Last 2 months Performance

[yalgaar 40]

I noticed the Performance for the month of March was 3.3% and based on Performance for April so far, the numbers most likely will be around 3% as well. The months of Jan and Feb were relatively very good. Performance was around 25% for both months.

I would like to understand what are re reasons for such a difference in Performance between these months? Is this something that can be defined? Wanted to understand the kind of Markets where the Strategies that are traded thrive and/or when they do not perform so well?

[Kim 7,943]

Our long term performance goal is 5-7% per month. I hope nobody expects to make 25% per month every month, otherwise they probably need a reality check. Most fund managers would dream to make 25% in a YEAR, not a month. 

It's very important to set realistic expectations. January and February were an anomaly, not a norm. It was a perfect environment for our strategies and we were able to find many good setups. When volatility exploded in March, it became more challenging to find good setups and we did not want to take more risk.

 

[Yowster 9,168]

8 minutes ago, yalgaar said:

I noticed the Performance for the month of March was 3.3% and based on Performance for April so far, the numbers most likely will be around 3% as well. The months of Jan and Feb were relatively very good. Performance was around 25% for both months.

I would like to understand what are re reasons for such a difference in Performance between these months? Is this something that can be defined? Wanted to understand the kind of Markets where the Strategies that are traded thrive and/or when they do not perform so well?

An extremely high level reason, volatility...

• Our core trades do well when volatility stays around current levels or rises.   That was the case in January and February where volatility was flat and then rising and giving large boosts to many of our trades.
• Once we got the middle of March, volatility started to drop and has been doing so ever since.   This created some very large percentage losers on a few trades that had an oversized negative impact on the portfolio performance.  We also had less trades on, which made the impact of those larger losses bigger.   There are a number of reasons for why we had less trades:
  • Lull in earnings season, and for those stocks that did have earnings their RV was orders of magnitude above normal levels which meant our typical analysis ineffective.
  • Options became very expensive, so it became difficult for many trade to fit into a 1K allocation.
  • For many stocks with moderate liquidity in normal times, now had less liquidity and very wide bid/ask spreads.   This made then much more dangerous to use for options trades as slippage was a very large concern.

[CDL 3]

I initially thought the stated performance goal of 5-7% a month was also likely in need of a reality check, until I signed up for membership and was able to start verifying all the trades and participating in the new trades in real-time and saw that it was definitely reasonable and legitimate. I only joined recently--just a little under two months ago--so my account balance for these trades has been more or less fluttering around unchanged since I joined, but even with that, the value of the knowledge I've gotten from the trade discussions and other resources on the site has been well worth the cost of admission.

[zxcv64 771]

@yalgaar, just to add to the two wonderful responses you have already received, here's my 2-pence worth :

 

1) 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.

 

2) As a newbie, you may be wondering - can a normal member here actually make 25% a month? From my personal experience, the answer is 'Yes'. But it requires a lot of perseverance and hard work. For me, it took a few cycles to get a handle on some of the trade types. I'm still struggling with straddles and find new ways to lose money, but it's my own mental block as opposed to the strategy. I love calendars and they are my bread and butter. Similarly, you will probably find your own niche soon enough.

 

Good luck on the journey.

 

Edited April 30, 2020 by zxcv64

[yalgaar 40]

@Kim @zxcv64

 

I am not sure why am I being asked to have a reality check!!

I never mentioned in my post my expectation is 3% per month or 25%. As far as my expectations are concerned, at this point in time I expect to make nothing but gain knowledge and It seems like I am in the right place to get that. IMO 3% a month is an amazing ROI. Hopefully I have made it clear that I am not expecting to make 25% a month ROI. To me that would be extremely naive.

Back to my the purpose of my post, I am trying to understand why such a huge difference in performance? Is there an opportunity to learn from this and change certain things about how we are trading here and use it to our advantage. 

 

 

[yalgaar 40]

15 minutes ago, zxcv64 said:

@yalgaar, just to add to the two wonderful responses you have already received, here's my 2-pence worth :

 

1) 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.

 

2) As a newbie, you may be wondering - can a normal member here actually make 25% a month? From my personal experience, the answer is 'Yes'. But it requires a lot of perseverance and hard work. For me, it took a few cycles to get a handle on some of the trade types. I'm still struggling with straddles and find new ways to lose money, but it's my own mental block as opposed to the strategy. I love calendars and they are my bread and butter. Similarly, you will probably find your own niche soon enough.

 

Good luck on the journey.

 

I do absolutely wonder that and I am amazed at how everything is done here. The Trades taken, the discussion, the reporting etc. etc. 

Thanks for your suggestions. I appreciate it.

[Kim 7,943]

Thank you @Yowster excellent summary.

On a high level, it's always best to focus on long term results and not short term month to month fluctuations. Not every strategy will work in all environments. When there is such an extreme change in market environment, it takes some time to adapt.

It is also important to understand that performance reporting is based on trades closed in this specific month. Similar to January 2019 where some trades were carried from the previous month, creating a larger monthly loss than the real loss.

@yalgaar I believe @Yowster provided a detailed analysis of the trades and the environments. My response was based on your comment "relatively very good" - if I misinterpreted it, my bad. 

[yalgaar 40]

46 minutes ago, Yowster said:

An extremely high level reason, volatility...

• Our core trades do well when volatility stays around current levels or rises.   That was the case in January and February where volatility was flat and then rising and giving large boosts to many of our trades.
• Once we got the middle of March, volatility started to drop and has been doing so ever since.   This created some very large percentage losers on a few trades that had an oversized negative impact on the portfolio performance.  We also had less trades on, which made the impact of those larger losses bigger.   There are a number of reasons for why we had less trades:
  • Lull in earnings season, and for those stocks that did have earnings their RV was orders of magnitude above normal levels which meant our typical analysis ineffective.
  • Options became very expensive, so it became difficult for many trade to fit into a 1K allocation.
  •  For many stocks with moderate liquidity in normal times, now had less liquidity and very wide bid/ask spreads.   This made then much more dangerous to use for options trades as slippage was a very large concern.

@Yowster Thank you very much for the detailed explanation about this. 

[Kim 7,943]

2 hours ago, zxcv64 said:

@yalgaar, just to add to the two wonderful responses you have already received, here's my 2-pence worth :

 

1) 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.

 

2) As a newbie, you may be wondering - can a normal member here actually make 25% a month? From my personal experience, the answer is 'Yes'. But it requires a lot of perseverance and hard work. For me, it took a few cycles to get a handle on some of the trade types. I'm still struggling with straddles and find new ways to lose money, but it's my own mental block as opposed to the strategy. I love calendars and they are my bread and butter. Similarly, you will probably find your own niche soon enough.

 

Good luck on the journey.

 

@zxcv64 You nailed it.

To put things in perspective, yes, we will have some occasional 25% months - but they are rare. And yes, to be able to achieve those returns, you must be proficient in our strategies and be more independent. 

[yalgaar 40]

@zxcv64 @Kim @Yowster Thank you all. I believe I understand the reasons for around 25% returns for the month of Jan and Feb as well as around 3% returns for March April. 

The most important thing is these are based on real trades on live accounts with real fills. So even with 3% in these market conditions is amazing returns! I am just so excited to learn all these methods and have similar returns on my LIVE accounts....hopefully soon. I am currently only focussing on the Straddle/Strangle and the Calendar Strategies. My intention is to understand why each trade is taken and all the dynamics around it. I am still not where I want to be with respect to understanding it to the level I would feel comfortable to take trades on real money accounts. Hopefully soon.......

Thanks again all of you!

[Alan 107]

@Yowster & @Kim One of the reasons Yowster gave above was that, "Options became very expensive, so it became difficult for many trade to fit into a 1K allocation".  If one were able to trade much larger allocations than 1K, are you saying that one would be able to take on more trades and potentially have even better results?

 

If so, is there any chance that these larger allocation trades could be included more in the official discussions? 

 

I realize that we have an "Unofficial Trade Ideas" section, and occasionally these larger allocation trades are discussed there - but it is only occasionally. Therefore, is there any chance that the official 10K starting account could be increased to a larger amount to accommodate these larger trades as part of the official discussion? I, for one, would be definitely interested in seeing a larger official account.

Edited April 30, 2020 by Alan

[Yowster 9,168]

@Alan I should have been a little clearer on the point about being difficult for many trades to fit into a 1K allocation.   What I was specifically referring to was the short-term hedged straddles trade that we were using over the last couple of months.

• We started with some successful DIS trades, but as the volatility ramped up the price of the straddles it got to the point where a 2:1 ratio hedged straddle price was ~1.7K.
• Other stocks priced $75+ also were too expensive as their straddle prices were trading at 2x or 3x their normal levels.  MU was one we found where the price was ok, had tight bid/ask spreads with lots of volume, and the stock was moving a lot.
• When I looked for candidates for these short-term hedged straddles, I looked for stocks whose straddle prices could fit into 1K trade size, but equally important was good options volume and tight bid/ask spreads.   Many stocks had their  options trading volume well below normal levels and the bid/ask spreads were very wide, so I avoided these because slippage was a big concern.   

[Bull3t007 143]

7 minutes ago, Yowster said:

@Alan I should have been a little clearer on the point about being difficult for many trades to fit into a 1K allocation.   What I was specifically referring to was the short-term hedged straddles trade that we were using over the last couple of months.

• We started with some successful DIS trades, but as the volatility ramped up the price of the straddles it got to the point where a 2:1 ratio hedged straddle price was ~1.7K.
•  Other stocks priced $75+ also were too expensive as their straddle prices were trading at 2x or 3x their normal levels.  MU was one we found where the price was ok, had tight bid/ask spreads with lots of volume, and the stock was moving a lot.
•  When I looked for candidates for these short-term hedged straddles, I looked for stocks whose straddle prices could fit into 1K trade size, but equally important was good options volume and tight bid/ask spreads.   Many stocks had their  options trading volume well below normal levels and the bid/ask spreads were very wide, so I avoided these because slippage was a big concern.   

I think his aim was more at including those trades that fit all criteria but are too big for the 1K portfolio, not necesarily because of the increased IV but more in general. I think there was a poll somewhere in the past but the allocation stayed 1k which seems logical to me. Maybe a section with potential canditates for 20k-30K portfolio's would be a nice bonus.

Edited April 30, 2020 by Bull3t007

[Kim 7,943]

2 hours ago, Alan said:

@Yowster & @Kim One of the reasons Yowster gave above was that, "Options became very expensive, so it became difficult for many trade to fit into a 1K allocation".  If one were able to trade much larger allocations than 1K, are you saying that one would be able to take on more trades and potentially have even better results?

 

If so, is there any chance that these larger allocation trades could be included more in the official discussions? 

 

I realize that we have an "Unofficial Trade Ideas" section, and occasionally these larger allocation trades are discussed there - but it is only occasionally. Therefore, is there any chance that the official 10K starting account could be increased to a larger amount to accommodate these larger trades as part of the official discussion? I, for one, would be definitely interested in seeing a larger official account.

In the previous years, we provided around 10-12 trade ideas per month. In the recent couple years (especially since @Yowster started posting official trades) the number basically doubled to 20+ official trades per month on average. I checked unofficial trades forum and there are around 10-15 trading ideas there every month.

I'm not sure how many more trading ideas we can provide. We aim to provide only the setups with the best risk/reward. 

That said, we will try and mention if we see a good setup that doesn't fit into 10K portfolio, but it would be unrealistic to manage several official portfolios.

As a side note, while increasing the total number of trading ideas almost 3 times, the subscription fee has not increased for over 7 years. Something to consider.

[MaryPaananen 260]

From my perspective, I most care about having the best setups possible - given whatever market environment we are in.  Obviously we are all in "continuously learning mode" - especially these last few months.  As an example, I realized after reading a post by @Kim that I have put too much negative bias into some of my trading decisions - whether getting in or getting out of various trades.   Because I believe the market has been acting irrationally as of late, I have not taken part in anywhere enough of the uptrend as I should have.   This is a bad practice -- one has to trade the market we are given and not try to MAKE it what we believe it should be.   Now, that is easily said and having a bias is a natural human trait - and most of us have learned to trust in our hunches, wisdom, learned experiences, etc . . .but sometime they fail us.  

Now back to the subject of performance and portfolio sizes.   I think the goal of a 10K portfolio is great, but I also wonder how many of us "goose" up the size of our trades to work better in larger portfolios - I do this all the time.   

What I do think is important is that if there are some really good setups that are a bit on the expensive side - would still like to ponder them.  Maybe they go into the "unofficial" bucket . . . or maybe a "Big Kahuna" bucket that is kept separate from the 10K portfolio bucket.  I'm not trying to add more work to anybody's plate - more along the line if you see some good viable setups - maybe discuss them and let the SO members know that some are not being taken due to size/cost . . . but they're still valid and here is where you go to see them.

Okay, enough out of me . . . seems my "negative bias" is just starting to match the market a bit more . . . I feel like some more "reality" is starting to creep into the market.  We shall see!

 

 

 

[pintodave 86]

Negative bias is a real thing! I am just in the first 25% of this book:  https://www.amazon.com/gp/product/B085N3SZ1T/ref=dbs_a_def_rwt_bibl_vppi_i0 

 

It's just more "mental trading soup" for the brain, but I find I need to go read stuff like this every so often. 

[Options18 2]

The average monthly gain of Steady Options, dating back to the beginning of this service, is actually 7.2% per month.

Even if one would earn 6% per month, that would actually double your acct every year or if you had an acct of say $100K, one could make an additional $100K trading with Steady Options.

Not easy but very doable with effort and diligence.

I know many people who work 60 hours/week and don’t come close to earning $100K/year.

I do get what you’re saying though.  You want to know which strategies work best   in up markets, flat markets and down markets.  It’s a great question for sure!

[IncomeTrader1 6]

I have been with SO pretty much from the beginning. I can tell that 1) the performance is real 2) there are some wild fluctuations in monthly numbers 3) yes, it is possible to replicate the official numbers or come very close, but it requires a lot of work and commitment. @Kim is talking about expectations all the time, and it is very true. Some months will produce double digit returns when the environment is right, and there will be periods of lower returns. 

 

[dsigma 13]

I find very useful when discussing RVs and plots are there. That is how I learn better.

 

Probably because now there are less earnings trades I am a litlle bit lost. I understand 'conceptually' the reasons for certain trades, but I do not fully get the reasoning of, for example, selection of strikes and expirations. 

 

All the effort is very much appreciated. I understand it should be difficult to generate more, specially in this environment. Instead of more trades, would not be an idea to focus more on quality rather than quantity? 

Edited May 3, 2020 by dsigma

[Kim 7,943]

17 minutes ago, dsigma said:

All the effort is very much appreciated. I understand it should be difficult to generate more, specially in this environment. Instead of more trades, would not be an idea to focus more on quality rather than quantity? 

We are trying to offer only the setups that we consider the best. Obviously we cannot be right 100% of the time, but I can assure you that we focus only on quality setups.

[dsigma 13]

11 minutes ago, Kim said:

We are trying to offer only the setups that we consider the best. Obviously we cannot be right 100% of the time, but I can assure you that we focus only on quality setups.

@Kim,

With quality I do not mean success rate or wrong selection of trades, I have no doubt you and @Yowster think thoroughly about them.

For the non-earning trades, more explanations about why we select some strikes, their widths, expirations, etc., are more valuable, at least to me. This is for me the 'quality' aspect I like to highlight and it would very helpful for me, as a newbie.  

[Kim 7,943]

Understood. 

We will try to post more detailed explanation, and all members are welcome to ask specific questions.

[Kim 7,943]

On 4/30/2020 at 4:07 PM, Alan said:

@Yowster & @Kim One of the reasons Yowster gave above was that, "Options became very expensive, so it became difficult for many trade to fit into a 1K allocation".  If one were able to trade much larger allocations than 1K, are you saying that one would be able to take on more trades and potentially have even better results?

 

If so, is there any chance that these larger allocation trades could be included more in the official discussions? 

 

I realize that we have an "Unofficial Trade Ideas" section, and occasionally these larger allocation trades are discussed there - but it is only occasionally. Therefore, is there any chance that the official 10K starting account could be increased to a larger amount to accommodate these larger trades as part of the official discussion? I, for one, would be definitely interested in seeing a larger official account.

Tons of unofficial trades in the last few days posted by @Yowsterand @TrustyJules Hope you are following.