2025 SteadyOptions Performance

[Kim 8,102]

In the name of full transparency, I would like to address some issues regarding SteadyOptions recent performance. I will separate the analysis into several separate posts. 

Our performance in the recent months is not in line with our long term returns, as everyone can see on the performance page.

The main reasons for the recent underperformance:

• We are struggling with a change in the fundamental behavior of volatility at the moment. Our trades rely on RV and therefore also IV and this has not been acting as expected.
   
• Periods of extended VIX decline have always been some of our worst performers. The main problem now is that we have been in a long period of VIX decline that’s been going for months - there have been a few spikes but in general VIX has gone from 30+ to the 20’s to the mid teens (and making things worse is many periods of minimal stock price movement during this timeframe).  
   
• Our core trades do well when volatility is stable or rises. When volatility started to drop, it created some large percentage losers on a few trades that had an oversized negative impact on the portfolio performance. 
   
• We had much less trades in 2025, which made the impact of those larger losses bigger. We had less trades because some options became very expensive, so it became difficult for many trades to fit into a $1K allocation, and for many stocks with moderate liquidity in normal times, now had less liquidity and very wide bid/ask spreads. This made them much more risky to use for options trades as slippage was a big concern.
   
• We used some directional trades, and the stocks did not follow historical patterns in those trades. When a directional trade goes against you, losses can grow very quickly. This is what happened with TTD, XYZ, KO, FL etc. Some of the non directional trades also experienced outsized losses. We will reduce the number of directional trades going forward.
   
• We used less calendars than usual because many of them were way too expensive compared to previous cycles. Now with VIX in the mid teens, we expect to trade more calendars, which is one of our best performing strategies.

We are having extensive internal discussions on how to adapt to the current environment.

 

Our strategies are designed to make money in any market. They are not guaranteed to make money, but our long term objectives are still in place. 
 

No strategy works all the time. There’s no room for ‘never’ or ‘always’ in the financial markets. 

 

 

[Kim 8,102]

To provide a few examples to show how our strategies have zero correlation with the markets:

• Apr.2024: S&P 500 -4.2% SteadyOptions +4.6%
• Dec.2022: S&P 500 -5.9% SteadyOptions +2.9%
• Sep.2022: S&P 500 -9.3% SteadyOptions +1.7%
• Apr.2022: S&P 500 -8.8% SteadyOptions +4.8%
• Jan.2022: S&P 500 -5.3% SteadyOptions +5.7%
• Mar.2020: S&P 500 -12.4%, SteadyOptions +3.3%
• Feb.2020: S&P 500 -8.2%, SteadyOptions +26.6%
• Dec.2018: S&P 500 -9.2%, SteadyOptions +17.3%
• Feb.2018: S&P 500 -3.9%, SteadyOptions +3.7%
• Jan.2016: S&P 500 -5.0%, SteadyOptions +10.6%
• Aug.2015: S&P 500 -6.3%, SteadyOptions +11.7%
• Jan.2014: S&P 500 -3.6%, SteadyOptions +22.9%

 

In 2022, S&P 500 was down 18.2% while SteadyOptions was up 90.5%.
 

As one of our members mentioned in 2020 during the Covid market meltdown: 

"I would rate the 3% profit for March as even MORE successful than the 25% profits for Jan/Feb. If someone can make a profit in a month when there was total carnage in the markets, then that shows resilience and security in the trading strategies. It shows that even during a black swan event, the system works, and the account will not be blown."

To provide some perspective, we already had periods of sideways returns and drawdowns in the past, followed by periods of outsized returns. 
 

 

 

Traders should think in terms of years and decades instead of weeks and months.

 

[Kim 8,102]

This is what we posted on SOFI discussion topic:

 

SOFI is a good example why many of our trades have not been performing well this year. Take a look at the RV chart:

 

 

2024 SOFI trades

 

2023 SOFI trades

Strangle (11.10%)

 

2022 SOFI trades

 

 

 

You can see how low RV was this cycle compared to previous cycles. It was already very low when we entered, and it became even lower in the last 2 days.

Remember: we are trading probabilities. Nothing is certain in the stock market, but playing probabilities works well in the long term.

As you can see, we trade the odds based on prior cycle behaviors and our losing trades have been opened with good analysis. Nothing has changed with this - but the market dynamics has. 

 

[Kim 8,102]

I always like to use the analogy of the whole stock market.

The stock market indexes produce average return of 10-12%, but that included several drawdowns of 20-30%. Some of those drawdowns lasted months or even years. Nothing goes up in a straight line. 

So, if you joined the stock market based on a long time return of 10-12%, would you quit if you experienced a 30% drawdown? If the answer is yes, then the stock market is not for you. If the answer is no, then SO is no different.
 

We all would like all our trades to be winners, but we know this is not possible. We know some of the trades will be losers. Many traders think that if a trade has lost money, it was a bad trade. They try to identify what errors they made that lead to losses. Why? "Because I lost money! So surely I have made a mistake somewhere?”

Was it the right conclusion? Is any losing trade necessarily a bad trade?

The answer is no. No matter how well he executed his trade, there will be losing trades because we are playing a probability game. Trading is a business based on probability. And probability means that sometimes we get what we want, sometimes we don't. And that's the nature of this business. The sooner we accept this, the better we can operate it as a business.

To put things in perspective, our model portfolio was up 10% in the first half of 2025. We had few bad trades in July and those put us back few percentage points. While those returns are way lower than expected, they are not the end of the world. We will refine our strategies going forward and I encourage everyone to look at the big picture. 

It is important to note that consistency in trading is important rather than changing everything when you get an adverse movement. Adaptation rather than revolution over time is the right way to go. Have our strategies lost their edge? This question has been asked many times over the years, basically every time we have a period of dull returns, and the answer each time has been "no, they have not". I believe this time is no different.

Profits come in bunches. The trick when going sideways between home runs is not to lose too much in between - Michael Covel

Since inception we had 13 months that produced 20%+ returns, and over 30 months that produced 10-20% returns.



To win you've got to stay in the game.

Our strategies worked very well for us for over a decade, and we have full confidence that they will continue working in the future. Those who have the patience will be greatly rewarded, like in the last 13 years. Members who have been with us from the very beginning know it very well.

 

[rasar 2,080]

Great analysis, and with candor and transparency, too. Thank, Kim.

The comment about directional trades did resonate with me, as I have been watching them from the sidelines, or had modified my own trade away from the official. Directional trades probably have their place in a basket of strategies.

 

However when they deviate from the core thesis, it's a red flag for me. Many such trades started out delta positive right off the bat, with no (or not enough) room for error - just the hope that the stock would revert if it went south (pun intended). Somewhere in my basket of wisecracks is a saying that goes "Hope is not a strategy". In such cases I tended to stick with the original thesis, which worked better, or at least add a simple hedge - one that is understandable by the lay person - kind of like like we do with our Double Diagonals, where a calendar is added to mitigate the non-movement of the stock.

 

Taking the loss on a bad trade and moving on is another thing that traders tend to postpone, and then find themselves in trouble. The persistent red values in the daily trade log that present themselves hour after hour and day after day tend to make traders obsess over recovering from them which takes away time from finding potentially successful new trades. Someone had mentioned a while ago, and I agree whole-heartedly, that there is a psychological cost to staring at ugly red losses on a continuous basis. I personally tried this "different" discipline earlier - that is, mostly sticking to the defined max loss and/or profit targets - and my trading became more fulfilling, the losses smaller in number and value, and profitable trades more numerous. Even the moments of depression were fleeting when the closed losing trades were put aside in the cumulative trade log, leaving the active log looking a whole lot healthier.

 

The wonderful thing about SO is the thinking, back-testing, discussion and evolution that have formed all the core strategies, and this time is no exception, I'm sure.

Edited Wednesday at 11:33 PM by rasar
Spaced out the paras.

[project 100]

 

I just received this email addressing some issues SO was facing in the past. I’m not a member anymore but I was and I’m familiar with the strategies. I’m a vol trader since over 20 years so here my 5 cents. There is no fundamental change in volatility. Volatility is behaving as it always does. Volatility reflects the future expectation of movement of an underlying during a certain time frame. One important driver of Volatility are events. The bread and butter of SO, earnings events. Since Trump took office, single stock volatility also incorporates a lot of Macro Event vol and there are a lot more than normal. Best example is the one you used: SOFI. Expiry is 1st of August. Thats Trump’s Tarif deadline and that’s something effecting all businesses. Hence to the normal earnings expectations you got additional macro risk that is specifically fixed on one date. But Trump started taking some expectations out of the deadline by announcing the sending out of letters with deals about two weeks ago and about one week ago announcement of a deal with Japan and on Monday the deal with EU. Hence 1st of August premium got priced out after several parts of the big event got communicated down the road. Thats like pre earning releases.
There are a lot of these Macro Events around. Hence, if you trade volatility, you need to be aware of these (extra)events and what the additional premium for these events are on top of the normal micro events. It’s ok trading on backtesting but you need to be aware of the future, hence if the future has addition risk that isn’t replicate in past comparisons. I can clearly say, the SO edge isn’t lost, you just need to be aware what expiry vols you are buying/selling and what (additional) risk they incorporate.

 

[Kim 8,102]

2 hours ago, project said:

 

I just received this email addressing some issues SO was facing in the past. I’m not a member anymore but I was and I’m familiar with the strategies. I’m a vol trader since over 20 years so here my 5 cents. There is no fundamental change in volatility. Volatility is behaving as it always does. Volatility reflects the future expectation of movement of an underlying during a certain time frame. One important driver of Volatility are events. The bread and butter of SO, earnings events. Since Trump took office, single stock volatility also incorporates a lot of Macro Event vol and there are a lot more than normal. Best example is the one you used: SOFI. Expiry is 1st of August. Thats Trump’s Tarif deadline and that’s something effecting all businesses. Hence to the normal earnings expectations you got additional macro risk that is specifically fixed on one date. But Trump started taking some expectations out of the deadline by announcing the sending out of letters with deals about two weeks ago and about one week ago announcement of a deal with Japan and on Monday the deal with EU. Hence 1st of August premium got priced out after several parts of the big event got communicated down the road. Thats like pre earning releases.
There are a lot of these Macro Events around. Hence, if you trade volatility, you need to be aware of these (extra)events and what the additional premium for these events are on top of the normal micro events. It’s ok trading on backtesting but you need to be aware of the future, hence if the future has addition risk that isn’t replicate in past comparisons. I can clearly say, the SO edge isn’t lost, you just need to be aware what expiry vols you are buying/selling and what (additional) risk they incorporate.

 

Yes, IV still reflects future expectations. But for many stocks, those future expectations have been very different from the previous cycles.

Macro events like tariffs can add or remove uncertainty to the global markets. This is why VIX jumped to 30+ when Trump first announced the tariffs, and this is why it kept going down gradually when the markets realized that things are not as bad as initially thought. And now it's back to the mid teens after few major deals have been announced.
 

But even when this macro uncertainty is removed (or significantly reduced), there is still specific event risk like earnings.

In case of SOFI, all previous cycles priced at least 14-15% move. So why this cycle would price only 10% move, even with reduced macro risk? The earnings are still there. And btw, if you look at the morning of earnings, SOFI moved 17% at the open (it retreated later, but this is not the point). So the market was very wrong in pricing earnings so low.

Also, when you enter a straddle during periods of high VIX and VIX goes down during the life of the straddle, it has a negative effect on the straddle price.

This kind of "mispricing" happened a lot in the last few months, and this was the main challenge.