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Articles


SteadyOptions 2015 - Year In Review

2015 marks our fourth year as a public service. We had a fantastic year. We closed 129 trades in 2015 which produced 195.6% ROI (117.3% gain on the whole account based on 10% allocation). The ROI is based on fixed $1,000 allocation per trade (non-compounded) and 6 trades open. The winning ratio was pretty consistent around 75%. We had only one losing month in 2015.

Should You Aim for 100% Gains?

Options can be risky, even very risky, but they don't have to be. There are a lot of myths and misconceptions about options trading. Here is one of them: you should aim for at least 100% gain in each option trade, otherwise it is not worth the risk. Is it true?

 

What Is True Diversification?

On CNBC's Mad Money, Jim Cramer has a segment called "Am I Diversified?". A caller tells Jim about five stocks in his or her portfolio and Jim has to decide if the caller's portfolio is "diversified." So for the retail investors out there, Cramer is sharing his top tips on how to manage your own portfolio.

Exiting An Iron Condor Trade

One of the more difficult aspects of options trading is knowing when to take a profit. No one likes to ‘leave money on the table.’ However, I also hope that no one likes to lose thousand of dollars trying to earn another $50 to $100. There is a compromise somewhere.

How To Protect NFLX Shares Before Earnings

NFLX is scheduled to report earnings on Monday July 19, 2016. I was asked the following question on one of the online forums: "What option to trade to protect NFLX shares being held thru earnings on Monday"? My answer was: "That depends what level of protection you want".

Climbing the Wall of Worry

Our LC Momentum model holds stocks as its core position. Long term empirical evidence across global equity markets shows equities significantly outperform all other major asset classes since 1900[1]. Morgan Housel recently published an article about the last seventy years of US stock market returns, and how they have to regularly climb the wall of worry.

How To Benefit From Italian Crisis

In case you do not follow world economic events, you might want to be aware of the fact that Italy’s banking sector is teetering on the edge of collapse.  Bad debts held by Italian banks make up seventeen percent (17%) of all outstanding loans in the country.  This equates to about 360 billion euros or 20% of the entire GDP of Italy.

Should You Leg Into Iron Condor?

The wings of an iron condor options trading strategy consist of two vertical credit spreads; i.e., a bull put spread and a bear call spread. The process of "Legging In" offers the promise of higher yields and enhanced probabilities of options trade success, but the question is whether it is worth the risk.

Why Simple Isn’t Easy

Living through a track record is very different than viewing it on paper. Even the most efficient track records in history have periods where they would have been very uncomfortable to stick with. Warren Buffett has had multiple 30-50% drawdowns in his career. In the world of indexing, there is nothing magical about the S&P 500.

Thinking in terms of decades

Peak to valley, from June 1998 – March 2000 Warren Buffett’s Berkshire Hathaway lost over 50%. In the same period, the S&P 500 returned over 45% and the Nasdaq 100 returned over 315%. A new client said to me the other day “I’m in this for the long term, but if after a couple years I don’t see any gains then I’m going to tell you this isn’t working.”

The Risks of Weekly Credit Spreads

Internet is full of hype. There are hundreds of options trading "gurus" and options newsletters promising you all kinds of ridiculous returns like "5% per week". What most traders don't realize are the risks that come with those returns. I would like to share with you an email I got from one of those options "gurus".

Why Dividend ETFs Yield Less Than Expected

I was asked a great question the other day by a member.  He had done some math and noted that the reported dividends received by dividend ETFs (such as SDY, VIG, and others), was LOWER than it should be, than if you just took a weighted average of the EFF's holdings.

Get Real

A few days ago a one of the Steady Condors members asked if the past performance of Steady Condors was in line with our expectations, and would we expect it to perform better over time. His concern was that our real results are worse than the backtesting. My response was:

 

Profiting From Unusual Options Activity?

I'm asked many times if we can use unusual options activity to make some good profits. In my opinion, using unusual options activity as an indicator for impending price moves is difficult, subjective, and dangerous. Yet many "options guru" pretend to build a whole "secret system" around this phenomenon.

Learn First. Trade Later

It is so tempting to begin trading options. Too many novices hear/read stories about earning 10% per month and, believing that nonsense, want their share of the ‘free money.’ They take a couple of lessons or read a chapter or two and believe they know what they are doing. A typical mindset is: ‘How difficult can it be if people are making 10% per month?’

Is Your Iron Condor Really Protected?

Iron Condor is a very popular strategy used by many options traders. It can perform very well many months, but the real question is: how much will you lose when the market volatility explodes? Many condor traders give back most or all of their profits during the usual 2 or 3 losing months each year when the markets do make large moves because they lack a detailed plan for risk management.

How To Get Black Swan Protection For Free

After seven years of strong bull market, many investors became complacent. They forgot how bad it was in 2008. However, many still would like to get some protection in case things go south again. We know that bull markets don't go on forever. But protection usually costs money. What if you could be protected AND get paid for it?

Buy the Winners: the Power of Momentum

Momentum is a phenomenom that tends to leave academics scratching their heads as it shouldn't really exist in a world of perfectly efficient markets.  Yet for 100 years a simple rules based, quantitative approach would have provided the opportunity to earn increased returns with reduced volatility and drawdowns vs. a buy and hold approach.

Is Your Risk Worth the Reward?

One of our members posted a link to an excellent post from Mark Wolfinger. Mark responded to a question from one of his readers: "For the past 2 years, I've been selling naked options (mainly puts, a few calls) to generate monthly income. My position returns just over 1% per month on average on the total account value".

Long straddle: a guaranteed win?

I came across the following question on Quora: "If an event happened that would sizably move a stock price (ex. poor earnings) from its original point, wouldn’t buying both a put/call option on that price be a guaranteed win? No matter which way the stock price moves, I would make a large return (even if I lost money on the other option)."

Are You Following "Tharp Think" Rules?

Thirty years ago, legendary trading coach Dr. Van K. Tharp sat down with two top traders Ed Seykota and Tom Bassoand and discussed the importance of psychology in trading. They decided that the factors of trading could be broken down as:

  • 10% Trading System
  • 30% Money Management
  • 60% Psychology

Lessons From Q1 2016 Earnings Season

In our continuous effort to expand our strategies, few weeks ago I presented a new exciting strategy to SteadyOptions members. The strategy is buying a Reverse Iron Condor (RIC) before earnings on stock with history of big post-earnings moves. RIC benefits from a big post-earnings move, but requires less movement than a straddle or strangle. The assumption is that with careful stock selection, this strategy has a very high probability of success.

My 2015 Personal Account Return: 80.2%

Many people say that it's too good to be true after looking at our performance page. In fact, if you had a nickel for every time you heard some investing “guru” cherry-pick advice to look good, you wouldn’t need to invest anything because you would have a fortune. SteadyOptions provides great options trading education, but is also striving to be one of the industry leaders in terms of honesty and transparency.

Steady Condors 2015 Report: 46.7% Return

This week we closed our December trades with gains of 6.7% on margin, and 5.1% return on 20k unit. This makes the 2105 year non-compounded return 46.7% on a whole account (including commissions). If we reported returns like most other services do (Compounded ROI before commissions), we would report 80.8% gain.