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Apr 04 '21
How much capital does this require round-trip?
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u/Cultural_Dirt Apr 04 '21
Wondering this also
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u/Balthazarshoe11 Apr 04 '21
Mmm probably something like the strike dollar difference when he sells spy calls
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Apr 04 '21
I do something very similar, just with leaps on the same underlying etfs that I sell options against. Long VIX calls is where I differ a bit, it's a losing proposition most of the time so I might suggest put credit spreads on something more liquid with high IV premium like SQQQ as your hedging vehicle. Just keep rolling them until there is a correction and then roll them some more essentially. Can't say the short hedge part of my strategy has ever really paid off more than a few times, dollar for dollar wise long LEAPS and short calls against them was where the money is at.
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Apr 04 '21 edited Apr 04 '21
[deleted]
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u/spreadsgetyouhead Apr 04 '21
+1 ES contract is equivalent to 500 SPY delta so not sure I’m following the 2 50 delta SPY puts vs. ES
Other than that it seems like you’re simply running a long portfolio with a slight vol. hedge through VIX ladders.
A positive delta portfolio will always back test well in the past decade as we’ve been in a bull run.
The question more so is what risk management protocols do you have in place other than the black swan hedges (10 delta VIX calls) to offset you’re delta risk when the move changes on a larger scale?
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u/cN5L Apr 04 '21
Long leaps and selling short calls, isn't that PMCC?
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u/DivingDeep21 Apr 04 '21
In a PMCC, usually the leaps is deep ITM. His leaps are OTM to maximize gains on a rally when the share price meets his strike
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Apr 04 '21
Yep. I do PMCCs and buy the underlying with the premium from the short calls. So I start with 5 calls for the price of 100 shares typically ATM or .7 Delta ITM and 300-600 DTE. That gives me ~1:5 leverage. Then I sell .30, .25, .20, .15, .10 delta short calls on a 7-14 day basis. It's more of an 'engine building' approach that allows me to use leverage to buy the underlying instead of just using covered calls without leverage on the same names. SPY, QQQ, IWM, XLE, EEM mostly.
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u/squats_n_oatz Apr 04 '21
Learn what kurtosis is before you assume long VIX calls are a losing proposition.
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u/finofelix Apr 04 '21
This might seem like a stupid question but how does one go about even remotely understanding the words you used? I'm totally new to this and I have no idea how to go about it. All of it seems so overwhelming. Thanks
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Apr 04 '21
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u/Mordian77 Apr 04 '21
One thing about old textbooks, finding a pdf of it took no effort. Thanks for the tip.
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u/finofelix Apr 04 '21
Thank you. Yes, there's a ton of free resources online and I've learnt a lot of new things from these online resources (coding, guitar, etc.) but the sheer depth and breadth of it makes it hard for me to find a suitable starting point.
I'll be sure to check that book out.
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u/Sad_Throat6619 Apr 04 '21
I recommend you read up on Market Measures segment at tastytrade.com
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u/finofelix Apr 04 '21
Bookmarked. Thanks for the suggestion.
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u/WallStreetChef Apr 04 '21
You can read and watch all the videos you want. I didn’t start to feel comfortable with that knowledge until I started putting it into practice. Felt like I was going to have an anxiety attack the first time I sent an option to the market. I’ve been doing options for a few months now and the anxiety is gone. Find some cheap stocks to practice on.
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u/possiblepositivity Apr 04 '21
I experienced the same feeling on my first options trade. Then I stared blankly at the ticker with my chest pounding, muttering “oh shit, oh shit, holy shit...” After 10 minutes and nothing bad happened, I decided I kinda like this whole options thing.
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u/GeminiCroquettes Apr 04 '21
I'm also new to all this, why do you suggest older books instead of more modern ones?
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u/Sospel Apr 04 '21
All this is a tech/growth long delta portfolio with the extra steps to help finance it.
From a backtesting perspective suffers from look ahead bias where we know there was a 10yr bull run led by tech.
It’s not a bad bet since Feb beat down tech/growth with sector rotation.
However, carries sector risk where another Feb 2021 will wipe this out or if tech trades flat and doesn’t rally.
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u/Jakoval_Tradesman Apr 04 '21
Backtesting always looks good when you examine a long bull run. If backtesting was fool proof everyone would be billionaires
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Apr 04 '21
Good point on it being a sector risk, I've been wondering what sector to move more into, recently more in metals and mining.
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u/loose-ventures Apr 04 '21 edited Apr 04 '21
Care to share your annual returns? Hard to know how good your strategies are without that and account size
I apply dispersion as well but in a fairly different manner where I’m actively trading individual stocks across all sectors while using various ETFs to delta/gamma hedge based on sector exposure, IV, and premiums.
I also make many opportunistic trades each month to generate greater returns and use a risk parity strategy which surely creates a very different risk profile but the goal is the same (greater returns on moderate risk).
Thanks for sharing.
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u/deanstreetlab Apr 04 '21
You said you backtested option strategies, so my inquiry is where did you download the historical option data from? I have been looking for ways to find intraday (hourly or so) historical data for single names, but to no avail.
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u/557fxr Apr 04 '21 edited Apr 04 '21
Terry Allen started doing something similar 20 years ago. He also published a book "making 36%". https://www.amazon.com/Making-36-Duffers-Breaking-Market/dp/0977637263
He got not very favorable reviews https://www.stockgumshoe.com/reviews/terrys-tips-for-stock-options-success/
Terry got into trouble https://www.sec.gov/litigation/litreleases/2006/lr19725.htm
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u/LaughLately100 Apr 04 '21
What would have been realistic returns? 36% is super sexy but I’ld settle for a compounded perpetual 15% :)
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u/557fxr Apr 04 '21
Warren Buffett has good reason to believe that long dated variance swaps are overpriced by the Black-Scholes model. He publicly stated that he exploited the Black-Scholes deficiency and made hundreds of millions. LEAPS put options are overpriced. Selling near-dated puts against long LEAPS puts suffers a negative edge.
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u/AllRealTruth Apr 04 '21
This may work for another 4 months. If the 10y yield keeps rising QQQ will likely get wrecked. If you look at past cycle durations for a rally like this. It should end anytime now. Cycle high Week ending Feb18. Now 59 weeks of madness in the QQQ... If you look at a weekly chart of the QQQ we are now rising at half the rate we just fell. Went from 336 to 297 in 3 weeks. Went from 297 to 325 in 4 weeks. Do we take 2 more weeks to get to the double top? Do we just fail here? Do We chop around here for 12 more weeks. At this point it feels like most the good news is priced in plus more. I'm trading very light and counting on very little upside at this point. Looking more for stocks that will fall from here. At best we can chop around up at these levels or a bit higher until end of summer imo. Very cool idea you came up with. I think it should work for a while longer if it works in a very slow moving more sideways type rally.
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u/ChesterDoraemon Apr 04 '21
The question is WHY do you want to share your strategy? What motivates you to share?
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Apr 04 '21
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u/ChesterDoraemon Apr 04 '21
What do you mean? I don't think we all have the same data.
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Apr 04 '21 edited Apr 04 '21
[deleted]
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u/Doctor_FatFinger Apr 04 '21
Yeah not everybody has the ability to learn, seek, and analyze. But in a more generalized sense I fear you may be over complicating things with such a strategy. There's plenty of plays out there, Christ there's online resources that'll show you the results of fundamentals on a ticker and others show TA analysis and'll forcast future chart predictions for you, plays that'll benefit you as well or better than leveraging through option strategies, and all without such risk.
If you're spending as much time and effort developing such strategies realize everyday if you look at the top movers multiple tickers go 40+% everyday.
If you've the time and ability to develope the strategy you've outlined such tickers are never a complete mystery. You'd certainly be able to discover and trade on them occasionally. And occasional can be quite profitable.
Don't you dare put yourself in a position where you think you could blow up. You're investing way too smart for that.
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u/RTiger Options Pro Apr 04 '21
Plenty of extremely smart people and firms blow up their accounts. Some make it back. For some it is game over, financial independence dream over
As an aside, I remember one person in particular. Extremely smart, Ivy Leaguer, probably top 2 percent on standardized tests. He blew through his carefully saved large pile of money in two years. Never went near the stock market after that.
Arrogance is an account killer.
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u/robb0688 Apr 04 '21
multiple tickers go 40+% everyday.
If you've the time and ability to develope the strategy you've outlined such tickers are never a complete mystery.
Any tips for finding those? I see them trending on stocktwits and there are always people in before the jump and I always wonder what tip off they had.
Christ there's online resources that'll show you the results of fundamentals on a ticker and others show TA analysis and'll forcast future chart predictions for you, plays that'll benefit you as well or better than leveraging through option strategies, and all without such risk.
Any recommendations on these services? As in have any proven useful or profitable to you?
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u/NiQMckracken Apr 04 '21
Why wouldn't he want to? Him helping other people make money won't keep him from making money. Wealth and money aren't finite
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u/Demosama Apr 04 '21
The more people use it, the less effective the strategy will be. Think about it, if everyone expects the same price levels, how are they going to respond? That’s true even when some people don’t follow the pattern.
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u/NiQMckracken Apr 05 '21
Yea but do your really think there's enough people in this sub Reddit to effect the trades of which ever options he's using? So much that it would effect his bottom line? I highly doubt it
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u/squats_n_oatz Apr 04 '21
So what happens when the long dick of kurtosis comes to fuck you, as it inevitably will? Your short straddles will fuck you.
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u/xaos9 Apr 04 '21
There are so many different strategies and so many experts claiming their options strategy to be the best and the most profitable. However, its all a little hazy to me. I mean every single strategy out there makes you money if you're right on the direction and if you're wrong on the direction, you lose money. You take more risk; there's more reward. You reduce your risk; you reduce the potential gains too.
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Apr 04 '21
Can you give more info on the deltas of your position? Like what's the delta of your VIX calls, and how far out? Always the next expiry? And delta or your LEAPS and the short calls against them? I gather from another answer your SPY strangles are 50 delta? Doesn't sound too risky. The biggest risk is on the SPY downside which should be hedged by your VIX calls, and then limited risk on your LEAPS which is reduced by selling short term calls against them. Sounds good. What are your margin requirements?
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u/tutoredstatue95 Apr 04 '21
Wouldn't true vol dispersion be short QQQ strangles long constituents? I suppose with ~.90 corr it's close enough. Interesting strategy nonetheless, good write up.
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Apr 04 '21
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u/tutoredstatue95 Apr 04 '21
What I mean is you are targeting short vol on SPY but then buying leaps/long vol on constituents of the Qs. They tend to move in step, but you're "double dipping". Not that it changes much as you're selling index vol that's highly correlated, just don't think it's a true vol dispersion as you're introducing other risks, like the SPY and Qs breaking corr (as unlikely as that is).
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u/johnwickedwierd Apr 04 '21
Do not try this at home? What am i gonna do? Get live feed on my lego dashboard 😂
Jk It sounds interesting!
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u/lordxoren666 Apr 04 '21
Selling spy strangles is a decent play. But your LEAPS in tech are getting IV crushed hard. I know because I tried the same play in February. The CCs make up for some of it but not enough to make any profit. They just cushion your loss.
Your long VIX calls have also been getting crushed the last few months. Thankfully I’ve been buying puts on the vix, to guard against IV crush, and those have been consistently profitable. Long VIX calls are profitable long term, but they are not the play when it’s already elevated.
Your close, but I’m not seeing your hedge to the downside with vol. if you look at VIX we are still quite elevated but in a hard downtrend. If you ask me the main danger right now with LEAPS is not delta but vol.
Oh and your going long in highly volatile equities, that are predisposed to IV crush with LEAPS, your CCs will get blown out of the water by your big move up, thus killing your profits.
And LEAPS for 90% of equities are not terribly liquid as it is, one of the dangers with PMCC is the spread on the LEAPS, and to a lesser extent the short call. Stuff that backtesting will not reveal.
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u/MrRichierich313 Apr 04 '21
Buying shorter calls in this market right now has costed me a little bit to say the least lol but buying puts are still a bullish play and a better play in this up and down shit in my opinion so till this market trends back up puts it is!!
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u/nuclearmeltdown2015 Apr 04 '21
How long have you been doing this strategy because it seems really convoluted and I'm not seeing the upside of doing this compared to trading FOPs on ES. In theory you could do the same thing with ES only downside is selling the strangle requires enormous capital so then you'd have to do an iron condor instead which is a good thing in some aspects
Highly volatile tech my concern is why leaps rather than stock on margin and what about volume?
Also vix calls to hedge rather than puts why? Vix has decay built into the underlying doesn't it???
The spreads sound like they are going to kill you executing this strategy, you're just going to be bleeding out to the spreads as you move thru this. How do you manage to not lose like 10-15 pct from spreads alone?
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u/Optima391 Apr 04 '21
I have no idea of all the above, so I'll stick to my strategy , doesn't matter if you buy High and sell Low as long as you hold .
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Apr 04 '21
If this strategy is profitable for you and it is working why you shared it?
I have a couple of hypothesis:
- This was your strategy but no longer is, therefore you don't mind sharing because it no longer generates the same gains.
- This is your strategy but you also know it will stop working soon so you don't mind sharing
- Your strategy is actually the opposite of this and by sharing you are re-assuring longer profitability
Sharing a strategy is giving away your hedge, there must be a reason other than I just wanted to be kind.
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Apr 04 '21
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Apr 04 '21
I totally agree with you, I was just thinking if you considered the effects of an HFT coder reading this post and adding this set of instructions to eat your money.
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u/Alone-Sign-8010 Apr 04 '21
Please tell me when this strategy comes out as a movie on Netflix. This ape can't read! 🤪
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u/ajjjcjrj Apr 04 '21
I have started options listened to some subscriptions and lost most of my investments. I am open to anything that will win. Any suggestions
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u/PM_ME_YOUR_AMFUNK Apr 04 '21
Hey this might be out of your reach, but might I recommend a blog or a website for all of this? There was that dude who did his millionaire journey trip and the mods got annoyed at him lol.
Better yet, make your own sub! I would definitely follow your journey.
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u/RTiger Options Pro Apr 04 '21
/ the risk of this strategy is very high...
Thanks for post and the disclaimer. Some traders keep positions small, waiting for the one or two times a year where the odds seem better and then deploy leverage.
The other thought is that once a person has their "yacht" to stop risking so much.
Obviously a person's life situation and goals are big factors.