“I Follow Bob”
I’m interested in your courses as I have followed Tastytrade for three years and follow “Bob” and make about three or four trades in four different accounts. Two are margin accounts and two are IRA accounts. The total is about $200K.
Even though I only place “high” probability trades, I have slowly lost money, and each account is down about 5% over the past three years. My hesitation with SJ options is the cost and the fact that I have a history of making bad decisions concerning investing. The positive with Tastytrade is it’s free. However, I have come to realize that I’m not making any money, just churning the account. The information that Tastytrade gives out doesn’t address all the problems with trades. I put on iron condors, and they immediately start to lose money, and according to tastytrade all one can do is wait to see if the market doesn’t move. I get out when the trade reaches 50% and buy back when the loses reach 200%, and as such it takes at least 5 winners to offset one loser, so it’s like treading water lots of movement and no progress.
What can your program offer? How much is the software? Do you recommend using more than one or two contracts as a time?
Thank you for your time.
I received the above message and decided to address this topic for others to learn from.
I am aware of the Tasty Trade methods and the difficulties with them. Probability trading is meant for very small allocation of a portfolio, such as 5% to 10%, which means it’s not an effective method of investing with options since a 3% return on 5% of a portfolio is only a .15% return. If this rate is achieved each month, and it won’t be, annual returns will be 1.8%. Double that if you want to risk 10% of your portfolio.
There are many reasons why probability trading does not work so well with options.
POP vs. R-POP™
If a trader includes the entire probability zone, then they must take on extreme amounts of risk. For example, if one is trading a high-prob iron condor and one does not make any adjustments inside the probability zone of 90%, then if the price moves to the edge of the zone, the trade will most likely be experiencing a very large drawdown and one big move could result in a tremendous loss on the account. For this reason, the “probabilities” of probability trading are difficult to realize unless the trader takes on large risks. The R-POP™, which I coined many years ago, is the “REALISTIC PROBABILITY OF PROFIT.” This would be the probability zone of acceptable risk. Although this can vary from trader to trader, it’s about half of the POP, which means an iron condor with a 90% POP only has an R-POP™ of 45%.
When trading on standard high probability, the winners are tiny and the losses are very large, so that is why one should only invest a small portion of a portfolio when trading on probability alone. It only takes a few bad trades, and the account will never be able to recover. One really bad loss can result in 100% of invested capital. If one is 50% invested, then 50% of the account is wiped out with max loss.
Too Many Trades
If one tries to manage many trades at once, that is very time consuming and risky when the market moves fast. It’s very difficult to manage a portfolio with too many positions.
Lacks Risk & Volatility Management
Traditional high-probability trading does not work well because it’s missing the very foundation of successful options trading. It does not address volatility and risk management. The high-probability trading concept has been around for decades, but most option traders are not successful, and partly because of this approach. It’s long history of failure demonstrates that it’s not an effective method of trading options.
SJ Options methods are completely different and do not rely on probabilities, they defy them. For over a decade already, we’ve demonstrated that calculating probability before an options trade is irrelevant since it does not address the fundamentals of profiting from an options position. The concept is very misleading and does not help a trader achieve success. At SJ Options we’ve realized a 98% win-rate of our trades for many years without using probability calculations.
OptionColors™ options analytical software is a very unique options trading platform and helps us achieve our high success rate. Options have a very distinct behavior that traders cannot see or understand in other software. With OptionColors a trader can see exactly how options behave; it’s like watching a glass engine. OptionColors helps us construct better trades and know when to enter and exit them.
The last thing I wanted to address was the price of the SJ Options options course. This person stated he is down 5% on $200,000, and he has also lost 3 years of time. So far he has paid about $10,000 trading on probability, and the market over the last 3 years was relatively easy to trade. He is fortunate to only be down $10,000 so far. Over a difficult market such as 2008, he could easily be down 50% or $100,000. I have spoken to an advisor who lost 50% of an account trading on probability resulting in over $500,000 in losses. I have heard many horror stories from options traders over the years, who tried to trade options based on the POP method.
Yes, we do have a tuition for our program, but not taking it can cost a lot more. We’ve put over a decade into developing our strategies and OptionColors software has also taken just as long. The tuition is relatively low considering what it comes with.
I or my staff would be happy to give you a personal demo of our products and services to explain in greater detail. I hope this article has helped you understand why trading on probability alone may not work out so well long-term. Thank you again for your questions.
With best regards,
Morris Puma, CEO