DubMcDub

@Wayne K., I presume from this comment that your method of achieving "leverage" in the 2x and 3x leveraged models is by investing in levered ETFs? I see that the strategy does not use options, and since it's retirement account suitable, I assume it also does not require margin trading.

I think Kim's numbers from the "Canadian Couch Potato" model are very realistic in terms of what to expect from a 60/40 stock/bond portfolio. Of course, no one is saying your portfolio has to be 60/40, but that's a pretty common breakdown. In my personal portfolio--again, not investment advice, I am just telling you what I personally do since you asked--I allocate about 65% to stocks and 35% to bonds (and other fixed income). Then within stocks, I allocate about 65% to US stocks and 35% to international stocks. I try to get worldwide exposure to as many different countries' stocks as possible. For the US component, I do roughly 50% allocated to large cap blend (SPY), 25% to small cap blend (IWM), and 25% to value stocks (MGV and VBR). My bond/fixed income holdings these days are mostly in 10-20 year US treasuries. The yield is crap, but it's at least higher than 0% and does provide some protection in the cash of stock market crashes, deflation, or both. You can get a very good, diversified portfolio using only 3-4 ETFs, by the way. My portfolio is probably more like 10 or so ETFs, which I think is still a reasonable number, but this depends on the person.

Again, I'm not an investment advisor, but I am happy to tell you what I personally do with my retirement funds. I invest them across a range of highly diversified, low-cost ETFs, with a slight tilt toward small cap and value stocks (small cap and value have historically shown a higher return, though no guarantees). The exact mix depends on how much you want to allocate where (e.g., how much stocks vs bonds, how much US vs international, etc.). Here are some ETFs I currently own, all of which are very low cost and diversified. Maybe you can look into some of these and see how they suit your needs: US Stocks SPY IWM MGV VBR VGSLX (technically this is a Real Estate investment trust, not a stock) Int'l Stocks EFV IEMG DLS US Bonds AGG TLT (I don't invest in non-US bonds for various reasons, one of which is that in a lot of countries, bonds correlate much more highly with stocks than they do in the US.)

Ah, I see. Well, I don't know enough about the solvency of various brokerages to really comment on that. Generally speaking, I do try to keep my long-term funds spread across a few different brokerages, just to diversify whatever institutional risk may exist. So maybe that's an option for you. With the caveat that I'm not an investment advisor, so I say this to you just as an SO "friend," I really do not think taking your retirement funds and then investing them in levered ETFs--even with "hedges"--is a wise idea. Of course, it's your money and you will do with it what you think is best. But I will tell you that I'm a pretty experienced and very profitable options trader, and even with my experience and history of profitability, I would never in a million years do something like that with my retirement funds. And I know other experienced traders who would tell you the same.

Do you have a 401(k) with work or an Individual Retirement Account (IRA)? Those can be good places for long term investments, before using an individual brokerage account, but it depends on your specific situation. Otherwise, yes, a brokerage account with your preferred broker (TD Ameritrade, or whoever else) is a perfectly fine way to buy and hold long term investments like SPY. I'm not familiar with any of these funds except UPRO. But I took a quick look, and it looks like several of them (including UPRO) are 3x leveraged funds. Doing passive long-term investing with leveraged funds is generally speaking a really bad idea. These types of fund are meant to be short-term trading vehicles, not long-term investment vehicles. I'm not sure I understand the question, here. Do you need to worry about losing money? All of these funds can definitely lose a lot of money, if that's what you mean. That's true of any investment, but it's extremely true of leveraged funds like some of the ones you've listed.

Upgrading to 2.0.62 resolved that problem for me, but is causing me to get a repeating error message in IB TWS that I need to update my API client (even though I've already updated it). Not sure if anyone else is having this issue, but I temporarily resolved it by reverting ONE back to 2.0.61 for now.

Understood.

@Djtux, the site is showing both September 22 and September 29 as "confirmed" earnings dates for NKE (sources #1 and #6 for Sept 22 ;source #4 for Sept 29). The actual earnings date is Sept 22, according to NIke's recent press release on their IR website (https://investors.nike.com/investors/news-events-and-reports/investor-news/investor-news-details/2020/NIKE-Inc.-Announces-First-Quarter-Fiscal-2021-Earnings-and-Conference-Call/default.aspx). Is there a reason why Sept 29 would be showing as a confirmed earnings date?

The do-it-yourself annuity and the gambler's paradise are both appealing to me. I doubt I'd pay for the latter, though you never know. The former is definitely something I would pay for, even though I'm nowhere near retirement age or needing an annuity. I find tremendous value in learning to do things like that on my own.

The point's been made before, but even very high liquidity options can have their prices (and especially spread prices) temporarily disrupted when a sudden influx of orders hits. This is the algos trying to predictively front run the order flow. So I second @FrankTheTank's remarks. But also, I say again, there is no such thing as an options advisory service that doesn't suffer from this problem, especially ones that trade spreads or multilegged strategies. Also, maybe it's been mentioned, but I want to give Kim some kudos for allowing this discussion on a non-member board. Any prospective SO subscriber can see this. If this whole thing were a ruse or whatever, you'd think he'd prevent threads like this from being publicly visible on his own site. (You'd also think he wouldn't allow monthly memberships that can be canceled any time.)

I don't agree that paper trading is "absolutely useless," but I completely agree that it won't help a trader develop the emotion-management skills necessary to be a good trader. As you say, it's not the same when you know the money isn't real. But this circles back to the basic problem under discussion. You've got members complaining to Kim and Yowster that they aren't replicating the official performance (or coming close to it). There can be only three possible reasons for that: the trader isn't sizing, entering, managing, and exiting the trade correctly from a strictly technical standpoint (completely excluding the emotional component); the trader isn't sizing, entering, managing, and exiting the trade correctly from a strictly emotional standpoint; and/or the trader is doing everything correctly both technically and emotionally, but it is literally impossible to match the entries and exits of the official trades. Paper trading absolutely helps with #1, especially with complex options strategies. Changes in IV are difficult to model, and you really need to see them to understand them. Paper trading is far and away the best tactic to help with this, since you can practice the technical side and observe the trade behavior with zero risk. Paper trading won't help with #2, as you correctly say. But if #2 is the trader's only problem, then I humbly suggest that the trader really isn't at the point in their development yet where they should be paying someone else money for trades to follow. Good picks can't overcome trader emotion. Things have a way of falling into place once the emotional side is in order. The theory being urged by a few folks is that #3 is the real problem--and apparently in some folks' minds, the only problem. On the one hand, I completely agree that no one will ever be able to consistently get the same entries and exits as the official on every trade. That's true of most advisory-type services, and it's definitely true of any service that trades in multi-legged option strategies. It is hardly an SO-specific issue. But on the other hand, it's demonstrably true that you can get better entries or better exits on many SO trades. The rub is, doing so requires the trader to be on point with items #1 and #2 above. So then we're back to the issue being either one that paper trading can solve (#1), or one that it can't solve but that suggests the trader should focus on the emotional side before paying for a service (#2). Just my two cents, as usual. Take all with a grain of salt, etc.

It can be a smart way to invest, if the service's strategy is one that lends itself well to picks and truly generates alpha or risk-adjusted return, not just extra returns by taking extra risk. But that's a huge if. The overwhelming majority of successful "picks" from a typical service rely on beta or other risk factors to generate the return. Anyone can do that without needing to pay a fee. Heck, these days you can do it through low-cost ETFs that will literally do the work of isolating to particular risk factors for you (e.g., beta). SO is a rare outlier in this respect. This strategy generates very attractive risk-adjusted returns, which is the only thing that matters. I have no idea what service you're referring to, obviously, but your skepticism seems very well warranted given the information you've presented. It is not difficult to be up 45% in an equity account since April, considering how equities have rallied since then. To my earlier point, all it would require is buying a few higher beta stocks. Same thing with a directional options service since April. Return is return, but if you're paying someone for a service, you should be getting skill, alpha, and risk-adjusted returns. If not, you could easily replicate it yourself with very little time invested, and without paying a fee.

To be honest, it's difficult to talk about why someone else isn't having success without seeing their actual trades as compared to the official trades. Few people want to post that information with sufficient specifics, so these discussions end up being unhelpfully general. If you want to post some of your trades and how they compare to the officials, I'm sure several of us would be happy to look at them and make whatever suggestions we can.

I'm not the one you asked, but I've been a member since December. I take a relatively small percentage of the official trades, and then my own trades based on SO strategies. I average about 12 trades per month. My return since December--on a significantly bigger account than the $10,000 model portfolio, which of course makes it harder to achieve a big return--has been 24% after commissions. My max drawdown during that time is about 11%. About 62% of my trades have been winners. Related: I also have about 12 years' experience trading options in various non-SO strategies. I suspect my returns would be lower without that experience. It is extremely difficult to make money trading options. Also, my experienced helped me come in with realistic expectations. Nobody is going to make 127% per year trading this strategy. Almost no one will make even half that. But the great thing is, even a tiny fraction of that return is an excellent return. If you make, say, 20% a year with acceptably low return volatility and max drawdown, you are crushing almost every professional who trades in public securities, and you're doing extremely well.

There's no question he didn't follow his own advice--he apparently used no risk management whatsoever on the natural gas trade that blew up his fund. Just kept selling more and more calls into the huge rally.

I remember reading The Complete Guide to Option Selling about 6-7 years ago. I remember thinking, "Man, this guy really doesn't seem to know what he's talking about, but he's the one managing millions of client money, so maybe I'm just not educated enough on the subject to see the brilliance of this." Nope. Anyway, I'd be fascinated to read his new book if it ever gets released, if only for a laugh.

My first reaction to hearing this, "Wouldn't that double count the RV decline against you, since the price of the ratio spread at T-exit versus the price of the ratio spread at T-entry already factors in the RV decline that occurred over the period?" But looking at the other thread linked by Djtux, I think what threw me off is that the calculator looks like the return matrices, the latter of which use historical data. But the call ratio calculator, as I now understand it, is NOT using historical data--rather, it is using current prices, much like your Excel spreadsheet. In that case, I completely understand what the "adjusted" RV serves. Do I have that correct?

@Djtux, on the call ratio calculator, could you briefly explain (or just link me to the explanation if it's posted elsewhere) what mathematical adjustment you're making when we set the Return Type to "Adjusted" versus "Unadjusted"? DM is also fine if you'd rather not post that publicly.

It's possible your brokerage has their own "house" rule about it and flagged you for doing it just once. That's a bit unnecessary by them IMO, but I guess it's their prerogative.

"Pattern Day Trader" in the U.S. generally means that (1) you bought and sold (or sold and bought) the same security within a single day, and (2) that you did this at least four different times over five business days.

I was going to make this exact same analogy, but I didn't want to sound flippant about something much more serious than trading (you didn't sound flippant at all, so I think my concern was unfounded!).

I'm no expert, but I suspect that much of the decisionmaking came down to simply a logical weighing of the relative hypothetical worst-case scenarios depending on which path you choose: If you shut things down aggressively and it turns out that hey, maybe this virus isn't so bad after all, the hypothetical worst-case scenario is a bad economy, a protracted recession or depression, and some specific industries that either need a bail out or never recover. The economy and parts of the populace will suffer for awhile, but we've recovered economically from much worse things than a voluntary shutdown of certain industries, and we'll recover from this too. And in the meantime, developed governments have plenty of stopgap measures they can take to somewhat ease that economic pain. On the flip side, if you don't shut things down and that turns out to be wrong, the hypothetical worst-case scenario is devastating and completely irreparable. Hospitals overrun. Hundreds of thousands or millions dead, including critical personnel who we need to keep functioning as a society. Potential for widespread panic and civil unrest. The list goes on. And with most of these things, there's nothing the government can do. The government can't resurrect the dead. It can't infuse our healthcare system with thousands of new doctors and nurses if the current ones get sick or die en masse. (And by the way, at some point this outcome has just as bad or worse of an impact on the economy. An economy is made up of people. People have to be healthy to work productively. The whole "save lives" versus "save the economy" thing has always been a false choice.)

Ahh, that makes perfect sense. Didn't even notice that up there. Thanks, Kim.

Another question for more experienced ONE users: is it possible to add a long or short position in the underlying to a trade? I have some trades I want to model that include both option legs and a position in the underlying simultaneously. This would also be useful to help accurately reflect total PnL on trades where I take assignment at expiration and sell (or buy back) the assigned shares the following Monday.

While I'm not at all confident in what the market will do over the next 6-12 months (like you, I wouldn't be surprised to see another leg down), a few observations here: A major (and IMO, underrated) difference between now and six months ago is the fall in interest rates. Six months ago, T-bills were still yielding 1.55%, and long-dated treasuries were yielding around 2.25%. The latter is certainly not a great yield historically, but it was at least enough to outpace U.S. inflation for the past 10+ years. But as of today, T-bills are yielding 0.10% (!) and the 30-year treasury yields only 1.24%. It's hard to imagine why anyone would buy the former, except maybe foreign governments who have to hold U.S. debt for various reasons. And while I won't say there's no reason to buy a 30-year bond yielding 1.24%, the reasons are relatively few. It's certainly not a good value proposition, unless you think we're headed for a long, long period of deflation. The fall in interest rates alone may justify why the equity market is at these levels, despite a much worse economic outlook. All the money in the world--and there's more every day with Fed intervention (see below)--has to go somewhere. With rates this low, bonds aren't attractive, CDs aren't attractive, savings accounts aren't very attractive, etc. So I think a lot of the resilience we're seeing in stocks is just the natural attitude of, "Well, I'm not going to get any yield on my money elsewhere, so I guess I'll buy equities, hold them, and at least earn some dividends while I wait for prices to recover." That's especially true in the sense that people with the big money--the type of money that moves markets--often either can't or aren't allowed to just put it in CDs or high-yield savings accounts. Another factor is the Fed liquidity, which is much higher than it was six months ago. The Fed isn't directly buying equities, but their aggressive purchasing of bonds adds cash to the market that historically has a positive ripple effect into equities. This isn't news to probably anyone on SO, but the market isn't pricing today's economy or even next month's economy. It's looking much further out than that. I have absolutely no idea what will happen, but factoring in the massive monetary and fiscal stimulus, it's not crazy to think that we could be roughly back to where we were in 6-9 months. Some industries surely won't be back that fast, but others may pick up the slack. The market dropped so fast and so deeply, I think there's an argument that it basically managed to price in all of the worst economic news in an incredibly short amount of time. That said, if what I just said is correct, I think it only applies to economic news. I don't think the market has any way to efficiently price in developments about the severity or mortality of the virus yet, for all the reasons Kim said. So, if it turns out that the mortality rate really is sky high, or if we see a bad second wave later this year, I absolutely think that will hit the markets hard unless we've somehow managed to nail down a really good treatment or a vaccine by then. Just my random musings here. Grain of salt, etc.