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Tastyworks A New Brokerage Firm

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Guest Chris

Tom Sossnoff a business man in the trading space has now created his own brokerage firm. Ugh! He seems to make money in creating businesses with in the trading space as he has been on the wrong side of the market as a trader for the past 6 years. It seems he wants all commissions instead of a portion hence his relationship with TD Ameritrade. Thoughts?

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Broker Check for TastyWorks: https://brokercheck.finra.org/firm/summary/277027 

 

The officers aren't particularly distinguished in terms of pedigrees, but they are "doers" -- Sheridan notably, who is a proven quantity in directing platform development (including mobile apps). If they can get the commissions down to a manageable drag, I might give their platform a whirl. The site claims functioning browser-based and mobile apps will be available right out of the gate, based on Dough's GUI. (Sometime in January 2017.)

 

(Although I'm not a fan of Dough, having robust browser-based and mobile platforms is a huge advantage for me, since I work in secure areas that will not allow me to download standalone ONE software or run it from a flash storage device. I'm testing the ONE now, linked to IB, in anticipation of a quick divorce from TDAmeritrade after taxes.)

 

Sosnoff is super creative. He also knows that execution and costs matter. It would be a big middle finger to the guys over at TDAmeritrade if he and his team pull this off, and with lower commissions. When TDA bought thinkorswim, I heard they wouldn't let Sosnoff near an executive position with any real authority. Probably just made him more determined.

TDA and IB are due for some disruption. I'm already tracking the Tradier/Livevol Core thread. Very interested in that as well.

 

 

 

 

TastyWorks.PNG

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I have never used Dough.It just didn't appeal to me I did use it though to look at the IV percentile list to see what options were relatively expensive.

I kept a TOS account open just so I use the software for analysis. But I Never made any trades because of the commissions.

ALL of my trades have always been with IB.
 

As far as the new TastyWorks platform is concerned, it seems like they have been working on it for over 2 years and it is exclusively for options.

They said it will be able to do things that TOS could never do.
 

They have proven that they can build good software and, just like all of us, over the past few years they have learned a lot more about what an options trader would want to have available in his "toolkit" for analysis, and the new software is supposed to have a ton of new tools that might be extremely helpful for  scanning for trading candidates based on your OWN criteria.
 

They HAVE to make more money because somebody had to pay for this huge project.

Instead of instantly tossing this off as a play for more commissions, and trying to imagine what is wrong with this, I would give this thing a chance to be examined to see how good a tool it is.

If they actually do provide IB rates, and the software is a huge step forward in the ability to analyze, and search w,ith your own filters, what is the problem?

Let the software prove whether it is a big step forward rather than imagine the worst before it has even come out.

 

Also, you can always get the software , but make all of your trades with IB if the commissions are too high and the software is great!

 

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When considering a broker, execution and commissions are probably the most important things, but you also need to consider the broker financial stability and size. IB is very stable, with years of proven reputation and financial stability. What do we know about financial stability of Tastyworks? At this point - nothing.

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3 minutes ago, Kim said:

When considering a broker, execution and commissions are probably the most important things, but you also need to consider the broker financial stability and size. IB is very stable, with years of proven reputation and financial stability. What do we know about financial stability of Tastyworks? At this point - nothing.

I'm going to go with using their software for analysis IF it is a major step forward, and keep my money,and do my trades at IB!

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I believe that Tom Sosnoff making trade recommendations at tastytrade and having a stake at Ameritrade was already a huge conflict of interest. Now when he owns tastyworks and continues doing his shows at tastytrade, it's even worse. I think it's only matter of time when he becomes part of next SEC investigation.

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I am also interested in getting ONE, probably with a 1-year subscription bundle. Would any member familiar with this software kindly give newbies like me a heads-up on its functionality, particularly on backtesting capabilities and if it has automated order entry capability (e.g. pick options according to particular parameters such as delta), as well how ONE stacks up with well known software like OptionVue.

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28 minutes ago, Mat M said:

I'm familiar with TOS and IB and use both platforms but am not familiar with ONE. Would someone who knows about it please post a link or more information about how I can learn about it?

@Mat M @JohnHL

Link to ONE webinar

https://steadyoptions.com/forums/forum/topic/2678-optionnet-explorer-software-webinar/

 

Edited by 4REAL

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I emailed them just for kicks about calendars in an ira.  Currently I have An Ira at TDA and 1 at IB.  At IB  I can do calendars in it but not at TD.  Evidently tasty Works will allow them.  Something to consider if the platform proves to be stable easy to use and has the functionality of tos that so many people like.

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My Take:

 

The commissions are $1 per contract. In addition, there is Options Regulatory of 0.04, which brings the total to $1.08. SPX, RUT, VIX, SPXPM and few more indexes cost more (between 0.18 and 0.65 extra). Exercise and Assignment is $5. Margin rates are around 7-8%. Stocks $5 flat.

 

Compare to IB:

Options commissions 0.70 plus Options Regulatory of 0.04, so total is around 1.48 (round trip). Commissions go down to 0.50/contract if you trade 10,000+ contracts. Only SPX and VIX are extra. No Exercise and Assignment fees. Stocks: $1 per 200 shares. Margin rates less than 2%.

 

In my opinion, Tastyworks commissions might be attractive to TOS traders, but definitely not IB traders. And don't forget to check financial stability of Tastyworks which at this point is unknown.

 

On a personal note, I wouldn't touch anything that has Tom Sosnoff name attached to it.

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4 minutes ago, Kim said:

My Take:

 

The commissions are $1 per contract. In addition, there is Options Regulatory of 0.04, which brings the total to $1.08. SPX, RUT, VIX, SPXPM and few more indexes cost more (between 0.18 and 0.65 extra). Exercise and Assignment is $5. Margin rates are around 7-8%. Stocks $5 flat.

 

 

 

kim, there are no commissions for closing trades.  So overall, most options trades will be cheaper than IB

That being said im still not touching it.

 

Edited by RapperT

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Yes, I took that into account: 1.08 in Tsatytrade vs. 1.48 in IB for round trip. BUT:

 

1. Trading indexes like SPX, RUT, VIX etc. is more expensive at Tastyworks.

2. 4 times higher margin rates.

3. Exercise and Assignment fees.

4. Much higher rates for stocks.

5. No volume discounts. 

 

When you account all factors, the total cost at Tastyworks will be probably similar or slightly lower than IB.

 

My point is that when you are a new player in town and want to compete against someone like IB who has been #1 broker 4 years in a row by Barron's, you need to do much better. Look at other new players like Tradier, Lightspeed etc. Especially when your mantra is "We want to help the small guy"...

 

Of course compared to TOS, those are amazing rates. For all Sosnoff/tastytrade funboys, it is probably attractive as well. But to steal clients from IB, they will have to do much better.

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They have been working with the help of the SEC for the past 3 years to put this operation together following the letter of the law.

They are 2 separate companies

1- TastyTrade, which is led by Sosnoff and only in the business of providing research and education, for free. They offer no products that cost money.

2- TastyWorks is the new "clearing and brokerage" arm of the company and is a separate company.

They are not a clearing firm. They are using "Apex Clearing" for that part of the program.

Apex has been around for many decades and has an excellent reputation.

Tom & co. started creating TOS in 1999 and it has grown to be one of the best retail trading platforms today.

I personally do not use it because I have been with IB since they started and , I do not know which platform is better but, I am so attached to it after all of these years, it is my personal choice. Plus IB has more money than almost any retail firm in the world and their commissions are near the best.

TastyWorks will probably be a little bit less money in commissions and their trading platform is the fastest in the (retail) world because they removed all of the"junk" that slows other platforms down.

It is strictly an "options" platform that deals with everything relating to options and HFT speed because of the way it was designed.

I think they have proved that they know how to design a platform. Just look at TOS. From 1999-2010 no other platform could touch it.

But now they used the same team to make something far superior.

They offer anything related to TastyTrade for free and would love to do the same thing with TastyWorks but, these things, at this level, cost a LOT of money to run.

With that considered, their rates are pretty amazing, and Apex Clearing is a solid clearing firm with a very long history.

If there was anything to worry about regarding the safety of your funds, then I think Apex would have gone out business over 25 years ago.

The whole thing got a big green light to begin from the SEC so I think it is about as safe as you can get.

They have only 1 problem for me, but it is only temporary.

They will only offer Equity, Etf, Indexes, and all related options and products at the very start.

In March they will add all commodities, and more and more products as time goes on.

You are not putting your money with a new firm that is just starting out and have to worry about how they will do.

The company has been clearing forever and is solidly built to handle anything.

I',m interested in the platform. I will never leave IB. At least I doubt it.

But, I will open a small account here to see what the platform is all about, and if it provides any tools that are new and can make my trading more efficient.

 

And NO...I am not a spokesman for them! I just wanted to provide some information about their operation that seems to be lacking in the conversation.

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One more thing . There seems to be a misunderstanding in many conversations here about what they are saying. People seem to be mocking them about this idea of "Trade samll/Trade often".

 I was watching them yesterday and they were really making a big fuss about "do not feel as if you need to always be trading and putting on positions"......they said "there are times when very good conditions are present for certain types of trades and that is when you should take advantage of them"

But they did a whole segment about "do not trade just for the sake of trading. It is always better to stay out of the market if your best conditions for a trade are not present"

I constantly hear them pounding the idea of "don't trade unless the conditions are right, for you"

Is that an idea worth mocking?

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im not mocking them for it, but it if one is getting paid through the generation of commissions the conflict is obvious. You cant disregard that.

 

There is nothing wrong with trading small and frequently if one's system is sound

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2 minutes ago, RapperT said:

im not mocking them for it, but it if one is getting paid through the generation of commissions the conflict is obvious. You cant disregard that.

 

There is nothing wrong with trading small and frequently if one's system is sound

So the only "absolute" solution is to not charge any commissions.

Since that can't happen while running a viable operation, I think these rates are among the best in the retail industry.

And, if one's system wasn't sound in logic and in results, and the person continued to trade often then they will have to learn the hard way to stop and get their act together before it's too late!

 

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13 minutes ago, cuegis said:

So the only "absolute" solution is to not charge any commissions.

 

 

huh?  no.  The solution is to be up front about the nature of the relationship when propagating advice and info through their "free" tasty trade network.

No reasonable person would have any issue with business men making money

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Tastytrade might be free (although they do have some paid products like bob the trader). A mouse will always find free cheese in a mousetrap; but I never saw one that was very happy about it. I'm still waiting for a proof that Tom Sosnoff or any of his traders or followers are actually profitable. Thousands of traders have been burned by his strategy of selling premium before earnings on stocks like AMZN and NFLX.

 

Tom Sosnoff is a brilliant businessman. He created Tastytrade in order to "help the small guy", while his real goal is to generate commissions for TDAmeritrade. Don't take my word for it, there are many people who think the same - here is one of them Tastytrade: A Shill with Skills  Again, his mantra has always been there "Trade Small, Trade Often". This is a huge conflict of interests for TastyTrade and now for TastyWorks. As many people have mentioned, when you present Tastytrade as a free network while being paid through teh back door, the conflict of interest and hypocrisy are obvious.

 

Tom Sosnoff is also very charismatic, he created a huge followup and now he will get many of his followers to follow him to TastyWorks. Brilliant move for him, not sure about his followers.

 

No matter who is their clearing firm, TastyWorks is still a new company. New platform, new management, unproven execution etc. 

 

I advised people to be very careful about Tastytrade, and my advice remains the same about TastyWorks. Those who believe that Tom Sosnoff provides good research, I suggest reading my articles Buying Premium Prior To Earnings - Does It Work? and Can We Profit From Volatility Expansion Into Earnings?

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1 hour ago, RapperT said:

huh?  no.  The solution is to be up front about the nature of the relationship when propagating advice and info through their "free" tasty trade network.

No reasonable person would have any issue with business men making money

I guess you havn't watched them over the past few weeks.

They took several weeks to explain the entire structure of the business, how it works, who owns what etc. etc.

I don't it would be possible to be more transparent.

They worked together with the SEC in putting all of this together the past 3 years.

Everything was perfectly in order for them. That's a pretty good approval.

I don't think there is anything else they can do to be more upfront.

You don't have to agree with everything they say. I certainly don't.

I have had lot's of disagreements with Tom (ex. how could you realistically say that you would NEVER buy premium?)

But, they are amazingly honest and fair, in a business that is mostly filled with scams (i.e. "I'll show you how to make $6784 per week, every week")

They work very hard, and provide mostly quality information. Most important, they are honest.

 

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18 minutes ago, Kim said:

Tastytrade might be free (although they do have some paid products like bob the trader). A mouse will always find free cheese in a mousetrap; but I never saw one that was very happy about it. I'm still waiting for a proof that Tom Sosnoff or any of his traders or followers are actually profitable. Thousands of traders have been burned by his strategy of selling premium before earnings on stocks like AMZN and NFLX.

 

Tom Sosnoff is a brilliant businessman. He created Tastytrade in order to "help the small guy", while his real goal is to generate commissions for TDAmeritrade. Don't take my word for it, there are many people who think the same - here is one of them Tastytrade: A Shill with Skills  Again, his mantra has always been there "Trade Small, Trade Often". This is a huge conflict of interests for TastyTrade and now for TastyWorks. As many people have mentioned, when you present Tastytrade as a free network while being paid through teh back door, the conflict of interest and hypocrisy are obvious.

 

Tom Sosnoff is also very charismatic, he created a huge followup and now he will get many of his followers to follow him to TastyWorks. Brilliant move for him, not sure about his followers.

 

No matter who is their clearing firm, TastyWorks is still a new company. New platform, new management, unproven execution etc. 

 

I advised people to be very careful about Tastytrade, and my advice remains the same about TastyWorks. Those who believe that Tom Sosnoff provides good research, I suggest reading my articles Buying Premium Prior To Earnings - Does It Work? and Can We Profit From Volatility Expansion Into Earnings?

He once did a study about "Buying premium before earnings" and it was one of the most stupid presentations I have ever seen.

He did the study in reverse. He decided that he wanted to make a point (you can't make money buying premium before earnings) , THEN, he went out and had his research team "cherry pick" a series of events, which he already knew the outcome of. Then, lastly, they ran a study to prove their point.

I agree with you on that one totally. Anyone can prove anything by cherry picking data and shape it to provide the results you want in advance.

He has presented ten's of thousands of amazingly insightful studies, that ARE true, as well.

I'm not going to call the guy a fraud because there is some very small % of his studies that I don't agree with.

Relative to the amount of information those people are putting together, there is a VERY small % that I would place in the category of that particular study.

I have never done my own study, if it were even possible, as to what % of his presentations are spot on compared to the ones that are misleading.

But, the majority make sense, and have value despite the unenlightened ones.

This is an industry where making money is a priority. I think stubbornly committing to the idea that one should NEVER buy premium is absolutely idiotic.

But, how does he make money from trying to perpetuate that idea?

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39 minutes ago, cuegis said:

He once did a study about "Buying premium before earnings" and it was one of the most stupid presentations I have ever seen.

He did the study in reverse. He decided that he wanted to make a point (you can't make money buying premium before earnings) , THEN, he went out and had his research team "cherry pick" a series of events, which he already knew the outcome of. Then, lastly, they ran a study to prove their point.

I agree with you on that one totally. Anyone can prove anything by cherry picking data and shape it to provide the results you want in advance.

He has presented ten's of thousands of amazingly insightful studies, that ARE true, as well.

I'm not going to call the guy a fraud because there is some very small % of his studies that I don't agree with.

Relative to the amount of information those people are putting together, there is a VERY small % that I would place in the category of that particular study.

I have never done my own study, if it were even possible, as to what % of his presentations are spot on compared to the ones that are misleading.

But, the majority make sense, and have value despite the unenlightened ones.

This is an industry where making money is a priority. I think stubbornly committing to the idea that one should NEVER buy premium is absolutely idiotic.

But, how does he make money from trying to perpetuate that idea?

Yes, this is the study I was referring to. He actually did similar studies more than once. Here is another one - Another garbage study from Tasty Trade.

 

I have no idea what percentage of his studies is good. I would assume that more than 50% for a simple reason: selling premium in general has an edge compared to buying premium, and since all his studies are about selling premium, he must be right more often than not. But as you said, the fact that he claims one should NEVER buy premium is absolutely idiotic, and he has zero credibility by claiming such idiotic claim.

 

I never said he is a fraud. I said he is a hypocrite and has conflict of interest. Doesn't make him a fraud.

 

"how does he make money from trying to perpetuate that idea?"

 

There are two different aspects here.

 

First aspect is his conflict of interest because he recommends active trading strategies that are commissions consuming and at the same time, benefits financially from those strategies, no matter if they make money or not. This is on the business level. btw, he is not alone - Najarian brothers do the same with TradeMonster/OptionMonster, and TDAmeritrade are doing the same with redoption. But at least they don't claim that their goal is to "help the small guy".

 

Second aspect is his claim that only options selling can make money. This is on the professional level. To me, this claim alone discredits the whole Tastytrade network because you can never know if their studies are correct or are skewed to support his concept. He did it with buying premium before earnings, I'm sure you can find many other instances. It doesn't matter what percentage of the studies is correct because novice traders will never know the difference. If he lied and skewed his study (intentionally) once, how can he ever be trusted again?? 

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he has two videos on his youtube channel about calendars.  One goes over why no one should ever trade calendars,  Then a couple years later they published one centered around how effective calendars are in low vol environments  I feel this kind of provocation is effective as entertainment but doesnt carry much weight otherwise.  His studies all employ very small sample sizes rendering their results iffy at best. He also outright disparages systematic trading, especially trend following despite the vast amounts of empirical evidence supporting the efficacy of both.

 

That being said, I think some of his options basics videos are very helpful.

 

Despite all of this, my issue is the opacity around his  TDA relationship and how close minded he is toward any approach other than his own.  In my experience,  anyone who thinks their way is the only way is either full of shit, peddling something, or both.

Edited by RapperT

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29 minutes ago, RapperT said:

he has two videos on his youtube channel about calendars.  One goes over why no one should ever trade calendars,  Then a couple years later they published one centered around how effective calendars are in low vol environments  I feel this kind of provocation is effective as entertainment but does dolf much weight otherwise.  He also outright disparages systematic trading, especially trend following despite the vast amounts of empirical evidence supporting the efficacy of both.

 

That being said, I think some of his options basics videos are very helpful.

 

My issue is the opacity around his  TDA relationship and how close minded he is toward any approach other than his own.  In my experience,  anyone who thinks their way is the only way is either full of shit, peddling something, or both.

I agree with you and I have had many conversations with Tom, debating many of these ideas.

But, as opposed to all of the charlatans moving around in this space...where does Tom gain "Financially" from pushing a stupid theory.(i,e, NEVER buy premium)

Especially when he is generally on the right track ( IV is overstated, ....you always have more of an edge as a seller of premium.etc.).

It looks to me like it has it's roots based in "ego" rather than financial gain.

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Turns out tastyworks $1 commission is not exactly $1. There is an extra 0.15 clearing fee and regulatory fee. So total to open and close position is $1.30. With IB it's around $1.50 on average, and many times you pay less for adding liquidity. Which means that overall cost with tastyworks will be similar or even higher than IB. And this is before even mentioning higher margin rates, higher commissions for stocks etc.

 

So much for "no hidden fees"..

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Guest Achemist

 

Dan Sheridan is connected to ONE

Sosnoff is connected to Tastytrade

One is good and one is bad but:

Sosnoff Sheridan Group is started in early 80's

 

I cant understood your hate to Sosnoff. He is far from perfect but he is not so bad as you try to show.

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I don't hate Sosnoff. I'm providing the facts only. And I don't see how Dan Sheridan connection to ONE is relevant. Dan Sheridan made an agreement with ONE to get better rates to his members. He does not benefit personally from this connection. Sosnoff does.

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On 12/7/2016 at 9:30 PM, Kim said:

Well, I guess we know now the true purpose of tastytrade.

NOT, It's Just the next step.

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I have been IB client for over 10 years. Never had any issues with their CS. Barron's ranks them #1 6 years in a row (ahead of TDAmeritrade in ALL surveys).

 

As for tastytrade "brilliant studies" - maybe they look brilliant to novice traders who cannot really fully understand and verify them.

 

Take a look:

Another garbage study from Tasty Trade.
Buying Premium Prior To Earnings - Does It Work?
Can We Profit From Volatility Expansion Into Earnings?

 

Please spend few minutes reading the links and tell me if you still believe their studies are "brilliant". In case of tastytarde, you indeed get what you pay for.

 

Many people fail to understand a simple thing: when someone claims that only his trading method works, RUN AWAY. He will do everything to "match" the studies conclusions with his theory. 

 

What was the true purpose of tastytrade? To gain thousands of followers for their "brilliant" free studies, and then use those followers to convert them to tastyworks.

 

But I'm actually very grateful to tastytrade. They say that our earnings straddles don't work. We don't do studies, we prove that they work with real trading, and tastytrade followers provide us a fresh supply of sellers when we buy them.

 

P.S. I have no idea if Sheridan pays commissions to his broker. I was referring to his agreement with ONE software. and yes, we are all businessmen in the end. Nothing wrong to be a businessman and admit that you want to make money. What is wrong is repeating time after time that your goal is to help the small guy FOR FREE, while hiding huge conflicts of interest. To me this is hypocrisy.

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Guest Alchemist

Kim, you said that you cant test just 2-3 symbols and make general conclusions that something is working or not. You are correct here! But you show us just 2-3 studies that are not good and you make same general conclusion. You never make incorrect conclusion? You never make mistakes? All your studies, trades and so on are more than perfect ?

Sosnoff has huge ego and that is his biggest problem in my opinion but still he done great job creating TOS and TT. As i said, he is far from perfect but he is not so bad as you try to show. 

You said you will never touch anything that Sosnoff create but I can same for your so loving IB. I was with IB more than 5 yrs and i am very unhappy with them. Forget commissions, what about their almost double margin requirements? What about changing margin requirements without any message? Their automatic liquidating system is so bad that i have not words to explain   it. and the cherry is their CS, probably worst in business.

So, everyone is both  good and bad , me you,,, Sosnoff, IB ..... you cant as you said make general conclusion on just 2-3 bad studies. "Trade small, trade often" is incorrect too? Ok then, allocate 100% of your capital in one strategy, in your favorite strategy ;)

OK, you get my point, you are smart enough to know that Sosnoff has great studies and very bad ones and in general he is very useful   but your personal hate to him is blinding you.

 

btw, the only real track record is audited one....i can produce a tons of not audited track records that cover my needs ;)

I wish you all the best !

plz excuse my English :)

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It's not 2-3 studies. It's much more. But this is not the point. I'm sure he has a lot of great studies. But once you see few studies that were intentionally skewed to reach the conclusions he wanted, how can you trust him? How can a novice trader know which study is good and which is bad? it is matter of credibility. Yes, everyone makes mistakes. Including myself. But I always admit my mistakes. Unlike Sosnoff,  I never say that my strategies are the only way to make money in the stock market. Have you ever seen Sosnoff admit his mistake?

 

As for IB - this is not the place to discuss it, you can place a comment in our   discussion. All I can say is that most our members are very happy with IB, and they must be doing something right to be ranked top broker by Barron's 6 years in a row.  

 

"Trade small, trade often" serves well the brokers in terms of commissions, and since tastytrade and dough are linked to Ameritrade (and now to tastyworks), it creates huge conflict of interests. I'm sure you can see that.

 

You are partially right about audited track record. Non-audited track record is still better than no track record at all (and Sosnoff has no track record at all). You can produce whatever you want, but usually it is pretty obvious when the track record is fake. And if someone has difficulty to recognize fake track record, he can read my article Performance Reporting: The Myths And The Reality.

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Guest Tastyworks account

I just opened up a small account in Tastyworks, out of curiosity. I'll just go with the facts here, I really know nothing about Sosnoff or the tastyworks team. I am just a trader, an options trader that is always looking for the best execution at the lowest possible fees, really don't care were (as long as my money is safe of course). After trading about 30 contracts so far in different, very liquid, ETFs (spy, iwm....) these is what I see in case it can help anyone:

The pros:

They have the fastest execution I've seen so far. I have other accounts, IB, TOS, Optionshouse. When I place an order with them, the order normally stays there for a while, I try to always go for the mid price between bid and ask. With Tastyworks, the order just goes through, honestly haven't seen anything like that in 5 years of trading, don't know how they do it. And the order goes through at the right price, equal, or better, than TOS or IB.
They have the best commission structure, if you place many different trades with 1 or 2 contracts each. $1.15 to open, $0.15 to close, so $1.30 round trip. Seriously? Hey let's face it, even IB can't beat that. I've been with them for 5 years now.

The cons:

Can't trade futures (not yet).
The platform is new, you may encounter a bug here or there.
High margin rates.
There is an option assignment/exercise fee. Still less than the horrible $15 TDA charges, but can't compare to $0 in IB.

I haven't trades stocks with them so far.

I am just putting these facts out there, just hope this helps.

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1 hour ago, Guest Tastyworks account said:

I just opened up a small account in Tastyworks, out of curiosity. I'll just go with the facts here, I really know nothing about Sosnoff or the tastyworks team. I am just a trader, an options trader that is always looking for the best execution at the lowest possible fees, really don't care were (as long as my money is safe of course). After trading about 30 contracts so far in different, very liquid, ETFs (spy, iwm....) these is what I see in case it can help anyone:

The pros:

They have the fastest execution I've seen so far. I have other accounts, IB, TOS, Optionshouse. When I place an order with them, the order normally stays there for a while, I try to always go for the mid price between bid and ask. With Tastyworks, the order just goes through, honestly haven't seen anything like that in 5 years of trading, don't know how they do it. And the order goes through at the right price, equal, or better, than TOS or IB.
They have the best commission structure, if you place many different trades with 1 or 2 contracts each. $1.15 to open, $0.15 to close, so $1.30 round trip. Seriously? Hey let's face it, even IB can't beat that. I've been with them for 5 years now.

The cons:

Can't trade futures (not yet).
The platform is new, you may encounter a bug here or there.
High margin rates.
There is an option assignment/exercise fee. Still less than the horrible $15 TDA charges, but can't compare to $0 in IB.

I haven't trades stocks with them so far.

I am just putting these facts out there, just hope this helps.

As far as futures go...they targeted March 1 as the start date for futures/options. So, figure another 1-2 weeks to be realistic. But soon.

I listened to them a few weeks ago , at length, explain how they went about creating their new trading platform vs. the old TOS platform.

Without going into a LONG explanation....basically, what they were trying to do was work under the assumption that the people using it were fairly knowlegable with regard to options at this point and , know what they want to do.

The last thing they need is some heavy duty technical analysis portion among many other similar things to slow down the whole trading process.

Their only goal was SPEED and low rates.

So, they removed all of the "crap" that slows the entire platform down so that, in return, you get SPEED!

You want charts, there are a zillion other places to look at that. They just wanted to keep it simple fast and clean.

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7 hours ago, Guest Tastyworks account said:

They have the best commission structure, if you place many different trades with 1 or 2 contracts each. $1.15 to open, $0.15 to close, so $1.30 round trip. Seriously? Hey let's face it, even IB can't beat that.

 

Tradier can.

 

Even leaving aside the $40/mo flat rate deal for members here, their everyday rate is no ticket fee and .35/contract.

 

Not sure if the additional fees of .04 (ORF) buy/.05 (ORF + TAF) sell apply here or only with the $40 deal, but even if they do it's just .79/contract round trip.

Edited by Noah Katz

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Guest Tastyworks account
15 hours ago, Kim said:

Thanks for sharing, appreciate it!

 

It would be interesting to see how the execution is for less liquid instruments.  

Even though I really don't like to trade other than "really highly liquidity", I went ahead today and took the challenge today. Tried a small short 1 point wide XLB vertical this morning, it was about $0.1 the spread at that time, I really can't trade larger spread than that. The order just went through really quick just like the rest.

I put it in both at the same time TDA and TW, hit send in TDA then in TW. They both filled, but TW filled the order inmediately, TOS filled about 2-3 seconds later.

Again I have nothing against any particular broker and don't favor any other either. I am just stating the facts here. Not sure how they do it, but it is impressive what I've seen so far.

If they can keep it like this for the next few months, really good performance with really bottom prices, I see options traders gravitating towards them. IB may not even bother, they are probably too huge. But I can see TDA losing some business if they don't try to match this as far as cost.

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I think tastyworks are targeting mostly TDA. I don't see many IB clients move as the commissions are almost the same (1.30 round trip at tastyworks vs. 1.50 at IB, but when you consider other costs like margin rates, assignment fees etc. it will probably be very similar). But with TDA, the price difference is huge.

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I think it is apples and oranges.

IB's customer base is professional, even though you can have a small retail account there.

IB clears $20 Billion hedge funds. Not to mention their own proprietary operations which span the globe.

TastyWorks is ONLY for the small, retail trader and they have provided "that" group with all of the best tools for their specific needs. The lowest (or close to it) commissions, and the fastest execution platform.

I don't think IB has anything to worry about. They are targeting totally different markets.

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1 hour ago, cuegis said:

The lowest (or close to it) commissions...

 

As far as I can tell no one is even close to Tradier, but when broker cost comes up they're never mentioned, except apparently by me. 

 

Is there some secret about them that I'm not privy to?

 

I've made similar posts in various threads, hoping for some feedback since I'm considering moving to Tradier, but all I get is silence...

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First off, thank for posting your experience with Tradier. The pricing certainly can't be beat and I'm sure everyone here has taken a look at them. This is just my point of view, maybe others here will post their thoughts as well.

 

1. Their website doesn't really provide much information. So it appears all they have is a plug-in they provide to 3rd parties. 

 

2. There are 30+ platforms supported. I really don't have the time to go through every single platform to find the one to trade from. Also, all of the platforms appear to charge a fee, so you have to add that fee into your trading costs to then try to figure out if you're really saving money.

 

3. I can only find a few reviews to see other people's experiences with Tradier. They have 2 reviews on Investimonials and a thread on Elite Trader from 3 years ago. Not much else.

 

4. I'm sure they are selling order flow. Can't find any info on that though.

 

Anyone else here using Tradier? Or anyone willing to give their thoughts? I am interested, but not sure I want to pull the trigger on this without more information.

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Cost of transaction is not everything

 

Some of the things I consider before opening acc:

 

1. Solvency of the broker, I guess if you change from TOS or IB, you won't improve yourself.

 

2. Liquidity/ Fills, say you do 1000 contracts (or 500 spreads) per month and have to pay an average of 0.01 more (compared to IB or TOS) to get filled, your monthly cost would be 40$/month flat fee + 500$ 

 

3. Platform

 

 

1. and 2. are holding me back to open an account for now.

Edited by 4REAL

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51 minutes ago, craigsmith said:

First off, thank for posting your experience with Tradier. The pricing certainly can't be beat and I'm sure everyone here has taken a look at them. This is just my point of view, maybe others here will post their thoughts as well.

 

1. Their website doesn't really provide much information. So it appears all they have is a plug-in they provide to 3rd parties. 

 

2. There are 30+ platforms supported. I really don't have the time to go through every single platform to find the one to trade from. Also, all of the platforms appear to charge a fee, so you have to add that fee into your trading costs to then try to figure out if you're really saving money.

 

3. I can only find a few reviews to see other people's experiences with Tradier. They have 2 reviews on Investimonials and a thread on Elite Trader from 3 years ago. Not much else.

 

4. I'm sure they are selling order flow. Can't find any info on that though.

 

Anyone else here using Tradier? Or anyone willing to give their thoughts? I am interested, but not sure I want to pull the trigger on this without more information.

Same here. Right now I'm really in a very good groove with everything involved in my process.

In addition, I have been with IB since they opened...over 20 years ago so their platform is like another appendage to my body and that is one less thing I have to think about during the day.

Basically, I'm in the space where I "don't want to mess around with a good thing".

If IB was charging $3.00 per option and Tradier .50 cents then I would have no choice but to move over to them.

But the difference is SO small compared to what I would be giving up right now by disrupting my routine.

Edited by cuegis

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  • Similar Content

    • By Kim
      We already debunked some of those "studies" here and here. Today we will debunk another study, and will show how to do it properly.

      On July 7, 2015, tastytrade conducted a study using AAPL, GMCR, AMZN and TSLA. An ATM straddle was purchased 21 days prior to earnings and closed the day before earnings. A table showed the results. The win rate, total P/L, average P/L per day, biggest win and biggest loss were shown:

        

      Their conclusion:



      Wait... They concluded that buying volatility prior to earnings doesn't work based on 4 stocks? Why those 4 specific stocks? Why 21 days prior to earnings?

      Our members know that those 4 stocks are among the worst to use for this strategy. They also know that entering 21 days prior to earnings is usually way too early (there are some exceptions).

      Also, what is a significance of dollar P/L when comparing stocks like AMZN and AAPL? At current prices, AMZN straddle would cost around $8,500 while AAPL straddle around $1,200. Theoretically, if we had a 10% loss on AMZN (-$850) and 50% gain on AAPL ($600), the total P/L would be -$250. But the correct calculation would be total P/L of +40% because we need to give equal dollar weight to all trades.

      But lets see how changing just one parameter can change the results dramatically. We will be using AAPL as an example. 

      First lets use the study parameter of 21 days.


      Tap Here to See the back-test

      Entering 21 days prior to earnings is indeed a losing proposition. But lets change it to 10 days and see what happens:


      Tap Here to See the back-test
       
      Can you see how changing one single parameter changes the results dramatically? I have a feeling that tastytrade knew that 21 days would be not the best time to enter - but using different parameters wouldn't fit their thesis.


      Now lets test the strategy on some of our favorite stocks.

      NKE, 14 days and 15% profit target:


      Tap Here to See the back-test
       

      MSFT, 7 days and 15% profit target:
       

      Tap Here to See the back-test


      CSCO, 21 days and 10% profit target:


      Tap Here to See the back-test

       
      IBM, 7 days and 15% profit target:


      Tap Here to See the back-test

       
      ORCL, 14 days and 20% profit target:


      Tap Here to See the back-test

       
      WMT, 7 days and 10% profit target:
       

      Tap Here to See the back-test
       

      As you can see, different stocks require different timing and different profit targets. Some work better entering 7 days prior to earnings, some might improve performance with an entry as early as 21 days prior to earnings.

      The bottom line is: you cannot just select random stocks, combine it with random timing and no trade management, and declare that the strategy doesn't work. But if you select the stocks carefully, combine it with the right timing and trade management, it works very well. Here are our results, based on live trades, not skewed "studies":


       
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    • By Stephan Haller
      Lately we experienced a 7% down move in the S&P 500.
       

      image source: TOS trading platform  
      We have also seen an explosion in the VIX.


      image source: TOS trading platform  
      All in all a pretty shitty situation if you have a delta neutral short premium portfolio.
       
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      Set up
      As shown in my books, IWM, FXE, TLT, GLD, XLE are the most uncorrelated ETFs. With these underlyings you have exposure to the Russell 2000, the Euro Currency, Bonds, Gold and the Oil Sector.
       
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      IWM

      image source: TOS trading platform
        FXE

      image source: TOS trading platform  
      TLT

      image source: TOS trading platform  
      GLD

      image source: TOS trading platform  
      XLE

      image source: TOS trading platform  
      Portfolio


      So far in dollar terms a $1,571.50 loss or 1.571% loss on the whole portfolio.

      Not too bad considering the IV explosion and the big moves, especially in TLT.

      As you can see, even in a tough market with big outside the expected moves and IV explosion, short strangles/straddles are not a recipe for disaster.

      The key is to trade small when IV is low and mechanically adjust your positions/deltas.

      Of course the expiration cycle is not over yet and we can still have more big moves and much higher implied volatility in the coming days, but you should have seen now, when you have the right set of rules and religiously stick to these rules and when you trade small enough when IV is low, you are not going to blow up your portfolio.

      Stephan Haller is an author, teacher, options trader and public speaker with over 20 years of experience in the financial markets. Check out his trilogy on options trading here. This article is used here with permission and originally appeared here.



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    • By Stephan Haller
      But with undefined risk strategies comes theoretical unlimited risk. Therefore it is crucial that you follow the rules I pointed out in my books and which are mentioned about almost every day on tastytrade
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      16 Delta Short Strangles:
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      Image source: tastytrade  
      Let's have a look at how much contracts you could sell, until you exceed 50% of your capital in margin requirement and/or 3x notional leverage and how much money you would make in a full year.

      For the study I was using August 13th 2019 closing prices. Although the percentage of theta you can expect to keep is higher than 25% in SPY and IWM, I was using the 25% number, to be more conservative.
       
      SPY 16 Delta Strangles


      As you can see, if you just sell 16 delta short strangles in SPY, you can expect to make 9.11% in profit, if you go up to 3x notional leverage.

      IWM 16 Delta Short Strangles


      As you can see, if you just sell 16 delta short strangles in IWM, you can expect to make 10.93% in profit, if you commit 50% of your buying power.
       
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      Image source: tastytrade
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      For the study I was using August 13th 2019 closing prices.
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      SPY Short Straddles


      As you can see, if you just sell atm short straddles in SPY, you can expect to make 18.13% in profit, if you commit 46.83% of your buying power.

      IWM Short Straddles


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      Stephan Haller is an author, teacher, options trader and public speaker with over 20 years of experience in the financial markets. Check out his trilogy on options trading here. This article is used here with permission and originally appeared here.


       
    • By Kim
      Here is how their methodology works:
       
      In theory, if you knew exactly what price a stock would be immediately before earnings, you could purchase the corresponding straddle a number of days beforehand. To test this, we looked at the past 4 earnings cycles in 5 different stocks. We recorded the closing price of each stock immediately before the earnings announcement. We then went back 14 days and purchased the straddle using the strikes recorded on the close prior to earnings. We closed those positions immediately before earnings were to be reported.


       

       
      Study Parameters:


      TSLA, LNKD, NFLX, AAPL, GOOG Past 4 earnings cycles 14 days prior to earnings - purchased future ATM straddle Sold positions on the close before earnings  
      The results:
       
      Future ATM straddle produced average ROC of -19%.
       
      As an example:
       
      In the previous cycle, TSLA was trading around $219 two weeks before earnings. The stock closed around $201 a day before earnings. According to tastytrade methodology, they would buy the 200 straddle 2 weeks before earnings. They claim that this is the best case scenario for buying pre-earnings straddles.

      My Rebuttal 
       
      Wait a minute.. This is a straddle, not a calendar. For a calendar, the stock has to trade as close to the strike as possible to realize the maximum gain. For a straddle, it's exactly the opposite:
       

       
      When you buy a straddle, you want the stock to move away from your strike, not towards the strike. You LOSE the maximum amount of money if the stock moves to the strike.
       
      In case of TSLA, if you wanted to trade pre-earnings straddle 2 weeks before earnings when the stock was at $219, you would purchase the 220 straddle, not 200 straddle. If you do that, you start delta neutral and have some gamma gains when the stock moves to $200. But if you start with 200 straddle, your initial setup is delta positive, while you know that the stock will move against you. 
       
      It still does not guarantee that the straddle will be profitable. You need to select the best timing (usually 5-7 days, not 14 days) and select the stocks carefully (some stocks are better candidates than others). But using tastytrade methodology would GUARANTEE that the strategy will lose money 90% of the time. It almost feels like they deliberately used those parameters to reach the conclusion they wanted.
       
      As a side note, the five stocks they selected for the study are among the worst possible candidates for this strategy. It almost feels like they selected the worst possible parameters in terms of strike, timing and stocks, in order to reach the conclusion they wanted to reach.
       
      At SteadyOptions, buying pre-earnings straddles is one of our key strategies. It works very well for us. Check out our performance page for full results. As you can see from our results, "Buying Premium Prior To Earnings" is still alive and kicking. Not exactly "Nail In The Coffin".
       
      Comment: the segment has been removed from tastytrade website, which shows that they realized how absurd it was. We linked to the YouTube video which is still there.
       
      Of course the devil is in the details. There are many moving parts to this strategy:
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      And much more. But overall, this strategy has been working very well for us. If you want to learn more how to use it (and many other profitable strategies):
       
      Start Your Free Trial
       
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    • By Kim
      There is a lot of buz lately related to tastytrade, Tom Sosnoff, Karen Supertrader etc. so I thought it would be appropriate to open a discussion topic where members can discuss tastytrade and exchange ideas and opinions.
       
      Here are some links to articles and posts about tastytrade.

      Karen Supertrader: Myth Or Reality?
      Karen Supertrader: Too Good To Be True?
      Karen The Supertrader Interviewed by tastytrade
      Why 'Karen the Supertrader's' Story Never Made Sense
      Tastytrade: A Shill with Skills
      Can We Profit From Volatility Expansion Into Earnings?
      Buying Premium Prior To Earnings - Does It Work?
      Another garbage study from Tasty Trade
      Reviews of TastyTrade.com at Investimonials
       
      While the shows can be entertaining, here is one opinion that summarizes what tastytrade do:
       
    • By Kim
      What lessons we can learn from this debacle?
       
      Were the Skeptics Right?
       
      "Self-taught options trader Karen Bruton (aka Karen the Supertrader) earned so much so quickly that some skeptics doubted her. In reality, the SEC says, she improperly concealed more than $50 million of losses."
       
      The new allegations paint a very un-uber portrait of Bruton, 66, a self-taught options trader who mesmerized fans and flummoxed skeptics with her life story of parlaying a $10,000 initial investment into a fortune and seemingly endless stream of profits.
       
      I'm still trying to understand the motives of tastytrade when they promoted her as making $105MM PROFIT, without properly discussing the risks. They also failed to mention that most of the growth in her fund came from  new money and not actual profits. Was it extreme ignorance or some hidden agenda? You decide.
       
      As a reminder, Karen claimed to make 25-30% per year by selling naked options on indexes. 
       
      The important point is this: 
       
      As I mentioned in my article, there is only one way to make 25-30% per year with this strategy: leverage. Combine leverage with naked strangle strategy which is very risky to begin with is a certain path to financial disaster.
       
      Leverage Can Kill You!
       
      Our contributor Jesse wrote over a year ago:
       
      "All trading has risk. It's not the strategy that determines if something is risky...it's the position size (amount of leverage) and risk management that does (and then the discipline of the trader to follow the plan which often means taking a pre-defined loss before it gets out of control)."
       
      Is selling naked options risky? That's the wrong question - ask better questions, and you'll get better answers...Is selling excessively leveraged naked options that aren't cash secured risky? Yes, eventually. Short strangles on SPX and other index products are money making trades over the long term, you just have to use sensible position size and sensible exits. Just don't get greedy. Pigs get fat, hogs get slaughtered.
       
      "The point here is not to dismiss all volatility and option selling strategies as useless and blow up prone. The short volatility trade on equity indices is one of the best trades out there. It does very well long-term. " 
       
      The point is to understand your risk. In fact, be obsessed with risk management if you want to survive as a trader for the long term.
       
      Well said Jesse.
       

       
      Also Hiding the Losses?
       
      To add insult to injury, Karen Bruton also started to hide the losses by rolling options positions, as explained here:
       
      "Between October and December of 2014, Karen took some heavy losses selling her options. But to keep the incentive fees coming in, she organized a sophisticated options roll at the end of each month. This allowed her to still “realize gains” of 1% every month to take fees from, while pushing unrealized losses out to the next month. Month after month the losses continued to snowball while she continued to collect her fees.
       
      Each month began with a huge realized loss. (The SEC reports that these losses now exceed $50 million dollars.) She offset these accrued losses by selling a ton of in-the-money call options on the S&P 500 E-mini futures due to expire at the end of the month. This injected fresh cash into the fund. Just enough so that she could report a small realized gain to investors. That way she could take fees that month too…
       
      But of course there’s no free lunch in trading. You don’t get gains out of nowhere. When these call options expired, yes she had her cash injection (from the option premium), but she was also left with a futures position (due to assignment) that carried a huge unrealized loss. Here’s where the loss rolling came in. She needed that futures position to stay open until the next month because if she closed it beforehand, that would realize a loss and cancel out the profits from the calls she sold. That means no incentive fees.
       
      So to cover this futures position, she would simultaneously purchasein-the-money call options expiring the following month on the same day she sold those original in-the-money call options. These calls allowed her to offset any gains or losses the futures incurred at the end of the month until the beginning of the next month.
       
      This all smells like a classic Ponzi scheme…Pay the old investors with money from the new ones."
       

       
      We are very familiar with those "rolling" techniques. Many options newsletters are using them to hide their losses. As we always said, rolling options position is simply hiding the loss.
       
      The Hope Investments fund has been created in March 2011, and October 2014 was only the second time since creation when S&P declined more than 10%. First time (August 2011) she probably hasn't been using as much leverage yet. If the fund experienced such significant losses after 10% market decline, imagine what would happen in 2008-like environment.
       
      SJ Options summed it up  nicely:
       
      "It’s very important to alert the public of the true risks involved in short strangles because in the interviews the risk is not discussed as much as it should be.  Because of the excessive media exposure, there are many of retail traders attempting to trade this uncovered options strategy that has nearly unlimited risk potential. The short strangle is not as easy as it appears to be.  Margins change quickly and it’s vulnerable to quick losses and margin calls.  Be very careful with this strategy.  We conducted an 85 year backtest of the short strangle, 45 days to expiration, and it lost money overall."
       
      Tastytrade Response
       
      Tom Sosnoff was asked to respond to Karen Bruton story after the SEC complaint. You can watch his response here (18 minute mark). He continues to defend her, calls her "a very special person" and a victim of an evil government. Tom calls all the publications about Karen "crap". He claims that Karen was actually not paid enough in her fund. However, according to the SEC complaint,  "Between November 2014 and March 2016, Hope collected over $6 million in incentive fees from the HI Fund. As of the same date, the HI Fund had unrealized losses of approximately $57 million." So she took $6M in illegal fees while the fund was down $57M, and Tom says that she was underpaid...
       
      Sosnoff also continues to claim that Karen "made ton of money" for her investors. He still sticks to his claim that she turned $100k into $105M between 2008 and 2011, "forgetting" to mention that most of those profits came from new investors money. God knows his true motives, but this article from 2014 gives some insights into the whole "tastytrade/dough/TD Ameritrade" scheme.
       
      Here are some articles about Karen SuperTrader:
      Karen SuperTrader: Myth Or Reality? Karen The Supertrader by Optionstradingiq A Glimpse of option strategies of Karen Karen The Supertrader Interviewed by tastytrade Karen the Supertrader's Winning Strategy Relied on Fraud, SEC Alleges Karen The Supertrader - SJ Options Tastytrade: A Shill with Skills The Spectacular Fall Of LJM Preservation And Growth
    • By Kim
      This is a critical issue that many traders don't fully understand.

      To understand the real risk this lady is taking, I would like you to take a look at Victor Niederhoffer. This guy had one of the best track records in the hedge fund industry, compounding 30% gains for 20 years. Yet, he blew up spectacularly in 1997 and 2007. Not once but twice.
       
      Are you Aware of Black Swan Risk?
       
      This is how Malcolm Gladwell describes what happened in 1997:
       
      "A year after Nassim Taleb came to visit him, Victor Niederhoffer blew up. He sold a very large number of options on the S. & P. index, taking millions of dollars from other traders in exchange for promising to buy a basket of stocks from them at current prices, if the market ever fell. It was an unhedged bet, or what was called on Wall Street a “naked put,” meaning that he bet everyone on one outcome: he bet in favor of the large probability of making a small amount of money, and against the small probability of losing a large amount of money-and he lost. On October 27, 1997, the market plummeted eight per cent, and all of the many, many people who had bought those options from Niederhoffer came calling all at once, demanding that he buy back their stocks at pre-crash prices. He ran through a hundred and thirty million dollars — his cash reserves, his savings, his other stocks — and when his broker came and asked for still more he didn’t have it. In a day, one of the most successful hedge funds in America was wiped out. Niederhoffer had to shut down his firm. He had to mortgage his house. He had to borrow money from his children. He had to call Sotheby’s and sell his prized silver collection.
       
      A month or so before he blew up, Taleb had dinner with Niederhoffer at a restaurant in Westport, and Niederhoffer told him that he had been selling naked puts. You can imagine the two of them across the table from each other, Niederhoffer explaining that his bet was an acceptable risk, that the odds of the market going down so heavily that he would be wiped out were minuscule, and Taleb listening and shaking his head, and thinking about black swans. “I was depressed when I left him,” Taleb said. “Here is a guy who, whatever he wants to do when he wakes up in the morning, he ends up better than anyone else. Whatever he wakes up in the morning and decides to do, he did better than anyone else. I was talking to my hero . . .” This was the reason Taleb didn’t want to be Niederhoffer when Niederhoffer was at his height — the reason he didn’t want the silver and the house and the tennis matches with George Soros. He could see all too clearly where it all might end up. In his mind’s eye, he could envision Niederhoffer borrowing money from his children, and selling off his silver, and talking in a hollow voice about letting down his friends, and Taleb did not know if he had the strength to live with that possibility. Unlike Niederhoffer, Taleb never thought he was invincible. You couldn’t if you had watched your homeland blow up, and had been the one person in a hundred thousand who gets throat cancer, and so for Taleb there was never any alternative to the painful process of insuring himself against catastrophe.
       
      Last fall, Niederhoffer sold a large number of options, betting that the markets would be quiet, and they were, until out of nowhere two planes crashed into the World Trade Center. “I was exposed. It was nip and tuck.” Niederhoffer shook his head, because there was no way to have anticipated September 11th. “That was a totally unexpected event.”
       
      Well, guess what - unexpected events happen. More often than you can imagine.
       


      The market bottomed right after Niederhoffer was margin called. By November, the market was back near highs. His 830 puts went on to expire worthless - meaning his trade, had he been able to hold on, turned out to be profitable.

      But his leverage forced his liquidation. He was oversized and couldn't ride the trade out.

      Niederhoffer had shorted so many puts that a run-of-the-mill two-day market selloff sent him out on a stretcher.

      If he had sized the trade correctly, he would have survived the ride and took home a small profit. But the guy was playing on tilt, got greedy, maybe a bit arrogant, and lost all of his client's money.
       
      Karen is managing over 300 million dollars now. Her annual returns are in a 25-30% range. Are those good returns, based on the risk she takes?
       
      Not in my opinion. I believe that betting 300 million dollars on naked options is a disaster waiting to happen. I'm sure that most of her investors are not aware of the huge risks she is taking. Niederhoffer's story should be a good lesson, but for most people, it isn't. Unfortunately, people desperately want to believe there is a way to make money with no or little risk.
       
      Personally, I have hard time to understand why Sosnoff is promoting those strategies. But this is a different story.

      As a side note, this article is not an attempt to bash tastytrade. It is an attempt to show a different side of the coin and point out some historical cases. If we don't learn from history, we are doomed to repeat it. tastytrade advocates selling premium based on "high IV percentile". They ignore the fact that IV is usually high for a reason. Personally, I consider selling naked options before earnings on a high flying stocks like NFLX, AMZN, ULTA, TSLA etc. as a very high risk trading. tastytrade followers consider those trades safe and conservative. Matter of point of view I guess.

      Some tastytrade followers argued that PUT Write index performed better than SPX. And it is true. But those are completely different strategies. The original purpose of PUT Write index (or any naked put strategy) is to buy stock at a discount and reduce risk. As long as you sell the same number of contracts as the number of shares you are willing to own, you should be fine, and in many cases to outperform the underlying stock or index. The problem with Karen Supertrader and Niederhoffer was that they used too much leverage. They sold those naked options just to collect premium. Same is true when you sell strangles before earnings.
       
      Related articles:
      Karen SuperTrader: Myth Or Reality? Karen Supertrader: Too Good To Be True? Do You Still Believe in Fairy Tales? Selling Naked Put Options The Spectacular Fall Of LJM Preservation And Growth James Cordier: Another Options Selling Firm Goes Bust  
      June 2016 update:  Turns out Karen is under investigation by the SEC. Read the details here and here.
    • By Kim
      First, few facts about Karen the Supertrader's strategy. She started trading index options in 2008 with $100,000. The highlights of her strategy:
      She mainly trades the S&P 500 Index (SPX). Sells calls and puts (strangles) at 56 DTE (Days To Expiration) and keeps the trade on for a few weeks. Calls are about 10% OTM, puts about 12% OTM. Karen commits around 50% of her capital, though sometimes she will go as high as a 70% capital commitment. Those rules can be modified based on market volatility.
       
      Here is the video:
       
       
      Today she manages 190 million dollars, after making nearly 105 million in profits.
       
       Before we start analyzing Karen the Supertrader's strategy, lets be clear: she did NOT make 105 million in profits as TastyTrade claims. That number includes money from new investors. This headline is misleading at best, deception at worst.
       
      How much did she really make? We don't really know, but lets try to "guess".
       
      With SPX currently at 2075, she would sell May 1825 puts and 2280 calls. This is how the P/L chart would look:
       

       
      So she would get around $700 credit on ~21k in margin. If she holds till expiration and both options expire worthless, the trade produces 3.5% gain in 59 days. That's 21% annualized gain on 50% capital, or ~11% gain on the whole account.
       
      This assumes that both options expire worthless and no adjustment is needed. This also assumes regular margin. With her capital, she obviously gets portfolio margin, so her margin requirements are significantly less. But if she wants to take advantage of portfolio margin, she has to sell more contracts, taking much more risk. For the sake of her investors, I hope she is using 50% of the regular margin, not portfolio margin.
       
      In any case, I have hard time to see how she can make more than 25-30%/year with this strategy. Don't get me wrong, this is an excellent return - however, by selling naked options, she also takes a LOT of risk. To make 25-30%/year with this strategy, she must use a lot of portfolio margin - which means a lot of leverage.  Karen the Supertrader’s strategy is also short gamma and short vega, which means as the market moves against her, the positions become worse at a greater rate. If volatility spikes like it did in 2008, her account will be gone in matter of days.
       
      Here are some questions/comments taken from public discussions about Karen SuperTrader:
      I really have no idea how that is possible. In the TOS platform, if I sell a naked Put, the usual margin required is very large. We’re talking that my short Put usually would yield between 1.5% – 2.5% of the margin required. - I think there is more than a fair chance she may be a fraud and possibly even an invention of TastyTrade. Any manager worth her salt would be happy to provide audited returns, especially if only managing 150 million. She is probably generating around 30% a year while taking a lot of risk. I don’t know if that makes sense in the long run. Another thing that’s strange is the fact there’s not even one chart or table of her performance. I hear a lot of big numbers but just give the facts black on white. This strategy will only work for a period of time. When it stops, the results will be catastrophic. If she was that good as she claims she is, after 7 years of such spectacular returns she would have few billion under management, not 190 million. It’s Finance 101 isn’t it? The higher the return, the higher the risk you have to take. If she is generating 30% or greater per year, she is taking on a lot of risk. Hopefully her investors realize that.  
      Here are some articles about Karen SuperTrader:
       
      http://www.optionstradingiq.com/karen-the-supertrader/
      http://smoothprofit.blogspot.ca/2012/11/a-glimpse-of-option-strategies-of-karen.html
       
      So: IS Karen SuperTrader myth or reality? You decide.
       
      June 2016 update:
       
      Karen is now being investigated by the SEC for fraud. Don't say we didn't warn you.
      Read my latest article: Karen Supertrader: Too Good To Be True?
       
      I suspect that investors will not learn the lesson from this case.  Humans desperately want to believe there is a way to make money with no or little risk. That’s why Bernie Madoff existed, and it will never change.
      TastyTrade removed all articles and videos related to Karen the Supertrader from their website and YouTube right after the SEC investigation started, but returned them few days afterwards.
       
       
    • By Kim
      The study was done today - here is the link. The parameters of the study:
      Use AAPL and GMCR as underlying. Buy a ATM straddle option 20 days before earnings. Sell it just before the announcement. The results of the study, based on 48 cycles (2009-2014)
      AAPL P/L: -$2933 GMCR P/L: -$2070 Based on those results, they declared (once again) that buying a straddle before earnings is a losing strategy.
       
      What's wrong with this study?
      Dismissing the whole strategy based on two stocks is completely wrong. You could say that this strategy does not work for those two stocks. This would be a correct statement. Indeed, we do not use those two stocks for our straddles strategy. From our experience, entering 20 days before earnings is usually not the best time. On average, the ideal time to enter is around 5-10 days before earnings. This when the stocks experience the largest IV spike. But it is also different from stock to stock. The study does not account for gamma scalping. Which means that if the stock moves, you can adjust the strikes of the straddle or buy/sell stock against it. Many times the stock would move back and forward from the strike, allowing you to adjust several times. In addition, the study is probably based on end of day prices, and from our experience, the end of day price on the last day is usually near the day lows, and you have a chance to sell at higher prices earlier. The study completely ignores the straddle prices. We always look at prices before entering and compare them to previous cycles. Entering the right stocks at the right time at the right prices is what gives this strategy an edge. Not selecting random stocks, random timing and ignoring the prices.
       

       
      As a side note, presenting the results as dollar P/L on one contract trade is meaningless. GMCR is trading around $150 today, and pre-earnings straddle options cost is around $1,500. In 2009, the stock was around $30, and pre-earnings straddle cost was around $500. Would you agree that 10% gain (or loss) on $1,500 trade is different than 10% gain (or loss) on $500 trade? The only thing that matters is percentage P/L, not dollar P/L.
       
      Presenting dollar P/L could potentially severely skew the study. For example, what if most of the winners were when the stock was at $30-50 but most of the losers when the stock was around $100-150?
       
      Tom Sosnoff and Tony Battista conclude the "study" by saying that "if anybody tells you that you should be buying volatility into earnings, they really haven't done their homework. It really doesn't work".
       
      At SteadyOptions, buying pre-earnings straddle options is one of our key strategies. Check out our performance page for full results. As you can see from our results, the strategy works very well for us. We don't do studies, we do live trading, and our results are based on hundreds real trades.
       
      Of course the devil is in the details. There are many moving parts to this strategy:
      When to enter? Which stocks to use? How to manage the position? When to take profits? And much more.
       
      So we will let tastytrade to do their "studies", and we will continue trading the strategy and make money from it. After all, as one of our members said, someone has to be on the other side of our trades. Actually, I would like to thank tastytrade for continuing providing us fresh supply of sellers for our strategy!
       
      If you want to learn more how to use it (and many other profitable strategies):
       
      Start Your Free Trial
       
      Related Articles:
      How We Trade Straddle Option Strategy
      Long Straddle: A Guaranteed Win?
      Why We Sell Our Straddles Before Earnings
      Long Straddle: A Guaranteed Win?
      How We Made 23% On QIHU Straddle In 4 Hours
    • By Kogelet
      Dear community!

      I would like to get an opinion about the following video. I posted the link below. 
      After making some research, I made the following assumptions and conclusions. 
      - Options are probability-based financial instruments. The premium paid for buying a straddle is supposed to include all risks related to the potential change of IV, theta, gamma. 
      - The chances of gain are 50/50 similarly to any short time predictions of the market price. Besides, you lose the spread and pay commissions. 
      - Options pricing already includes any potential increase in IV and time decay is more likely to kill the potential trade.
      - As the markets are very efficient, Options pricing already includes information about historical volatility. Even if we find stocks with high historical volatility during previous earnings, the greeks are always balanced between each other to make your chances of win to 50/50 minus spreads & commissions. 
      So, what you think?
       
       
      As options are 
       
       
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