How He Trades Full Time with ONE Strategy
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- Опубликовано: 14 дек 2017
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Tom, have you thought about doing a rising stars -where are they now edition? See how they have performed continuing into events like 2020 and the volitility we are getting now in 2022.
Awesome video. Thank you for giving us real videos with real results. I'm learning more about strangles and loving it. I liked the fact that it's directionally neutral. I did Futures for some time and my portfolio never gave me hope until learning about options Trading! God bless you guys.
Very good one, and that one's not too cocky. The few word he says always mean something. He said a dozen things to be remembered here.
Here is an analogy I would enjoy hearing Tom’s (or anyone’s) comments on:
Suppose there is a very long pier jutting out into the ocean, and every morning, hordes of fishermen go out onto the pier and stand shoulder to shoulder all along both sides and on the end. They all drop their lines in the water at the same time and start fishing. For a while, a few people are catching fish; some of them get a big fish and some of them get small fishes, and some of them use up what little bait they had fairly quickly and have to go home. At some point, one of the fishermen on the right side of the pier notices that the fishermen on the left side of the pier are catching a lot of fish. He goes over to the left side and looks out at the water, and yells at the fishermen back on the right side, "There are so many fish over there that they are jumping out of the water and everyone is catching loads of them!"
So the fishermen on the right side of the pier all rush over to the left side and quickly drop their lines in the water. But it doesn’t take long to realize that since there are the same number of fish but now twice as many fishermen, the fishermen are all now catching fewer and smaller fish.
Then one of the fishermen notes that the ones who are catching fish are using live bait instead of lures, so all the fishermen at the rail run ashore to the bait shop and quickly buy up live bait. Some of the fishermen who had caught only a few small ones so far are forced to cut up their catch instead and use it to try to keep on fishing, too.
After a while, all the people now fishing with live bait still ends up catching fewer fish, until one of the fishermen sees that those who are using sophisticated fish finders to tell them exactly where to fish are doing much better than everyone else. Now everyone else runs ashore to the store again and buys all the expensive fish finders and rushes back out. In no time, they all identify the same historical trends of who caught what fish at what depth and using what bait, and as soon as everyone follows the trend and fishes exactly the same way, the inevitable happens and there are still far too many fishermen trying to catch the exact same fish.
At the end of the day, all the fishermen go home. A few had caught a couple of big fish and were happy; a lot more had a few smaller fish and considered it only a small loss; quite a few however used all their bait plus everything they had previously caught and cut up for additional bait so they had nothing left at all. While only a small few came out ahead, the rest went home to study how those lucky few did it so they could go back out tomorrow and try to catch their fish the same way.
And at the end of the day, the only people who made any money are the ones who sold everybody all the bait and the fish-finding tools.
Wish there was more traders in Pittsburgh!
he found his best weeks are when he has positions on and doing nothing. lol I feel that
Tom reminds us that direction-neutral positions end up directional on day 5
and sagedly said the only real drawdowns he had were due to position size!
Hi. What is the base that is being used to calculate the returns?
In other words: is it the amount of cash placed in the account? Or some calculated max risk number?
The cumulative performance of selling strangles just shows how risky it can be.... all gains of 5 months in 2017 wiped out in a few weeks on may... and it took the rest of the year to come back. During a large market correction with jumps on volatility this can be very difficult to manage...
he explained that due to getting into a backwards cattle market . .
You don't have to keep trading when volatility strikes
Yeah maybe a good idea to only trade strangles when volatility is in a certain range, although when volatility pops is when you have the best odds.. i'd have to dig deeper if i sold strangles. maybe a better idea to trade lower volatility so that you reduce risk of an outsized move
You should be personally limiting your risk with stop losses at 200-300% of what you got credited for opening the trade.
@@chaseramos4865 we want volatility
This is the dream. 😁 A full time portfolio manager.
Tom Sosnoff, I want to be this guy! Awesome video!
Great interview! Interesting that he chose strangles. And at 20 delta to sell. I have been told that in buying them 30 delta is the most bang for the buck due to the Gamma Curve if the underlaying moves more than 2 points. But for selling them, I would pick a lower delta in order to kind of play it safe so to speak. But that is a naked position, my broker would more than likely make me turn it into an iron condor in order to meet the margin requirement, as well as my option level that limits it. Gona have to try this on Thinkback and see if its for me, and if I can get that level.
Is the reason for product indifference because one should look at the IV of the stock when trading strangle?
This is what I have doing and works at least to me.
Strangles is too BP reductionist.
I do in 40-50IV Rank, 20/25 delta..
Average close is 10 days, but 25% win rate.
And then put another one, I trade 3 lots for 1 lot strangle this guy do..
20 WD spreads had proven to win faster for me..
Also done 10WD 30 deltas, and I love it too..
But 20x20 has been good to..and I look the stock chart some..
I wonder what happened in April 2017, every strangle he sold went against him in a big and he is diversified according to him .....hmm stock, oil, corn, bond , all go down big or go up big at the same time ??
Forget Feb. 2018, did he survive Dec. 2018?
Or last week....
Did he survive Feb 2020????
@@DaBearsManiac2 His otm puts caused him to buy stocks cheaper then people who bought jan 2020 ? so win win>?
He left trading in June 2018 and has been working in investment management firm since then. Somehow sad, i am sorry for him.
Great interview. Smart man. I wonder how much capital he was working with .
If Sosnoff says its sizable I'm guessing 7 figures ir close to it.
Thanks for the good content! One comment, however, is that I wish more time was spent discussing why it was worth liquidating his retirement accounts (in his late 20s with associated penalties) to pursue his "short strangle" recipe? Did he feel the alternative of sticking with "defined risk" strategies (allowable within retirement accounts) wouldn't have been worth it? Hence better to take the [one time] hit to transfer to a standard brokerage account that allows you to run "naked" and reap the [longer term] benefits? There was something there I wanted to learn about. Just a friendly comment -- again, thanks for all the valuable insights.
While yes, there is a penalty, the question really is more about feeling whether you can do better than the money managers that are handling your account or not. Especially if the guy was working for financial services firms. I work in financial services too and I can tell you that most 401k offerings are limited (mostly due to regulations). All I can choose from are boring index funds and target date retirement funds, not much else. So if you have confidence and know you can trade a much broader set of securities and have the skills for a higher rate, then the 1 time penalty is a no brainer. You eat the penalty and then move on - much better than letting your money be managed in a "bland" way for the rest of your life.
how was his 2016 return 72%? unless he meant from 04/01/16 - 04/01/17 which I'm not sure because he said it was a partial year?
Why not just buy a pair of 5 cent put/calls for protection?
He’s a new trader lol
Thanks for the interview with this guy. But would you please let us know what was exactly his strategy for Strangles? He said, he works with his comfort zone. But if we are to be specific, what should be delta on both sides what what should be the IV and IV rank and DTE? He talked abt two things little bit clear i.e delta 20 on each side and DTE 30 - 40 days or 45 days. But still don't know what would be the IV and IV rank?
In other videos they shared that the IV should be around 70 of higher. When it dropped below 50 they would sell.
IV PERCENTILE = > or = to 50
Its good that youre asking this and there's some good answers here. However, dont miss the key that Louis is giving above. He's also in multiple uncorrelated markets. If you can do that successfully, the finer points like IV can take a back seat. 20 delta in uncorrelated markets with good trade management on the R/R side and that should all be a combination to make you money.
What do they mean by scalping?
Around 8:00, he starts talking about using Delta as a barometer of when to roll a position. Is there any TT training where you guys elaborate on this specifically? You have a lesson or two on Delta in the Thinkific training, but I'm looking to understand Delta in this context that he's describing.
The answer is always yes on tastytrade.com - just head to the search function and you'll find plently of segments on this. Here's one of them!
www.tastytrade.com/tt/shows/market-measures/episodes/rolling-30-delta-puts-10-09-2017
@@tastyliveshow Thank you again!
How did he do Feb 5th?
and 10/10/18?
and 12/26/2018
Can we get an update how this man did in March 2020? Did he blow up his account or no? I feel like everyone can make money in a bull market but how did he fare in bear market/black swan event?
Considering he is selling options chances are he is a very risk adverse and cautious trader, so likely he wouldn't have blown up his account. Remember people who sell options are generally slow and steady cautious types, while people who buy options are generally risk taking types.
Looks like he moved to investment management at Merrill in '18.
Hi, when he says 20 delta, does he mean 20 delta on each side of the strangle or a 20 delta on the overall position (meaning a 10 delta on each leg) ?
He is referring to 20 delta on each leg, which creates a neutral delta strangle.
3 years later.... is he a mega-millionaire yet?
Behind wendys now, he likely got shreked during the covid crash
He says he waits for the delta positions to get skewed till a 35 to 5 before he rolls over the untested side. Isn't that a little too delayed? If I sell a 30 delta strangle what is the best time to roll over should the stock starts to steeply move in either direction? Also what does break even mean? Does it mean the stock price touching either of the Strike price I sold?
"best" time to roll depends on what sort of delta you want to maintain in the position - waiting too long would mean a stronger delta exposure. Breakeven in the case of a short strangle is where you would breakeven at expiration. Short put - credit on the downside, and short call + credit on the upside would be your breakeven points.
@@tastyliveshow Thank you for taking the time to reply, now if I may ask another question? In your experience what kind of adjustment works the best? Let's say I short a 30 delta strangle and the stock moves upwards drastically skewing the delta to a 60 to 15 on the call and put respectively. According to your videos in this situation it's suggested we wrap up our winning side and sell another put which hovers around the 60 delta mark (to equate the strangle). Now this often turns our trade into a stradlde or tbh an inverse strangle in most cases. Now if the stock continues to move upwards we can collect more premium on the put side but the problem arises when the stock starts to come down and we start to lose on put side while still being in loss on the call side. Sorry for the long question but this is the predicament of my life right now.
It's all about disciplines.
Is it me or just Tom is trying to learn how to trade from this kid 🤔? Love Tastytrade!
He's learning nothing . nothing new in selling premium . wonder if the young man knows it's possible a day could come when there's no way to get out
I mean that is the point of an interview
When he says 10 to 20 positions, does he mean 10 to 20 strangles or does 1 strangle count as 2 positions?
A strangle is normally considered one postion.
One strangle equals one position
what do you mean by five delta positions? 0.5? Thanks for the reply
.05
While Delta is technically the move in options price for every $1 move in underlying, generally the 5 delta position essentially means the strike has a ~5% chance of being in the money at expiration. So if you're on the sell side of that position, you have a theoretical 95% chance of the option expiring worthless and keeping all the premium. Options chains at all main brokerages have a column for delta and many traders use it to enter positions and quickly calculate rough percentages chances of OTM/ITM. Often times you'll also hear traders open positions in terms of standard deviation (1 sd, 1.5 sd, 2 sd, etc). One standard deviation is around a 16 delta.
is there a video that shows how to "roll up the untested side" ?
There sure is!
www.google.com/url?client=internal-uds-cse&cx=015477303216471237373:u_cnlyqjhzi&q=www.tastytrade.com/tt/shows/market-measures/episodes/trade-defense-rolling-untested-sides-03-15-2018&sa=U&ved=2ahUKEwiRnbWw9ariAhUH1qwKHduRCMAQFjAAegQIARAC&usg=AOvVaw15YAiuFAP66yOyRUSjAlil
You either buy back the call and sell a lower one, or buy back the put and sell the higher one.
Does anyone know why he may have lost so much money around May, 2017. I can’t see anything unusual with the SPX or VIX. Maybe he was trading commodities.
I would like to know this too
People on TT seem to think that never buying is macho or something. This doesn't impress me at all, it just makes me doubt what they're saying.
where in pittsburgh he from. Im in the east suburbs of pittsburgh
a question that could have been asked a lot more and should always be asked more: "why?"
Did he survive March 2020? 😱
Lol tastytrade says you always used 5 percent of your capital bc of event like that, when you have no events like feb-march 2020 crash the 5 percent of capital can make your account increase by 30 percent if done according to tastytrades philosophy which most people don't follow and panic. Btw if he rolled out his puts he would have been profitable today but personally I'd take the loss 😅😅😅
Well, I would argue this was the best time to sell options. Volatility was too juicy. And, one could go way out on 1 SD because of increased volatility.
Good question!
I agree. This was an unfair question, considering he probably manages his capital and positions well. I started buying strangles for the first time in March and I have had my best year so far as I quickly moved from those strangles into covered calls at 1sd on high iv blue chips. I also like condors on FRO for some reason. Agreed Fahim, I would have taken the loss; I have just recently started to learn to properly roll my positions. Chandramouli.... agreed, those premiums were wonderful.
I was lucky only because I had been watching the johns hopkins covid Map in early March and watched it grow exponentially, so i saw market turmoil coming.... and with my limited knowledge of options strategies.... I bought a whole lot of vxx strangles (yep, i didn't even have directional bias).... and I did very well. What are your predominant strategies curently?
Wiped out
real numbers would be nice... but 4 years on and i still don't know if 100k portfolio is enough to live on.
I've tried the TT strategies. To me they are like watching paint dry selling IC's. Strangles unhedged scare the shit out of me. I'm sorry I can't ever see myself being comfortable with unlimited risk. I trade 1 DTE long straddles and butterflies in high IV works for me. Defined risk and flat every Friday before close. No worrying about positions over the weekend so i can live.
you could always just buy the position back if it starts to turn against you, and if you do it on stocks which are typically not volatile it is shooting fish in a metaphorical barrel.
Sea of death with long straddles.
Dude gives off hella buffalo bill vibes.
I wonder if this guy is still trading full time?
captain stottlemeyer voice
when he says there is a gap between what a tasty trader knows and what a pro knows. is he impying that the prof fund managers know more than the average tasty trader or is it the other way around
other way around
Base voice good
"Nahhh we aint goin to Pittsburgh bro lmfao"
he has no track record, 2 years isnt enough data.
Mabye thats why it's called rising star
Which school in NYC is the best school to teach me how to be a expert online trader?
Hi Nathaniel,
We don't offer any recs for physical locations in which to learn options trading, as all of tastytrade's content is free! Check out www.tastytrade.com/tt/learn for more information on common options trading concepts and mechanics.
NONE trading is like going to the mines in WV. you aren't taught you observe run a conservative bias risk management strategy and be patient stay focused and invest all of your time into the markets and what i mean by that is spend your time watching all securities but find a "honey hole" stick with it, and most importanley trade your plan don't rely on the group. You are the business run it right and success will follow. God Speed and happy hunting.
School of hard knocks!
is he playing with 5k or 500k.... If you dont disclose your account, how do I trust your account basis
its not the $$ amount, its the method that's material ... can i rinse and repeat and consistently be more profitable than not
can i trade full time if i only have 100K account?
Hi Alon,
Trading full time depends on a number of things including your risk tolerance, size, products traded and more. For more input, the best point of contact is your brokerage firm's trade desk!
$5k month is a 5% return sounds simple but would be hard to do consistently what the pressure of paying for ur lifestyle. expenses would be the huge factor but on the skeptical side I’d lend toward no unless ur already a skilled trader(or in this market going long on Apple amazon or google
Big Al only have 100k? People trade full time with much much less. It all depends on how you trade
Still in business?
yeah. he works in fast food now
Shaking your head at indexes? S and P index in 2017 was 21% He made 13-17% doing this full time. What am I missing?
What about 2018
He's well aware what indexes are capable of. His point was that there are other ways to make similar returns if you know what your doing. He was shaking his head at the person's index recommendation as a lot of people that recommend passive investing perceive traders as people who take insane risk and lose money which is true for many but not all.
Am I the only slightly new trader who is totally lost?
Check out our beginner course that's free - that should help:
tastytrade.thinkific.com
Selling strangles in an upward bullish market he must have extreme luck behind him
No luck here. Its possible. He may be rolling up his Put short positions and/or selling additional Strangles to deal with any pullbacks.
Satish Gundarapu so basically adding to your losing position and hoping it goes back in your direction
@@caatrader Adding to losing positions is asinine. If your trade is a loser, close it and make a better trade. Doubling down is not influenced by past results and belies an inveterate, magically thinking gambler mentality.
The problem with tasty trade is that you assume we know what a 20 delta strangle is. I kind of do, but to truly understand this conversation I would like to see examples and adjustments etc. None of this great info means anything to the guy almost getting it
.2 delta option. Similar to about 1 standard deviation Out of the Money.
20 delta think as 20% risk of loss, 80% win rate.
Delta 20 just means a 20% probability of landing in the money which is a little more than 1 SD, which tends to be the optimal risk to reward to probability. If you trade a lower delta you don’t get much premium and if the delta is too high there is too much risk.
That isn't a problem lol, just a higher level conversation that you need to do some research to understand
They discussed this on a thousand videos prior to this.
the fact that this guy will not will not buy options will be his undoing
This strategy is suicide
how?
why?
long term it is.
@@matiasbraconi825 Strangle is an unlimited risk strategy. Black swans do exist and wipe out these confident traders.
@@felipefigueiralima7748 maybe he got wiped out in feb
LOUIS, I too am in the Pgh area, looking for a mentor. Would love to an opportunity to talk with you. Maybe you can help me turn the corner. If interested, let me know how I can contact you directly, and there might be a PriBro's sammich in your future! Thx!