I understand that nobody recommends trading this way. But I'm thinking this is the only method that suits my personality. And I'm wondering how successful one might be with the method if played at the extreme maximums of cautions and probabilities, in the sense that you're only entering a trade when you have a 1/50 chance or worse of failure, and around a 4% return on risk. Yes, you still lose everything if you lose once, and the time to recoup the amount lost from a single failure is most likely a year or more.
But still, I wonder. Does anyone make a living out of a trading strategy that's focused on achieving a near 100% win rate? Are they still around? Might they have some tips to share? I'm having trouble finding a lot of information about people who trade like this, probably because they've all blown up their accounts and moved onto more intelligent trading methods. But maybe, some of you guys are still out there in the shadows?
Any steamroller enthusiasts out there?
byu/Stickerlight inoptions
Posted by Stickerlight
7 Comments
something with a 2% chance of failure wont offer a 4% return.
why would the other side of the trade pay that?
“Does anyone make a living out of a trading strategy that’s focused on achieving a near 100% win rate?”
Maybe if they live in a cardboard box under the freeway….😉
The **only** way to win at options is to disagree with the market and be right enough to turn a profit. The market sets prices based on supply and demand and every option lands at a fair value the market believes will break even *at that moment*. Given the terminal price distribution implied from the pricing (IV) you can statistically determine how the market has priced any given outcome.
If you have a conviction view that you can get 4% for what’s priced at a risk of 2%, then it could be a real edge. But even if you are right, is it really worth it?
Using your numbers above let’s assume the 2% of the time the trade fails you lose 100% and the rest of the time you gain 4%.
Assuming also the same investment basis for each trade you’re looking at a 1.96% return.
We’re also assuming these returns already account for transaction and liquidity costs, but you’ll want to factor those in if not.
Finally, I don’t know how long the terms are for these trades, but you have to view those returns through the lens of a risk-free return of ~5%.
But to answer your question: yes, there are always people who haven’t been run over yet.
About this time, some highly volatile index fund is revealed to be the steam roller, which essentially photoshops the entire low delta strategy into something much more risky.
If the strategy has a 1/50 chance of total loss. Then after 34-35 trades there’s a 50/50 chance that you’re broke.
You’re numbers are wrong.
Be more specific other than “steamroller”