thoughts of experience trader on all income trading strategies

[aiti]

For example a 5-Lot-RTT 2390/2340/2260 with Expiration at 28/29.Sept 17 for 0,70 each Lot just in the moment
cost for ES 175 $ plus commision 28.20 $ Margin shown in the tradepanel of IB is 1416 $.
cost for SPX 350 $ plus commision 26.66 $ Margin shown in the tradepanel of IB is 13008 $.

You can try it in your account at TS without sending the order.
I think at TS in the tradepanel there will the commisions and margin be shown. Then you can compare them yourself.

 

[aiti]

I forgot to talk about capital requirements:
Be aware that despite the margin-requirement is so low for ES the risk is only the half of the SPX trade.

 

[GH13]

I forgot to talk about capital requirements:
Be aware that despite the margin-requirement is so low for ES the risk is only the half of the SPX trade.

Also, SPAN is risk based margin like PM so your margin if the market moves down will be dramatically different than what you started with.

 

[Luke]

I would prefer to start with SPY / IWM in order to start small and keep my risk under control (I aggree with Marcas on most points) Also I can't replicate RTT with SPY because the commission costs tend to neutralize the gains. Finally I'm not (yet) sure If I'm ready to paid right now for a service before getting accustomed to trade a smaller capital strategy by myself before.
My dream would be to gain those first $1000 by myself in order to pay one year of RTT service.

Have you considered something like the Parking Trade or Mark Alpers' credit spread trade? It's not a "paid" service but will help you get comfortable with entering trades, understanding margin, keep your risk low and then you can paper trade with appropriate lot sizes the RTT or whichever you choose. Both of those have clear presentations and guidelines and they are simple put credit spreads pretty far out of the money, so they can handle a large down move (if you can handle a drawdown if such a large move happens quickly).

 

[tom]

I am trading ES futures options with the Tradestation futures+ platform , which is required to trade futures option with TS, and use OptionVue for risk analysis. To use the futures plus platform at no cost, live data and market depth included, you need to open and fund a futures account and then open a separate futures options sub-account through an internal transfer of funds. No need to apply for SPAN margin; it automatically apllies to ES futures options. With the help the TS staff easyily done. Commisions are 1.20 USD per trade plus 55 cents for exchange and 1 cent for NFA fees, totalling 1.76 USD. Not the cheapest but quite good as compared to many other brokers. As yet, commissions were exactly the same for each single trade, independent of position size, number of legs or whether you add or not liquidity to the market.

To give you an idea for the relation of SPAN margin to RegT margin. With a 30k account, I have 5 overlapping Road Trip Trades open, each of them a 6 lot, plus some hedges with teeny puts. My current margin fluctuates between 10k and 15k which is about 5 times less than RegT margin (taking as such as an approximation the maximal possible loss on the left side of the expiration graph). To be on the safe side, your margin requirements should preferentially stay below half of your capital; increases in volatility and large moves against your positions may increase margin substantially. This means that if you do not trade the RTT every 2 weeks but only once a month (the 3rd Friday expirations), there should be not a problem to trade a 4-lot and have 3 overlaping trades without exceeding 4k of margin requirement and be well off with a 10 k account. A realistic expectation for returns might be 200 USD for a 4 lot, which would be equivalent to 2% per month over capital and close to 5% per month over margin.

Posted by Peter M Klatt

 

[Marcas]

Steph,
I advice you not to start with /ES. There is too much going around there and you should focus on trade itself .
You said that commissions on SPY will eat your profit. They might. So what? If profits are on your mind you will lose money and time.
10K for start? Very well, put 2 tranches of RTT or any other trade you like (choose proven, low maintenance one). If somebody recommends 4 lots at minimum it's even better. You will have to figure out by yourself how to navigate with 2 lots - this is worth much more than most brilliant seminar when taken passively.
You want to pay for year of service in advance? Don't do it! No, no. Well... if you plan to follow somebody for long time then it is ok, it even saves you some money, but this is not the way to became trader. I'm not against seminars or services, just use them wisely, don't overdo.

As per me wanting to take your money. It's kind sort of... More accurate would be to say that I will be competing with you for the same money. That's better perspective, I think.

Good luck.

 

[tom]

I believe that Marcas resumes well what is the price you have to pay for a learning process that holds the promise to convert you in a reasonably successful trader. Just a few words regarding spendings on courses and alert services. I fully agree with Marcas, don´t overdo. But do not go to the other extreme thinking that the self-made indie approach is the way to go (with the exception of a few privileged minds and fortunate gamblers). Dan Sheridan's most valuable advice, and many of the Aeromir guys have been trained by him, is that you have to learn the craft. And this is the point when most people will profit from following a mentor's strategy and become familiar with it ad nauseam. Chose one that has been mathematically/statistically profitable for some time, fits your style, knowledge, capabilities and expectations, stick to it for at least one year. And then decide what to do next. Aeromir is certainly a good place to go forward.

Posted by Peter M Klatt

 

[GH13]

Aeromir is certainly a good place to go forward.

Tim Pierson's Beginner's Group here is a great place to start. I listen to the recordings and there is a lot of fantastic info in there. By actively participating you can get involved and I don't want to speak for him but I imagine he would welcome questions and comments during the meeting.

 

[Steph]

Thank you all, I understand the process you try to give me. So I will follow Tim Pierson's Beginners's group and his parking trade, and in the meantime will also learn by following and trading the SPY weekly strategy (a positive expectancy strategy from Ali Pashaei. I've just bought his course on CD a few weks ago and for the moment it is a kind of mentor's strategy for me to follow). Marcas and Peter: effectively ES options are not the easiest way to start with even if I perceive the margin advantage (I have not a future account, need to fund another account) and in some months why not starting trading RTT on a month to month basis subscription with SPY until I will get ready to handle some more risks with a bigger underlying.

 

[jrob]

I am trading ES futures options with the Tradestation futures+ platform , which is required to trade futures option with TS, and use OptionVue for risk analysis. To use the futures plus platform at no cost, live data and market depth included, you need to open and fund a futures account and then open a separate futures options sub-account through an internal transfer of funds. No need to apply for SPAN margin; it automatically apllies to ES futures options. With the help the TS staff easyily done. Commisions are 1.20 USD per trade plus 55 cents for exchange and 1 cent for NFA fees, totalling 1.76 USD. Not the cheapest but quite good as compared to many other brokers. As yet, commissions were exactly the same for each single trade, independent of position size, number of legs or whether you add or not liquidity to the market.

To give you an idea for the relation of SPAN margin to RegT margin. With a 30k account, I have 5 overlapping Road Trip Trades open, each of them a 6 lot, plus some hedges with teeny puts. My current margin fluctuates between 10k and 15k which is about 5 times less than RegT margin (taking as such as an approximation the maximal possible loss on the left side of the expiration graph). To be on the safe side, your margin requirements should preferentially stay below half of your capital; increases in volatility and large moves against your positions may increase margin substantially. This means that if you do not trade the RTT every 2 weeks but only once a month (the 3rd Friday expirations), there should be not a problem to trade a 4-lot and have 3 overlaping trades without exceeding 4k of margin requirement and be well off with a 10 k account. A realistic expectation for returns might be 200 USD for a 4 lot, which would be equivalent to 2% per month over capital and close to 5% per month over margin.

Posted by Peter M Klatt

Pk..AWESOME REPLY AND INSIGHT!

 

[pintodave]

Thank you for all those good advices and support.
As far as I understand, for me the RTT needed at least 4 lots to allows easier adjustments. So with a 3k to 5k per lot that represents 20k.
I currently have a 10k account. Also statting with RUT or SPX is quite intimidating for me (because I would like to keep a 2% max loss per trade or $200). I would prefer to start with SPY / IWM in order to start small and keep my risk under control (I aggree with Marcas on most points) Also I can't replicate RTT with SPY because the commission costs tend to neutralize the gains. Finally I'm not (yet) sure If I'm ready to paid right now for a service before getting accustomed to trade a smaller capital strategy by myself before.
My dream would be to gain those first $1000 by myself in order to pay one year of RTT service.

Agree with all the above responses and thought I'd throw my .02 in with it...

I had a 10-20k acct for the longest time, and I did "ok" with it (for me, the definition of ok for a new trader is not blowing it up), and a lot of the dilemmas you have pointed out are real. Mentally, I finally figured out my problem was perspective. I was trading my 10k account like a 10k account. The simple fact is, if you are using a small account to gain experience and want to eventually scale up in the coming months/years, then you must trade that 10k account with the mindset it is already a 100k account. I was not doing anything improper with my small account, but I was doing lots of trades, some with no real goal or end-game in mind, more of a "hey let's try this for a month", or lets try this earnings trade I saw or read about. Nothing wrong with that, BUT the question is: is that how I would trade a LARGE account? Absolutely not. I might use a tiny portion of a large account to do spec trades or test new trades, but that is not how I'd manage the whole account. So I mentally started trading that 10-20k like it was already 100+k. Exciting, no. Less stressful, yes.

Some thoughts for the RTT in a small acct is reduced lots (as already mentioned), or you can go with more contracts but skip cycles, for example only follow along the monthly expiration trades. Also as mentioned above, by doing less contracts, you will still be forced a little to think about your personal position vs what Dan is showing with his position, all while having a relatively controllable trade. That is also wonderful for your learning process. Regardless, I can emphatically say you stumbled across the correct forum to hang out in, it is a great group here.

 

[Marcas]

I earn less comparing to near ATM trades but I feel much safer.

Well, I have second thought.

I remember what Steve S said: margin is what broker say it is.
Right, but when I have a good trade with hedges I'm proud of and my risk starts below 10% and my real risk is much lower. And if something happens my hedges kick off and vomma start to work so I will be positive, why, the heck, my broker should be unhappy?

In excerpt from the latest Gartman Letter quoted by Zerohedge (www.zerohedge.com/news/2017-10-19/how-dennis-gartman-was-margined-out-black-monday) we read:
"I got a frenzied phone call from my clearing firm at the time wanting 100% margin on both sides of the trade by 10:00 to be wired to them or they were going to sell me out… immediately!"
Doesn't matter how position looks (later Garman would be nicely up if he could meet this call), broker wanted 100% margin within 30 minutes or else. He has right to do so. In that case all my nice hedges... I quickly should take few screen-shots to have something to talk about later.

So i'm having second thought before I "step on it". Maybe Kevin's rules are not so bad after all... at least in strange now-days.

 

[GH13]

I remember what Steve S said: margin is what broker say it is.

I went round and round a few weeks back with TOS regarding margin on my positions. I finally got it sorted out after 2-3 people looking at it but it made me realize that just because the analyze tab is showing me what my PM margin should be doesn't mean that is what TOS will interpret it to be. TOS is one of the better firms regarding liquidating trades for margin calls (a lot of other brokers will start to liquidate your position right away) but that is not a risk I am comfortable taking.

 

[Marcas]

Yes, you are right. Another point I'm not 100% sure is handling margin calls. Obvious thing is to bring money in. You can also do trades to relieve margin. I did so in near past when I let my t+0 line drop to fast, but there is a limit - I think I can do it 3 times with TOS after that my PM is suspended (not sure about it though).
About being comfort with risk. I think I would be more brave after we had a long fall, but now... I don't thing we will crash tomorrow but in few moths? Who knows? Soon, I may loose my sleep.

 

[tom]

The Road Trip Trade may not be the most sexy strategy if you look for spectacular returns and boosts of adrenalin, but it may be one of the most robust income trading strategies out there that combines a high win rate with consistent returns that help to build confidence and become a skillful options trader without the need to spend your day in front of the screen. And it is fully scaleable, in particular if you use ES futures options.

Above post was written by PK on 19th July 2017 which almost 1 year back. The performance of RTT over past 12 month somehow has been lack luster.
can the not so good performance be solely attributed to market conditions ?
Also RTT did not stand or react very well to the down move that happened during the 1st week of Feb 2018. It is possible that some of the trades that were well above the max loss were not existed but kept open for much longer duration of time otherwise the returns would have been worst.



Posted by Sanjeev B

 

[DGH]

Hi Sanjeev. First, the RTT seeks positive expectancy over time, not spectacular returns followed by deep draw downs. Average yields per cycle in most market environments range from about 2% to 6%, with occasional double digit returns when volatility is elevated and good premiums abound. In strong bull markets when volatility is low (as now), yields will be in the lower range, but the high win rate and other performance metrics are maintained. Second, the losses in February are due in part to a concussion which I suffered on February 1. For a period of about 2 weeks I was unable to fully concentrate on my positions, and I chose not to try to do much to mitigate my losses since I was concerned about compounding a bad situation in a falling market. Normally, I would have simply closed the positions long before incurring large losses, since loss mitigation is one of the key tenets of maintaining high positive expectancy. If you study the RTT equity curve on the website (Aeromir.com) you will see that the period in February and part of March was an aberration, not the norm.

 

[Kevin Lee]

There is no strategy, RTT or any other, that is all weather proof. A strategy will work in certain market environment and not in others. Question is whether the strategy produces positive expected value over the long term and whether the behavior of the strategy fits a trader's personality. If the answer is yes, then it's a good strategy. However, one must not expect a strategy to produce positive returns in all kinds of market environment. That's not realistic.

 

[tom]

Dan & Kevin,
Thanks for providing valuable insights.

Posted by Sanjeev B

 

[Marcas]

RTT is a rigid strategy, it does not adjust to market environments. It does best in flat market and dropping iv - like all BWB type trades. It's worst env. is in rapidly dropping market and rising vol - like for all BWB type trades. By using fixed strike selection: strike spans and point distance to atm it does not adopt. Thus it is up to trader to include techniques that compensate for this, in my mind, deficiency. Those maneuvers need to be added on top of another set of adjustments, natural to OTM BWBs that start with debit - rising right expiration line.
RTT was real low maintenance trade only in slowly rising market and flat iv, if market changes don't expect to be able to take any road trips while having RTT on, especially in size.
I'm referring to oryginal RTT presented by Dan in Round Table session.