Unusual Options Activity

[Edwin 63]

For those who pay attention to unusual options activity, has anyone gone through and tracked the P&L of such strategies (CNBC/OptionMonster/Andrew Keene)?  I wonder if someone has tracked this has a general probability of winners in relation to the delta of the options purchased.  I understand that you could always have a low amount/percentage of winners and have huge winners on a few positions and have a positive P&L, but wanted to see if anyone was able to have any long term success trading this way.

[Kim 7,503]

This is the answer I got from OptionMonster when I asked for their track record:

 

We do not keep hard track records, but anecdotally, I can tell you in 2013 Inside Options performed at about a 65/35 win/loss ratio with avg return about 15% and 2014 was about 50/50 and breakeven. 

 

This of course is before commissions. Considering that they do around 200-250 trades per year, commissions will be heavy. And they refused to provide 2015 track record.

 

​So after commissions, you are pretty much guaranteed to lose money with this service.

 

Andrew Keene doesn't publish track record either. For me, it is always a huge red flag.

[Edwin 63]

Keeneonthemarket (now called AlphaShark) does post some of their open positions.  Being in their trading room before, the entry prices that are posted aren't accurate compared to what he was actually filled at.

 

http://alphashark.com/positions/

 

I'm surprised CNBC allows the Najarians, Dan Nathan and Mike Khouw talk about UOA and hardly ever talk about the losers & their p&l with these strategies, and always pump up the winners that they called in the past.  It's irresponsible on their part.  It's too bad they don't actually teach any options education on Options Action, and almost never educate viewers on Options Greeks.  I'm surprised that show is still on the air, I don't get who their target audience is supposed to be for Options Action.  Are they trying to sucker people into buying low delta OTM options?  I would think if it's supposed to be an educational show to get people interested in options trading, they would at least teach viewers about the fundamentals they actually need to know.

[Kim 7,503]

Why would CNBC care? Their goal is to get ratings and commercials, not to educate you. If they show their losers and people see their real track record, they would stop watching, which is not in their best interest.

 

Take a look at my article Why CNBC's 'Fast Money' Earnings Plays Might Be Bad Advice. Different show, same principle.

[Edwin 63]

I would think they would want to educate on the basics of options trading, and at least explain the greeks to viewers so they would come back for more learning.  I'm surprised the show has been on the air that long and they are able to sustain any ratings to justify the cost of running that show considering how unprofitable their trades are.

[Kim 7,503]

Well, OptionMonster is in business for a long time too, they are also consistently unprofitable, so what? They still able to charge $250-500/month because of their "name". People still believe that being TV celebrity automatically means you are a good trader. 

 

Same for Schaeffer which has one of the most horrible track records, but still charges thousands a year for his services.

 

​Those are all well oiled marketing machines that make money from commercials, subscription fees etc. but not trading. They don't even trade their own "recommendations".

[clowner 0]

Hi All,

I am new member from Spain. The reson i register was steadyoption is the only service that i could find that publish a trackrécord. It is terrible when you ask for a trackrecord, no one tells any think about historia performance but CTAs.

I am a spread futures trader and I would like to ask if UOA strategy (unusual option activity) has and edge on the long run. I would like to know is it worth to learn this kind of strategy. There are so many services and traders playing this game but no one is publishing they performance.

Does anybody know about the reality of playing UOA strategy?. If three is and edge here, I would like to learn and add this kimd of option strategy to my actual future spreading portfolio.

Thanks and sorry about my english.

[Kim 7,503]

Please see my comments above. Personally I did not see any proof yet that this is a profitable strategy in a long term.

[Edwin 63]

I would agree, no one will show you their overall long term performance.  You can follow people on twitter instead of paying for subscriptions, or do your own scans or look in the Trade Flash gadget in TOS to find UOA.  

They are usually low probability trades buying low delta premium that are highly leveraged.  I wonder if you take the opposite trade, if you will make more in the long run.  Instead of buying out of the money calls, sell an out of the money put or put spread.  The main issue with UOA is that you don't know what their overall portfolio looks like.  They could be buying calls against short stock, or buying premium to hedge against another position, or they are legging into a trade.  Even if they know information they illegally obtained or are just making a bet, they can still be wrong.

Edited January 30, 2016 by Edwin

[clowner 0]

Thanks both,

 

i am doing the research by myself of this kind of strategy.

 

Regards.