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Monday, August 12, 2013

Other Reasons I Love Tasty Trade



I've blogged extensively on Tasty Trade's philosophy of selling volatility and playing the probabilities of being in the money, and probabilities of success. Such information is invaluable to an options seller, especially if you are contrarian.



But there are other reasons that Tasty Trade appeals to me so much.

1. Trade Small, Trade Often. This mantra has big payoffs as my major losses in options have been when I was in too many contracts, and too few trades. (the all my eggs in one basket problem). When you operate with a limited fund, it is tempting to go for the big Apple trade or something similar, but the smart thing is to do a LOT of small trades with (appropriate) varied strategies (depending on the volatility and underlying), and keep a lot of trades going all the time. It's a numbers game.

2. It's a Numbers Game. This is a very exciting area of options. If you flip a coin, you have a 50 - 50 chance of it being heads, and a 50 - 50 chance of it being tails. If you are a statistician or/and mathematician, you will be familiar with random walk market theory. For us novices, Wiki tells us that the random walk hypothesis is a financial theory stating that stock market prices evolve according to a random walk and thus cannot be predicted. Think about that! If it cannot be predicted then WHY are all of these people learning chart indicators and chart oscillators and the hundreds of variations on chart predictions. It's because (obviously) that they believe that the market CAN be predicted, and believe that following the trend will produce results. Tasty Trades' research team has done enough analysis (see their entire archive of "Market Measures" videos) to prove to me otherwise. I'm in the random walk corner.

3. Standard Deviations. The volatility of an option is by definition equal to a 1 standard deviation expected move. So if I sell a put 1 standard deviation below the current stock price, it has an 84% probability of expiring out of the money. That kind of information gets me a lot more confident than the possibility of a trend continuing. As I said, a numbers game.

4. More Risk? Better Probability of Success! The TRUTH about naked options is inspiring. One would have you believe that you will lose your mind, give away the farm, and let the Devil take your soul if you sell (short) a naked put or call. UNLIMITED RISK~!~ the options class teachers warn. They have everyone so scared that all the real successful trading is kept in the hands of professionals who KNOW that the brokers estimate your risk on every trade, and the amount of margin they hold for your naked options is the actual risk. It is not unlimited. Indeed it is quite limited. And the more margin it takes, the higher the risk. The higher the risk, the more likely the trade will be successful. Unless of course you are an IDIOT and don't know how to trade at all. Tasty Trade has videos on just what the mathematical truths are about selling naked options and strangles vs. selling defined risk trades (like iron condors and credit verticals). The naked strategies are incredibly more successful, historically, over any reasonable period of time.

5. Underlyings that Entertain me One of the bonuses of trading the Tasty Trade way is that their philosophy does not work unless you use underlyings that have high volume, high volatility prospects, and good premium. This means that selling options on staid little stocks that trades less a million shares per day is a waste of your time. It also means that I get to trade Apple, Priceline, Google, Chipotle, Bidu, etc. ALL fun, sexy, and rich premium underlyings. If you want to enjoy trading, keep it interesting. if you buy LEAPS on Proctor and Gamble expiring in 2015, you can go to sleep until then for all the action you'll get. To say nothing of the loss of real income on more volatile underlyings. Selling options is the only way to go in my opinion.

If any or all of this sounds crazy to you, and you think you know options, I urge you to tune in to TastyTrade.com on your computer, take a look through their archives, (ALL FREE) and watch the live shows as well as the teaching videos. You'll thank me some day.

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15 comments:

  1. One of the instructors at Options University, Tim Blotzer, also loves these guys/gals and speaks highly of them. His favorite mantra is trade small, trade often - along with, don't be greedy and don't be stupid! LOL

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  2. Hello Beverly,

    I found your site while searching for reviews of Options Animal. I appreciated your honest review of OA. I read all of the comments on that post and found that you had switched to using tastytrade.com. I then checked out the site and read a few of your blog posts about it. I think you're right in that these guys have a lot to teach. Tom Sosnoff is obviously brilliant. I use thinkorswim all the time. However, I found the site itself to be very poorly organized. There is a vast amount of content on there and it's almost impossible to know where to start, especially many of the videos have such vague or "funny" titles. You obviously learned a lot so the information is in there somewhere but where do I find it? Can you suggest a series of videos that outline their strategies and philosophies? Maybe you could write a blog post about your favorite videos that give the basics of what they do? I have time to sit and watch videos but not enough time to sit and watch hundreds of hours before finally piecing it all together. I wish they an index of "beginner" videos or something. I'd love to hear your thoughts on this. Thanks!

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  3. Oh, one more thing: In one of your blog posts you mention that you make 5% per month. That's a good return but is that return "normal" for the tastytrade system? Or is that "normal" based on your personal trading style and risk tolerance? I.e. I've found plenty of credit spreads that can return 20 - 40% per month with an 80% probability but are you taking even lower risk trades that in turn return provide a lower return? I'm an aggressive trader so if tastytrade.com can only be used to provide 5% per month then I'll keep looking for a different educational site. Thanks for your time!

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  4. Hi, thanks for reading/responding. Yes, when you go to the TastyTrade.com website, look under "Shows" (at the top) and on the right side of the red drop down under "Extras" you will find BUNDLES. This is the section that bundles like shows on a given
    subject. This is for finding stuff you may NOT know, but not having to watch stuff you already do.

    If you are a real beginner, you should probably watch the entire series of "Where Do I Start" which is Tom Sosnoff teaching
    his 24 yr. old daughter to trade, from scratch. Also, Liz and Jenny shows are "basic" and their series deal with beginnings
    and you can find a whole section there showing you step 1 (what is a put?) through more advanced stuff.

    I'll give some thought to doing a post about this, thanks! I'd like to be helpful to other traders, so that might be a splendid idea.

    Happy trading,
    Bev

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  5. Hi Bev:

    I am a graduate of Options Animal and an avid listener of Tasty Trade. I could certainly comment on both, but I also came across an interesting site called Options Annex (www.optionsannex.com.

    Most of the material is free, and a very inexpensive course. It's a new site apparently, and it has a advanced approach to trading options similar to Tasty Trade, except if focuses on trading the Weekly SPX using spreads (similar to Karen the Super Trader, except she trades the Monthly using strangles).

    Thought you might find this site interesting.

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    Replies
    1. Not interesting at all. Another person trying to make money off option training AND he's using the coattails of the FREE Tasty Trade videos to do it. I really
      hate that.

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    2. I'm sorry you feel that way; I don't and here's why. First, the course is a strategy for making money from Weekly options, not an option training course. This differs from what Tasty Trade supports (a monthly approach). I am also an avid listener of TOS (Don Kaufman) who has recently stated that Weekly option trading is just a viable as Monthly, and that using an Expected Move is a better approach (Don prefers it) as opposed to using the Option Chain skew (advocated by Tasty Trade). As I said, I could certainly discuss some of research performed by Tasty Trade (by Al Sherbin, who no longer is there) which was poorly performed.

      And second, Tasty Trade encourages linking to their videos; so this actually helps get the word out about them. However, this site links only to those videos in which the webmaster feels has value.

      Just my two cents. In either case, we can all agree to disagree.

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    3. well, hello? monthlies give u more premium and more time to be right

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  7. Hello, I found you today. I enjoy the commentary. It is very helpful. I am delighted to have found this blog. Thank you!

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  8. love tom and tony there great they sure put there hart into teaching us new traders.

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    Replies
    1. I'm always happy when new traders find them. Wish I had years ago!!!

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  9. Overall I really like TastyTrade for the education they provide but I think they really understate the difficulty of trading. Building a trading career requires much more work than what Tom Sosnoff and his team wants you to believe. I know that times have changed and technology has evolved to a point where things are much easier now however, one cannot dismiss the fact that there's a lot of intuition involved in trading. This intuition can only be acquired through countless hours of screening. Trading is a craft, and one of the hardest out there one could argue. I think there's a lot of shared interest in regards to the things they teach at Tastytrade and their involvement with TD Ameritrade. For example, their moto, trade small trade often, benefits TD Ameritrade obviously through the commissions generated. They in turn support Tastytrade via referal commissions. Plus, Tom Sosnoff having sold Thinkorswim to TD Ameritrade a few years ago now holds a certain % of TD Ameritrade. As little as that might be, this surely benefits him over the longer term.

    I do not take for granted every single backtesting studies they present on the show because statistics can be biased. You know what they say, numbers are fragile beings, if you torture them enough they end up telling you whatever you want to hear. I find Tom's dogmatism in regards to the non brownian nature of the markets quite annoying. Clearly, the studies they show supports their specific beliefs about market randomness. However, a lot of studies have been done by great directional traders out there (Mandelbrot, Linda Raschke, Nassim Taleb and many others ) and their results also supports their respective beliefs about the cyclinal nature of volatility and the efficacy of their directional trend trading strategies. I guess what I'm trying to say is that markets are more complex than a either-or proposition. Consequently, you can skin the cat in many ways. Absolutism in trading is costly over the long term. Flexibility is what pays.

    I still think there is value in their education. Just dont buy everything they say because again, their interests are shared. In the end, home work always pays.

    It takes time to become a trader. It has always been the case. It works the same way for any highly competitive endeavor out there and it's not now that it's going to change.

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    Replies
    1. I could argue with you on several points, agree with you on several points, but I'm no longer in the game and don't want to be bothered.

      Trade small and trade often has nothing to do with TDA, and everything to do with actual probabilities and you should know that.

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