chadrwood 0 Report post Posted September 3, 2012 Just from reading some of Kim's articles in the past I know he loathes most things CNBC (and for good reason...never trust the media). I don't usually get to see the yahoos that come on at 5 p.m. ET where they talk about their options plays, because I'm trying to get out the door, but the few times I have seen them I've heard them talk about a strategy where they spend $5.00 to make $5.00. I have never spent the time to backtest or see if any of them work, but I was curious if anyone has ever used something similar? I suspect the ones those guys talk about are delta heavy in one direction and probably produce poor results. Any experience with this? Share this post Link to post Share on other sites
Kim 7,475 Report post Posted September 3, 2012 I had an article about CNBC - http://seekingalpha.com/article/387901-why-cnbc-s-fast-money-earnings-plays-might-be-bad-advice. There are many strategies where you risk $5 to make $5. We know that risk/reward and probability of success are directly related. If you risk $5 to make $5, your probability of success would be around 50%. If you want higher probability of success, you need to scarify the risk/reward ratio. BTW, in the RUT ICs we are doing we usually risk about $5 to make $5. In our case we close early so we never will make the full $5, but we also adjust so we never lose the full $5. Share this post Link to post Share on other sites
