vasis

Good news for German residents! 20000 limitation to offset forward losses including options has been lifted. https://www.bundesrat.de/SharedDocs/TO/1049/erl/3.pdf?__blob=publicationFile&v=1

Dear colleagues! Did you consider setting up an offshore company for stock trading to optimize costs and taxes? Any preferences in GEOs, legal/tax risks, etc? It is, probably, more important for Europe residents - special taxation practically blocks individual option trading, but US residents may also have benefits.

About Germany: don't forget about the specific trading options in Germany. Each leg is considered a separate position with a limit for losses of 20K euro. In other words if you have a deal where you have 3 legs and 2 of them showed loss -30K euro and the last one showed profit +29K you have to pay taxes from 29K - (30K-20K) = 19K beyond overall loss you have. 20K euro if a deduction for whole year. So, next time for such trade you pay taxes from 29K. Practically it means that option trading is prohibited in Germany. AFAIK, some other EU countries have similar rules.

Hi Jesse, First of all, thank you for so detailed answer. I just pinged CBOE history market data department to share quotes (if any) for weekly options started from 2005. All that you explained makes sense to me, one question - what is the maximum drawdown you saw in your backtesting, and how far it was from the index (better/worse)? You mentioned that your folks are trying to optimize diagonal hedging: do you have any targets what exactly should be improved (total cost of hedging, max drawdown)? If Anchors really beat the market in the long run (15-20+ years) it means that options pricing is wrong and close legs cost more than it should. Do you think such inefficiencies may exist for a long time?

Seems to me SPX weeklies appeared in 2005 and were introduced by CBOE. It should be enough to make backtesting over 2007-2010 declining market. Another approach might be price approximation using implied volatility + theoretical price (from Black Sholes or more advanced models) + price of monthlies. For me, Anchor scheme is quite expensive over high volatility downtrends market when the price of hedge is high. The backtesting will show - is it still more profitable than the index in the long run or not.

Hi @Kim, @cwelsh, not sure why my post was deleted (probably, such information already shared), bu let me repeat my question. Did you make backtesting of Leveraged Anchor strategy over declining market 2000-2012?

Hi Kim. Best wishes to you and Steadyoptons in the New year! Did you meet the situation when companies postpone their earning releases? If yes, how often it happened in your practice? What is your approach to handle such situations (calendars should be very profitable, but straddles/strangles lose value a lot).

I personally tried to play different strategies (we had an interesting talk about PureAlpha or PureVolatility). The question about complex strategies is what to do after volatility spike - switch to buying put or transform it to another strikes with a big risk to miss downtrend (and even loss money there). Hold the original strike (where you bought put) even and roll options seem simple and relatively efficient strategy. Just IMHO. Yes, need to choose what game you play - just falling VXX or your estimation of proper option pricing (ivol of VXX)

If you make backtesting you will see that just buying put is more effective and simple. You can play with strike and expiration date: DIM put is more stable but risky when ATM Put is more volatile with long periods of decline but positive on average.

Hi Kim, What do you think about snap to mid orders available by IB? Do you use them?

Hi @CXMelga, Your credit spread has always limited profit (money which you take from selling spread) and loss ($5). If xyz goes to $80 your sold leg will be assigned to 95$. No chance to get profit from credit spread if the market goes against you. At the beginning of options market <when not everything was automated> it was a chance to get profit on expiration if option's buyer forgot to assign your sold leg - but it happened very rare

Somebody from OptionSeller clients shared his statement for 1mln portfolio (you can even find a small number of April calls - absolutely useless). Looks like a horror movie - https://docs.google.com/spreadsheets/d/1-oj5UkqU0tMHrMnIEiuIYmTlxVWoU-VJqumykJ3IMUA/edit#gid=1356201715

Very interesting - good catch. Several questions - the current situation is not the worst thing which may happen. In 2013/2014 NG had higher volatility, but they survived somehow OR oil in 2014/2015. And another point - how law company/attorneys (in case of Cordier its ChapmanAlbin) starts the claim process? Is it their initiative or it should be some request from optionsellers' investors?

Yep, this video. In most cases naked options sellers fail over 3-5 years, his company has been working for 19 years...Of course - no excuses for him since last CL and NG movements might be handled through debit spreads/direct delta hedge with futures/etc

Forget to link video

Very dramatic video from James Cordier, but seems it's mostly natural gas (NG) which had a huge spike last days. NG is really "widows maker", plus it's not so liquid as oil, especially for options. Great example to avoid naked calls (/puts for future options) or proportional spreads with naked legs

Hi Kim, looks great, but what about futures and options to futures (CME)? They allow that?