discussed backtests, it was always related to extreme circumstances where adjustments had to be made. .

I never back tested to find what my expected rate of return is.

If you are testing merely to test extremes, you can pick off 15-20 extreme environments and then model them out.

In my case, I looked at three types of extreme environments:1. Sudden, unexpected crashes.2. Bear markets.3. Strong bull markets that lasted many years.

They each had their own combination of IV + delta analysis that you have to guess at.

If you can address these scenarios with your strategy, then the other scenarios fit comfortably.



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#4560 Jul 31, 2015

OK ... I am a convert to Back testing and Stress testing ... Tyler , I'm assuming you��use the risk navigator on IB ... What #s do you input for your 3 extreme environments for volatility , delta , and any other variables ?��Tom and Dustin -��What variables ��do you use to ��back test / stress test your portfolio ?ThanksVictor ��

From: "Tyler Jewell tylerjewell@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> To: supertraderkarenstudy@yahoogroups.com Sent: Thursday, July 30, 2015 10:09 AM Subject: Re: [SuperTraderKarenStudy] Re: Back testing ... True or most probably true ?

��When I discussed backtests, it was always related to extreme circumstances where adjustments had to be made. ��

I never back tested to find what my expected rate of return is.

If you are testing merely to test extremes, you can pick off 15-20 extreme environments and then model them out.

In my case, I looked at three types of extreme environments:1. Sudden, unexpected crashes.2. Bear markets.3. Strong bull markets that lasted many years.

They each had their own combination of IV + delta analysis that you have to guess at.

If you can address these scenarios with your strategy, then the other scenarios fit comfortably.



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#4561 Jul 31, 2015

I wrote a program that simulates the market behaviour on 2008 and 2012 and applies that against current positions. Its not really for the faint of heart :)

On Fri, Jul 31, 2015 at 2:34 PM, Vic Ferrari vico213@... [supertraderkarenstudy] supertraderkarenstudy@yahoogroups.com> wrote:

.

OK ... I am a convert to Back testing and Stress testing ... Tyler , I'm assuming you.use the risk navigator on IB ... What #s do you input for your 3 extreme environments for volatility , delta , and any other variables ?.Tom and Dustin -.What variables .do you use to .back test / stress test your portfolio ?ThanksVictor .

From: "Tyler Jewell tylerjewell@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> To: supertraderkarenstudy@yahoogroups.com Sent: Thursday, July 30, 2015 10:09 AM Subject: Re: [SuperTraderKarenStudy] Re: Back testing ... True or most probably true ?

.When I discussed backtests, it was always related to extreme circumstances where adjustments had to be made. .

I never back tested to find what my expected rate of return is.

If you are testing merely to test extremes, you can pick off 15-20 extreme environments and then model them out.

In my case, I looked at three types of extreme environments:1. Sudden, unexpected crashes.2. Bear markets.3. Strong bull markets that lasted many years.

They each had their own combination of IV + delta analysis that you have to guess at.

If you can address these scenarios with your strategy, then the other scenarios fit comfortably.







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#4566 Jul 31, 2015

Hello Victor,

I use back testing to develop strategies.�� I don't think you become proficient until you have done the strategy a few hundred times.�� Back testing allows me to work some of the kinks out with minimal repercussion.

I do risk assessment on the Analyze tab.�� I look at a 100 point drop (in SPX) and a 20 point rise in volatility.�� I also look at a 10% up move along with a reduction of 5 points in volatility.�� Those numbers should not exceed my net liq.

Tom



---In supertraderkarenstudy@yahoogroups.com, vico213@...> wrote :

OK ... I am a convert to Back testing and Stress testing ... Tyler , I'm assuming you��use the risk navigator on IB ... What #s do you input for your 3 extreme environments for volatility , delta , and any other variables ?��Tom and Dustin -��What variables ��do you use to ��back test / stress test your portfolio ?ThanksVictor��



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#7533 Jun 10, 2016

Vic...I love everyone of those assumptions...lol.



Dwayne��

Sent from Yahoo Mail for iPhone

On Friday, June 10, 2016, 11:27 AM, Vic Ferrari vico213@... [supertraderkarenstudy] supertraderkarenstudy@yahoogroups.com> wrote:

��" It's going to be a beautiful day" , "Try the Veal - Best in the city " , " Looks like Golden State is going to win the championship "��

Mark - Do you ask people that make the above statements if they Backtested their assumptions ? I am not a formal ��Back Tester ... My instincts and decision making processes are based on an amalgamation of my experiences and knowledge I accumulated throughout the years . You are implying that no statement or opinion can be made without a Back test .��

When Tom Sossnoff tells Dylan Rattigan that Bonds must go down [they didnt ] or Commodities must go up [they did ] , is it based on a back test or just his instinct based on his own experiences in the market ?��

One of my experiences that I had was listening to a Market Measure that actually back tested a study that showed the markets are for the most part are mean reverting in 2 - 3 day cycles . Another one is my study of charts and observing that when the SPX is extended off the 10 day moving average for 2 - 3 days it is a strong possibility it will pull back . I did not pull this out of a hat , and I know there is a chance it will continue higher , but I certainly wouldn't make a trade on that small chance ... When Tom said he went long on Wednesday night , when the market hit 2120 , in below average volume , extended for 3 days ��off the 10 day , yes , my amalgamation of my experiences and knowledge I accumulated throughout the years , told me this is not a high probability trade ��and maybe he should pay attention to the 10 or the 8 if he doesnt already do so . ��

I am sure the Nobel Prize winners of LTCM who blew up their fund and almost took the market ��down with it , in 1998 , and needed a Federal Reserve bailout , did plenty of Back testing . Do you think Warren Buffett back tests the companies he chooses to invest in ,based on their financial metrics ? Is his long successful ��track record anecdotal or is he a good decision maker ?

��As far as your SEC story - First of all , I am not licensed so I couldnt give a rats ass what they think , but you are being manipulative in insinuating that its fine worthy or fraudulent telling the forum to use as the 10 day SMA OR the 8 day EMA as a ��gauge as to whether the market is extended or not . I dont know what that person said or did , but I'm certain it was not recommending a technical indicator .��

This is an open forum with many opinions ... I hope we don't have to back test and stifle them because it doesnt fit your scientific criteria .��

Thanks��Victor��



From: "drklein01@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> To: supertraderkarenstudy@yahoogroups.com Sent: Friday, June 10, 2016 10:00 AM Subject: Re: [SuperTraderKarenStudy] Re: Tom's Version of KST



��Vic--

For the sake of argument and discussion, I'm going to pick on you here so feel free to beat me up with a response.�� :)

Have you backtested the 10-SMA and 8-EMA?�� You say "usuallythe SPX pulls back..."�� How many occurrences?�� Did this make money overall?�� What was the largest loss and distribution ofthose losses?

In case you haven't backtested it, you cover yourself by saying "it's not fail safe but it's another tool to put in the tool box..."��

Without backtesting you really can't put valid context around when to take action.�� Maybe you saw it work once and your brain held onto that.�� It's an anecdotal finding.�� What about the other tools in the box?Are those equally anecdotal?�� Are you going to take multiple anecdotaltools and somehow use them together to make concrete decisions about real money?�� If so then are you treating this like Las Vegas?

Is it really any better than a coin flip?�� In order for you to say yes,you need to have a decent sample size of occurrences where youmade decisions based on objective measures of the tools.

So really, I guess the question I might ask is why are you givingthis "advice" in the first place?�� Someone else might take it andapply their gut feel or anecdotal experience or personal preferenceto it, which may compound the uncertainty.��

Maybe for this reason in particular, a coin flip isn't so bad.�� Some people would actually recommend a coin flip because they think so many things about the market are completely random.��

Incidentally, there is a guy who did a lot of talking and writingabout the 8-SMA and 10-SMA combination.�� He was found guiltyof using "misleading and deceptive promotional material," fined$200K, and permanently barred from NFA membership.�� I'm notcalling you a fraud Vic but I think it is an illustration of how manipulative and dangerous anecdotal guidelines can be.�� Well-defined algorithms can also have problems (curve-fitting) but I personally believe if done in a valid manner, much of that can be eliminated.

Mark







---In supertraderkarenstudy@yahoogroups.com, vico213@...> wrote :

Tom ... I know nothing as well , more nothing than you ... But .. Do you ever use the 10 day Simple moving average [SMA ] or the 8 day Exponential moving average [EMA] ? They serve as great reference points as to how far extended is the market ... Usually the SPX pulls back to it when it ventures above it after 3 - 4 sessions like a magnet ��... Using it as a reference , the market was above the 8 and 10 for 3 days as of last night ��and looked ready for a pullback last night to the 10 ��today , which it did ... It's not fail safe ��but it's another tool to put in the tool box to gauge where the market is going amongst others ...��



From: "poast@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> To: supertraderkarenstudy@yahoogroups.com Sent: Thursday, June 9, 2016 6:46 PM Subject: [SuperTraderKarenStudy] Re: Tom's Version of KST



��6 trades today.��

When I trade I first try and listen to what the market is telling me.�� Then I make what I think are logical assumptions.�� Then I review everything to see if it makes sense.�� Then I jump in.�� Last night I saw that I had negative Delta and it looked to me that the market was going to drift up.�� I took a long position in /ES.�� I gave ample room for the market to move around and went to bed looking forward to some profit in the morning.�� When I logged in this morning I thought the contract expiration had changed.�� Nope, I just lost 6 points.�� Obviously I didn't understand what the market was telling me.��

Upset with these results I recognized a scalping opportunity and jumped in and was able to get my 6 points back in a "revenge" trade.�� Risky but it played out.�� I then had opportunity to improve my Delta and picked up a little over 2 points.��

In hindsight I don't understand what I was thinking last night but I was really out of touch with the market.��

I ended the day down (22).

Tom







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#7540 Jun 11, 2016

��I don't think you're a imbecile, ��Mark , , but I do think ��imbeciles ��regularly use anecdotal/empty claims to sell in this space.

Good luck with your back testing every statement ��/ ��opinion made " when money is involved " . I'll be busy making it ....��



From: "drklein01@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> To: supertraderkarenstudy@yahoogroups.com Sent: Saturday, June 11, 2016 9:11 AM Subject: [SuperTraderKarenStudy] Re: Back Testing

��Yes Vic, those are the sorts of predictions that are fine without data.�� It's no biggie if it's not a beautiful day... people say that casually all the time and the weather surprises.�� Taste is very subjective (and even good restaurants have bad days).�� Teams upset in sports semi-regularly.

There's a brainwashing that goes on when money is involved, though.�� This is hard for me to explain and it would take pages and pages to develop so I won't.�� Newbies enter thinking there's a definite way to make money and they fall prey to people trying to make a buck off their ignorance.�� "Investor education" services, trading/investment newsletters, and financial advisers are three groups who participate in this potential for profit.�� Not everyone is a bad apple but there are a number of bad ones out there.

So yes:�� when someone makes a claim to me in the financial space, one of the first things I ask is "what data do you have to back that up?"�� Maybe they have done some backtesting and do have something I can learn from.�� Maybe they're really just about "gut feel" and "anecdotal finding" like I suggested you to be, though.�� That I will quickly dismiss.�� Flipping a coin is just easier to me.�� I had a Canadian Loonie a while back (I like ducks) and I used that for my most difficult decisions.

Sosnoff makes lots of predictions based on his gut feel and his alleged "tape reading" skills.�� Do we have any reason to think he knows what he's talking about?�� He doesn't show his performance numbers.

Yes a system that passes rigorous validation can fail.�� Part of system trading is to continuously monitor the fitness of the system and know what it would take to bail.�� It could always be a false positive but you go into it with a plan based on extensive study.�� That's how I would recommend any newbie learn to trade---not by going with anecdotal claims like "you might want to look at an 8/10 MA" or "check out the MACD" or any of 10,000 other indicators or empty claims.

Can we all be Warren Buffett?�� Maybe there's a bell curve pertaining to success in this space and some people win the lottery.�� I'd call Buffett one of extreme winners.�� Call it skill, luck, or both but I don't hear about others achieving similar success by doing what he has.�� Maybe my head in the sand.

> but you are being manipulative in insinuating that its fine worthy > orfraudulent telling the forum to use as the 10 day SMA OR the > 8 day EMAas a ��gauge as to whether the market is extended > or not .

I can't understand your English here.�� How am I trying to manipulate how and why?��

I'll repeat what I said before:�� I don't think you're a fraud, Vic, but I do think fraudsters regularly use anecdotal/empty claims to sell in this space.�� I always remember the 8/10 MA combination as a strategy discussed by one guy found guilty of misrepresentation and disbarred by the NFA in the late 1990s (all appeals to NFA and CFTC failed).

Mark



---In supertraderkarenstudy@yahoogroups.com, vico213@...> wrote :

" It's going to be a beautiful day" , "Try the Veal - Best in the city " , " Looks like Golden State is going to win the championship "��

Mark - Do you ask people that make the above statements if they Backtested their assumptions ? I am not a formal ��Back Tester ... My instincts and decision making processes are based on an amalgamation of my experiences and knowledge I accumulated throughout the years . You are implying that no statement or opinion can be made without a Back test .��

When Tom Sossnoff tells Dylan Rattigan that Bonds must go down [they didnt ] or Commodities must go up [they did ] , is it based on a back test or just his instinct based on his own experiences in the market ?��

One of my experiences that I had was listening to a Market Measure that actually back tested a study that showed the markets are for the most part are mean reverting in 2 - 3 day cycles . Another one is my study of charts and observing that when the SPX is extended off the 10 day moving average for 2 - 3 days it is a strong possibility it will pull back . I did not pull this out of a hat , and I know there is a chance it will continue higher , but I certainly wouldn't make a trade on that small chance ... When Tom said he went long on Wednesday night , when the market hit 2120 , in below average volume , extended for 3 days ��off the 10 day , yes , my amalgamation of my experiences and knowledge I accumulated throughout the years , told me this is not a high probability trade ��and maybe he should pay attention to the 10 or the 8 if he doesnt already do so . ��

I am sure the Nobel Prize winners of LTCM who blew up their fund and almost took the market ��down with it , in 1998 , and needed a Federal Reserve bailout , did plenty of Back testing . Do you think Warren Buffett back tests the companies he chooses to invest in ,based on their financial metrics ? Is his long successful ��track record anecdotal or is he a good decision maker ?

��As far as your SEC story - First of all , I am not licensed so I couldnt give a rats ass what they think , but you are being manipulative in insinuating that its fine worthy or fraudulent telling the forum to use as the 10 day SMA OR the 8 day EMA as a ��gauge as to whether the market is extended or not . I dont know what that person said or did , but I'm certain it was not recommending a technical indicator .��

This is an open forum with many opinions ... I hope we don't have to back test and stifle them because it doesnt fit your scientific criteria .��

Thanks��Victor��



From: "drklein01@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> To: supertraderkarenstudy@yahoogroups.com Sent: Friday, June 10, 2016 10:00 AM Subject: Re: [SuperTraderKarenStudy] Re: Tom's Version of KST



��Vic--

For the sake of argument and discussion, I'm going to pick on you here so feel free to beat me up with a response.�� :)

Have you backtested the 10-SMA and 8-EMA?�� You say "usuallythe SPX pulls back..."�� How many occurrences?�� Did this make money overall?�� What was the largest loss and distribution ofthose losses?

In case you haven't backtested it, you cover yourself by saying "it's not fail safe but it's another tool to put in the tool box..."��

Without backtesting you really can't put valid context around when to take action.�� Maybe you saw it work once and your brain held onto that.�� It's an anecdotal finding.�� What about the other tools in the box?Are those equally anecdotal?�� Are you going to take multiple anecdotaltools and somehow use them together to make concrete decisions about real money?�� If so then are you treating this like Las Vegas?

Is it really any better than a coin flip?�� In order for you to say yes,you need to have a decent sample size of occurrences where youmade decisions based on objective measures of the tools.

So really, I guess the question I might ask is why are you givingthis "advice" in the first place?�� Someone else might take it andapply their gut feel or anecdotal experience or personal preferenceto it, which may compound the uncertainty.��

Maybe for this reason in particular, a coin flip isn't so bad.�� Some people would actually recommend a coin flip because they think so many things about the market are completely random.��

Incidentally, there is a guy who did a lot of talking and writingabout the 8-SMA and 10-SMA combination.�� He was found guiltyof using "misleading and deceptive promotional material," fined$200K, and permanently barred from NFA membership.�� I'm notcalling you a fraud Vic but I think it is an illustration of how manipulative and dangerous anecdotal guidelines can be.�� Well-defined algorithms can also have problems (curve-fitting) but I personally believe if done in a valid manner, much of that can be eliminated.

Mark







---In supertraderkarenstudy@yahoogroups.com, vico213@...> wrote :

Tom ... I know nothing as well , more nothing than you ... But .. Do you ever use the 10 day Simple moving average [SMA ] or the 8 day Exponential moving average [EMA] ? They serve as great reference points as to how far extended is the market ... Usually the SPX pulls back to it when it ventures above it after 3 - 4 sessions like a magnet ��... Using it as a reference , the market was above the 8 and 10 for 3 days as of last night ��and looked ready for a pullback last night to the 10 ��today , which it did ... It's not fail safe ��but it's another tool to put in the tool box to gauge where the market is going amongst others ...







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#7542 Jun 12, 2016

Couple easy to understand backtests. The aim is to confirm the story that "premium is in general expensive".

I bought data from.www.marketdataexpress.com/, the official data subsidiary of cboe and focused on weekly expiries. (These are the options with the most time decay) The data I bought ranges from the end of 2010 until may 2016. (Taking some advice previous in this thread, I too do not believe anything in Finance until I do it for myself)

First thing I noticed is that there are FAR more options with a strike below the current price. This is a histogram of all options.





Lets make a few tests. I will focus on three. (All on weekly options)

Sell a strangle with put and call as close to the underlying price.Sell a strangle with put and call 5% away from the market.Sell a strangle with put and call 10% away from the market.

(Profit is quoted in underlying points. Ie: i didnt multiply by trading fees or product multipliers. It DOES take into account spreads, this is done by the data showing the first and last quote on CBOE.)

Sell a strangle with put and call as close to the underlying price.



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#7545 Jun 12, 2016

It seems like there is almost no point in selling calls. (Seems to be against common consensus, but thats what the data seems to tell me)

Bevan

I came to that conclusion about 4 months into selling premium.

To me, the crappy little premium collected is worthless..

1) It's not enough to defend against a breach to the downside2) It merely makes you have to worry about the market in both directions



Who needs it..

RM



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#7546 Jun 12, 2016

I studied my trades for the past 4.9 years. ��Almost five full years!

About 1/3 of all profits have come from call selling while 2/3 of all the contracts traded have been call contracts.

Average yearly return is around 24 percent. ��Yet in the same five year period the market has more than doubled in its value.��

When call selling takes you negative it really takes you negative. ��However, having naked calls allows me to take a slightly more aggressive stance with out selling. ��So it's all a question of balance.

-Tyler

---------------From: Rob McCance rob.mccance@... [supertraderkarenstudy] supertraderkarenstudy@yahoogroups.com>Sent: Sunday, June 12, 2016 9:09 AMSubject: Re: [SuperTraderKarenStudy] Re: Back TestingTo: supertraderkarenstudy@yahoogroups.com>

>��It seems like there is almost no point in selling calls. (Seems to be against common consensus, but thats what the data seems to tell me)

Bevan

I came to that conclusion about 4 months into selling premium.

To me, the crappy little premium collected is worthless.��

1) It's not enough to defend against a breach to the downside2) It merely makes you have to worry about the market in both directions



Who needs it..

RM



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#7547 Jun 12, 2016

Surely you mean put selling can take you "really negative"? Returns are skewed to the negative side..

Would be interested in confirming your results, approximately how far out do you sell your calls? I believe you are selling 3 month expiries, 45 DTE? The above is for weekly expiries. (Which I would be surprised arent better for the strat, giving how time decay works)



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#7548 Jun 12, 2016

What I wrote was accurate. ��When calls go negative from itm they really go negative. ��But I always recover.

My trading style is documented in the archives.

-Tyler

---------------From: Bevan Ramsden bevanramsden@... [supertraderkarenstudy] supertraderkarenstudy@yahoogroups.com>Sent: Sunday, June 12, 2016 10:08 AMSubject: Re: [SuperTraderKarenStudy] Re: Back TestingTo: supertraderkarenstudy@yahoogroups.com>

>��Surely you mean put selling can take you "really negative"? Returns are skewed to the negative side.��

Would be interested in confirming your results, approximately how far out do you sell your calls? I believe you are selling 3 month expiries, 45 DTE? The above is for weekly expiries. (Which I would be surprised arent better for the strat, giving how time decay works)



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#7549 Jun 12, 2016

This is very eye opening...thanks so much for all the hard work andsharing.

I really need to get more focused on my details like this.



I look a lot. and post little because the information, well, I feellike my posts would of some much less value.



Just want to say again:

Thanks for having this amazing group and showing up fully present.



Robert

On 6/12/2016 6:20 AM, Tyler Jewelltylerjewell@... [supertraderkarenstudy] wrote:

.I studied my trades for the past 4.9 years. .Almostfive full years!

About 1/3 of all profits have come from call sellingwhile 2/3 of all the contracts traded have been callcontracts.

Average yearly return is around 24 percent. .Yet inthe same five year period the market has more thandoubled in its value..

When call selling takes you negative it really takesyou negative. .However, having naked calls allows me totake a slightly more aggressive stance with out selling..So it's all a question of balance.

-Tyler



---------------

From: Rob McCance rob.mccance@...[supertraderkarenstudy]supertraderkarenstudy@yahoogroups.com>

Sent: Sunday, June 12, 2016 9:09 AM

Subject: Re: [SuperTraderKarenStudy] Re: Back Testing

To: supertraderkarenstudy@yahoogroups.com>





.It seems likethere is almost no point in selling calls.(Seems to be against common consensus, butthats what the data seems to tell me)



Bevan



I came to thatconclusion about 4 months into sellingpremium.

To me, the crappylittle premium collected is worthless..

1) It's notenough to defend against a breach to thedownside2) It merely makesyou have to worry about the market in bothdirections



Who needs it..

RM







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#7550 Jun 12, 2016

Tyson, I did not see images either, until after installing the latest Adobe flash player update...and reloading browser..

On Sun, Jun 12, 2016 at 6:54 AM, tysonpmiller@... [supertraderkarenstudy] supertraderkarenstudy@yahoogroups.com> wrote:

.Bevan,

Thank you for sharing your testing. However, the images did not come across on the post so I cannot see your results..

Tyson



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#7552 Jun 13, 2016

Markets do not gap up - especially the SPX, which is a broad-based index of companies that are very well established. Look over the past 150 years at the best 20 performing weeks in SPX history (and also study what happened the weeks before).. You'll find that the SPX behaves upward in a very normal fashion.

Right now, I have 20% of my calls ITM.. I have the other 80% deep OTM.

For the calls that are OTM, I work hard to keep them OTM.. But when I am so close to expiration, even if the market starts moving up aggressively, rolling from Wednesday to Friday is easy and will usually get me anywhere from 2-5 strikes of additional buffer, which is quite a lot.



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#7555 Jun 13, 2016

I did not say that shorting calls are less / more risky than puts.. They have similar risk profiles - they are both derivatives against an underlying price instrument.

But, please check the email records for the past couple years. I've spent a lot of time explaining the rationale for why I sell so many calls, so aggressively.

There are a lot of people who have interrogated the statements in Yahoo and over Skype and found them to be valid & not exaggerated.

I started doing options just hoping to make 10% / year.. When I got into the 20%+ range / year, then I took a lot of time to figure out how to optimize for even higher returns.

Selling naked calls are a huge part of my strategy.

My alpha comes from the psychological fear that the broad market has (such as this thread) in people who are scared to sell calls because of the incorrect fear that they will lose more money with them because of unlimited upside.

I encourage people to paper trade the following:1. Place a bunch of calls right ATM and let them go in the money.. Then look at how bad things are and how you might adjust out of it.. It's not that bad.2. Try trading huge volumes of OTM naked calls with 1-2 days to expiration, and when they are threatened, how to adjust.

What I do isn't for everyone, but by taking the posture that I do - I am able to sell a smaller amount of puts much more aggressively (ATM), and then adjust to whatever is happening.. And when my puts go ITM, like they are this morning, I don't really care because I had so many calls to help me out.



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#7557 Jun 13, 2016

What I do isn't for everyone, but by taking the posture that I do - I am able to sell a smaller amount of puts much more aggressively (ATM), and then adjust to whatever is happening.. And when my puts go ITM, like they are this morning, I don't really care because I had so many calls to help me out.

Tyler - definitely an interesting trading style. And it works for you so I'm not sure why people try to pick it apart. I.appreciate.you sharing it because if.nothing else, it makes me think, rethink, and consider the options and possibilities.

Much depends on individual personalities and trading styles. For example, you are very active and you like that and it works for you. Personally, I'm always looking to be able to pick spots, then be as inactive as possible, even ignoring the market..

We would never have a similar trading plan. However, I could.definitely.learn things from reading all your posts and I appreciate you sharing them.

RM



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#7559 Jun 13, 2016

Hi guys,

As a new member who has joined the group for a couple of weeks, I'd like to say thank you to the group members for sharing their methods of trading, which represents excellent learning opportunities for me.

I have been reading and learning Tyler's posts for a while. I think Tyler's method is essentially an alternate cover call strategy. Instead of longing the underlying, his strategy short ��ATM puts. This is smart as shorting puts can earn premium (i.e. time value) rather than holding up capital. So if the market movement is limited, this strategy can earn premiums from both the calls and puts. Even if the market moves modestly, the premiums from calls and puts can compensate each other. Of course if the market moves violently this strategy will face problems just like other options selling strategies.

To me, the drawback is that this strategy requires quite active management / adjustments that results in significant transaction costs in terms of commissions and bid/ask spread.

Kindly let me know if there is anything wrong with my understanding.

Thanks again guys.

Best regards,John



On Monday, June 13, 2016 10:37 AM, "Rob McCance rob.mccance@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> wrote:



��What I do isn't for everyone, but by taking the posture that I do - I am able to sell a smaller amount of puts much more aggressively (ATM), and then adjust to whatever is happening.�� And when my puts go ITM, like they are this morning, I don't really care because I had so many calls to help me out.

Tyler - definitely an interesting trading style. And it works for you so I'm not sure why people try to pick it apart. I��appreciate��you sharing it because if��nothing else, it makes me think, rethink, and consider the options and possibilities.

Much depends on individual personalities and trading styles. For example, you are very active and you like that and it works for you. Personally, I'm always looking to be able to pick spots, then be as inactive as possible, even ignoring the market.��

We would never have a similar trading plan. However, I could��definitely��learn things from reading all your posts and I appreciate you sharing them.

RM







----------------------------

#7560 Jun 13, 2016

My strategy doesn't require active management. .

I choose to actively manage it to maximize the returns, however..

My goal is to maximize my theta without imbueing unnecessary risk..

Maximum theta comes from being ATM.. Low risk comes from trading small. .

So I trade small ATM.I trade big far OTM in a way where my risk is extremely low.

Now, I used to only trade 1x / week (Fridays).. With Wednesday expiration, now I trade 2x / week.

If you wanted, you could only trade the same style 1x / month.

The style just calls for certain types of adjustments when it is time to trade, which should happen at the time options expire, but generally not before - unless I have a large batch of calls that need to be adjusted up & out before expiration.. This only happens a couple times a year.



----------------------------

#7561 Jun 13, 2016

Hi Tyler,

Thanks for the elaboration. Excellent food for thought.

Best regards,John



On Monday, June 13, 2016 11:31 AM, "Tyler Jewell tylerjewell@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> wrote:



��My strategy doesn't require active management. ��

I choose to actively manage it to maximize the returns, however.��

My goal is to maximize my theta without imbueing unnecessary risk.��

Maximum theta comes from being ATM.�� Low risk comes from trading small. ��

So I trade small ATM.I trade big far OTM in a way where my risk is extremely low.

Now, I used to only trade 1x / week (Fridays).�� With Wednesday expiration, now I trade 2x / week.

If you wanted, you could only trade the same style 1x / month.

The style just calls for certain types of adjustments when it is time to trade, which should happen at the time options expire, but generally not before - unless I have a large batch of calls that need to be adjusted up & out before expiration.�� This only happens a couple times a year.



----------------------------

#7619 Jun 20, 2016

Hi Tyler,

I think I understand how you do risk management on the up side (i.e. roll up and out). Would like to ask if you manage the down side and how, like setting a stop loss point for the puts or entire position. How did the strategy perform last August?

Thanks in advance for your advice.

Best regards,John



On Monday, June 13, 2016 11:22 AM, John Ha johnha_99@...> wrote:



Hi guys,

As a new member who has joined the group for a couple of weeks, I'd like to say thank you to the group members for sharing their methods of trading, which represents excellent learning opportunities for me.

I have been reading and learning Tyler's posts for a while. I think Tyler's method is essentially an alternate cover call strategy. Instead of longing the underlying, his strategy short ��ATM puts. This is smart as shorting puts can earn premium (i.e. time value) rather than holding up capital. So if the market movement is limited, this strategy can earn premiums from both the calls and puts. Even if the market moves modestly, the premiums from calls and puts can compensate each other. Of course if the market moves violently this strategy will face problems just like other options selling strategies.

To me, the drawback is that this strategy requires quite active management / adjustments that results in significant transaction costs in terms of commissions and bid/ask spread.

Kindly let me know if there is anything wrong with my understanding.

Thanks again guys.

Best regards,John



On Monday, June 13, 2016 10:37 AM, "Rob McCance rob.mccance@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> wrote:



��What I do isn't for everyone, but by taking the posture that I do - I am able to sell a smaller amount of puts much more aggressively (ATM), and then adjust to whatever is happening.�� And when my puts go ITM, like they are this morning, I don't really care because I had so many calls to help me out.

Tyler - definitely an interesting trading style. And it works for you so I'm not sure why people try to pick it apart. I��appreciate��you sharing it because if��nothing else, it makes me think, rethink, and consider the options and possibilities.

Much depends on individual personalities and trading styles. For example, you are very active and you like that and it works for you. Personally, I'm always looking to be able to pick spots, then be as inactive as possible, even ignoring the market.��

We would never have a similar trading plan. However, I could��definitely��learn things from reading all your posts and I appreciate you sharing them.

RM



----------------------------

#7620 Jun 20, 2016

I manage my downside by only opening enough puts to allow for a 50% drop before rolling, and then just riding things out.. Last August was -7% return for me.

This year I have started to look at adding long put ladders, and finding cheap ways to add those on so that I can cap my downside losses to at most 15% in a crash scenario.. It's still experimental - will take some time to figure it out.



----------------------------

#7621 Jun 20, 2016

Hi Tyler,

Thank you again for your advice.

Best regards,John



On Monday, June 20, 2016 2:59 PM, "John Ha johnha_99@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> wrote:



��Hi Tyler,

I think I understand how you do risk management on the up side (i.e. roll up and out). Would like to ask if you manage the down side and how, like setting a stop loss point for the puts or entire position. How did the strategy perform last August?

Thanks in advance for your advice.

Best regards,John



On Monday, June 13, 2016 11:22 AM, John Ha johnha_99@...> wrote:



Hi guys,

As a new member who has joined the group for a couple of weeks, I'd like to say thank you to the group members for sharing their methods of trading, which represents excellent learning opportunities for me.

I have been reading and learning Tyler's posts for a while. I think Tyler's method is essentially an alternate cover call strategy. Instead of longing the underlying, his strategy short ��ATM puts. This is smart as shorting puts can earn premium (i.e. time value) rather than holding up capital. So if the market movement is limited, this strategy can earn premiums from both the calls and puts. Even if the market moves modestly, the premiums from calls and puts can compensate each other. Of course if the market moves violently this strategy will face problems just like other options selling strategies.

To me, the drawback is that this strategy requires quite active management / adjustments that results in significant transaction costs in terms of commissions and bid/ask spread.

Kindly let me know if there is anything wrong with my understanding.

Thanks again guys.

Best regards,John



On Monday, June 13, 2016 10:37 AM, "Rob McCance rob.mccance@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> wrote:



��What I do isn't for everyone, but by taking the posture that I do - I am able to sell a smaller amount of puts much more aggressively (ATM), and then adjust to whatever is happening.�� And when my puts go ITM, like they are this morning, I don't really care because I had so many calls to help me out.

Tyler - definitely an interesting trading style. And it works for you so I'm not sure why people try to pick it apart. I��appreciate��you sharing it because if��nothing else, it makes me think, rethink, and consider the options and possibilities.

Much depends on individual personalities and trading styles. For example, you are very active and you like that and it works for you. Personally, I'm always looking to be able to pick spots, then be as inactive as possible, even ignoring the market.��

We would never have a similar trading plan. However, I could��definitely��learn things from reading all your posts and I appreciate you sharing them.

RM







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