Najarian brothers

[Guest Mark]

Any opinion about the Najarian brothers? They have now a new service called investitute - is it any good?

[Kim 7,437]

Well, they founded OptionMonster few years ago. Charged around $500/month. After it failed miserably, they are now running investitute, charging $395/month.
 

Like OptionMonster, they don't publish track record, which is a big red flag to me.

Of course they are using the fact that they are TV celebrities to charge those ridiculous prices. 

Their "specialty" is UOA (Unusual Option Activity). Read my opinion about UOA here. There is zero evidence that it can work consistently. You can spot 10 cases of UOA, and if one of them turns to be profitable, you can bring it after the fact as proof that it works, without mentioning the remaining 9 cases. Very convenient.

[jedimarkus 0]

I can only say this about Jon and Pete.  When I first came to Chicago, Jon gave me an intern job and treated me very well (I went on to become a CME floor trader years later)

I never saw either of them do anything unethical.  This was all early 1990s so I cannot say what has transpired since then.  That's all I have for you amigos! 

[Kim 7,437]

I don't know them personally, so cannot comment on this. My comments were strictly regarding their track record (or lack of it) and UOA.

As a general comment, the fact that someone was market maker or floor trader doesn't necessarily make him a good options trader. Those are completely different skills.

[jedimarkus 0]

I could not agree more! 

I know 99% of my former floor trader friends have completely left the biz because they could not adapt nor change.  

 

[Guest Jeff]

Najarian brothers are just one example of previous market makers who imply that being market makers gives them some kind advantage in options trading. It is sad that people cannot read into this BS and simply ask for a track record in order to see if there is some real value, or they are just using their name.

BTW, you can put Tom Sosnoff in the same category. All of them are very good businessmen and marketers, but are they any good in options trading? 

As they say, show me the money.

[DavidR 1]

I contacted them and asked for a track record. They didn't even bother to respond.

 

Najarian brothers are just big names that don't really care about their customers. Too busy to talk on CNBC.

[DavidR 1]

On 1/11/2018 at 10:32 AM, Kim said:

I don't know them personally, so cannot comment on this. My comments were strictly regarding their track record (or lack of it) and UOA.

As a general comment, the fact that someone was market maker or floor trader doesn't necessarily make him a good options trader. Those are completely different skills.

This is very true.

Mark Sebastian from OptionPit also mentions that he is a former market maker, but I haven't seen any track record on their website. Those clowns who constantly brag about their market making experience are frequent speakers on CNBC, but where is their track record? How do you even know they are good traders?

[cuegis 683]

2 minutes ago, DavidR said:

This is very true.

Mark Sebastian from OptionPit also mentions that he is a former market maker, but I haven't seen any track record on their website. Those clowns who constantly brag about their market making experience are frequent speakers on CNBC, but where is their track record? How do you even know they are good traders?

I'm definitely not defending them in any way.

But, I was a market maker in options, on the floors of 4 different exchanges for many years, and in order to do that job, especially for so many years, you REALLY have to have have a pretty sharp understanding of every nuance of options.

 

But, even knowledge and experience is no guaranty that someone can produce profits in a retail setting.

Especially in a situation like this.

They probably made a lot of money ,month after month, as a market maker.

But, you have understand the situation.

That was at a time when there were still "floors" of exchanges, and you could either buy, or lease a seat on the exchange.

By doing so, you were actually able to "buy edge". By virtue of being only among 100-200 people in the whole world who could trade in a "certain" way, it was very difficult to not make money.

 

But, starting in 2002, the floors began closing, one by one, until there were no longer any left, and everything was now "electronic" trading.

 

So, who knows how well, if at all, they were able to translate their "floor" experience into a "retail" environment, where they no longer can pay for "edge", and have to rely on their own expertise, and creativity in that world.

 

Kim is right, they are different forms of trading that require different skill sets and approaches.

On the floor, you don't decide on positions that you think are best to take, and then put them on.

You have the advantage of being able to buy on the bid, and sell on the offer, while instantly hedging your delta to avoid that exposure.

But, you have to accept positions that the order flow gives you, and very often you can wind up with big positions that you would never proactively put on as a strategic plan.

One day the orders just keep coming in to sell OTM higher strike calls.

So, you make a market that is low, and buy on the bid, while simultaneously selling the amount of deltas in stock.

Then the broker comes back asking for a market for another 2500 calls, so you lower your market and have to buy your share of the next tranche of sales.

You could wind up, as even a small trader, with long 3000 , 30 delta calls, and short the equivalent amount of stock to hedge the delta.

Then the stock rises, and the calls stay the same, as IV goes down on the upside,  and your short stock is killing you.

 

That is one example of the price a market maker, in equities options, has to pay  for the benefit of being able to buy on the bid, and sell on the ask all day long, while deciding the prices they will do it at.

With "members" margins and commissions, there is almost no costs there.

But, that world no longer exists.