Awesome! Thanks!

Can anyone clarify

You bit misunderstood the first part, true - 2% risk for every trade. But the whole strategy can get up to 30% of your account. So you actually can add contract every Monday, based on the fact he was in the trade for approximately 40 days.

@@guygonen380 Sorry it still does not make sense. The example I gave accounted for adding a trade every Monday and winning every single time. Take a look at the math & call out where I am off.

@@igiveupfine 1. I just watched the last few minutes when Tom talks about the backtest. Every Monday, he put on a trade allocating 10% of a 100k portfolio. Over a two-year period he returned over 40% annually bringing his 100k account to 249k. So this backtest demo is not showing more than this single trading strategy. 2. He is apparently only allocating 10% and still getting these astronomical results which is confusing. 3. I am not sure my allocation is spot on but I think it is pretty close. Maybe you can break it down another way. You are talking about having 16 going at a time which would essentially put a 100k account at risk for a drawdown of well over 30%. Not a good idea. My example was each week put on the allowable risk (2% of the account). That would allow for 1 position each week, maybe two if you want to be generous. I even gave the benefit of putting on a new trade every single week with the assumption of 100% winners and still don't get anywhere near his returns. I'd love if someone could break down where I am wrong but at the moment I don't think I am..... this strategy is bogus.

Be careful with these 3x leveraged products. Hope it works out for you bro.

Technical analysis

Sustainable my Tiddies...

Good question! At this time no, but I would adapt with the market.

Also, with his example it's just hitting 18% with higher delta. His idea is great but it would only work when the volatility is high

Buying power would be significantly higher selling a 50 delta ATM put option compared to the 14 delta

I would assume it would be the strike wherever the 12 delta, so in your case then yeah

Another person who explains the same strategy never makes a trade with the same DTE. So he always pays attention that he doesn't have two options with the same DTE.

Thanks @@fabianmuller1736 , that makes sense. Do you have a link to that video?

Because of the long time until assignment or expiry. The broker doesn't calculate the full collateral at the beginning. But it rises the nearer it gets to the assignment or expiry.

I observed the same discrepancy. The BP need is in the tens of thousands even for LEAPS.

@@pdlue I believe he is referring to actual BP reserved in a margin account. It would be far different in a cash secured account. He also pointed out that he is using a “red key” (RK) margin account which gives very good returns, but you can get unbelievable returns on this strategy in a “portfolio margin” account (PM)

Margin

That’s I think absurd and miscalculated margin.. margin should be a few thousand to sell naked, one option Maybe you’re meaning if assigned. Which he said he really doesn’t do along with closing out at a 2-3x loss so he really is never assigned Yea that is 37,500 in cash or margin he needs to front if assigned..

When a valuable comment like this gets around, the KZfaqr always disappears 😅😅😅! You’re right I noticed the same. The other thing he didn’t tell us. If you sell 30 days later You won’t cash 💰 the full premium, you will only take a percentage of it and you will have to buy to close. So really ex. $37000 collateral $600 premium at expiration And probably $23 gains when he close the option 30 days later. If done successfully 4 times a month. That’s a 100 bucks 😅😅😅😅😅😅😅😅 Jesus Christ!

If the delta is where you want them to be, I dont care about my unrealized losses. Ever trade NDX? Talk about unrealized losses....but as long as the options are far out enough, who cares about the unrealized losses?

@@lasvegasadventures8729 Not sure what you are saying. I care about the loses. If the leap is in the money(50+) delta. Yes NDX you don’t get assigned until expiration, But if time is running out and it is down, you will loose, unless you are hedged. Which no one talks about. All they want to do is rolling. Or sell more to average down. Which is hard to do if you have a small account.

If it was available, maybe. I dont want to overweight my ES trading with too much span margin risk though.

You need a margin account, this doesn’t work well in a cash secured account

He's probably level 4

Yep

@@TommKing13 if you are using margin, with 100k account, you can't own all 10 SPY when getting an assignment, correct? What's your risk mitigation if the volatility spikes and drop fast closer to all your strikes? Thanks

A SPY contract is $3.3K. 10 of them is $33k in BP

2x the credit received. If you receive 100 your max loss is 200. And you get out at 30% so you risk 200$ to make 30$. Very bad ratio but he said he has a 97% win rate.

Option Omega

@@TommKing13 thanks. I know that TastyTrade has some kind of backtesting capabilities but haven't tried it yet. Have you researched the TT offering?

What do you mean exactly? Your TakeProfit is at 30 %. Additionally your premium depends on the actual IV

You are looking at max loss if this goes to 0. I will close at a 2X loss.

@@TommKing13 So 2X Loss is? For example if Max Profit is 600, Max Loss is -37,400 and BP is 3800 what is 2X Loss?

​​@@mcop1The loss normally relates to the premium you get. So in this example your premium is 600, so the loss is 1200

It is a good leverage opportunity. My main 2 reasons for NOT doing it are 1. TT does not offer LEAPs on ES like TOS and 2. I do not want to overextend my reliance on ES and the leverage I am already using on 112 and Strangle trades.

Thank you

SPY Leap controls 100 shares; /ES represents 500 shares so an /ES LEAP would be like selling 5 contracts vs. 1 SPY LEAP. Risky but juicy!

That's a good point. Even if you calculate with the max winner you will end up less than it shows. 110 trades x 480 USD = 52,800 USD

I came to the same conundrum. I did some work in excel to figure this out. The key is the 10% allocation is not total portfolio but per position. Every monday the backtest is opening a position worth of 10k based on buying power requirements. They would be holding 6, 7 or possibly 8 weeks worth of these LEAPS. Which equates to 60k,70k or 80k worth of buying power. Too much risk. Stick with 2-3% of buying power per week or 10-15% allocation of your portfolio in total. Should yield about 1% per month net based on Tom's rules

I think the only fair way to describe ROI is using the entire account balance. As we saw, a volatility spike can drastically increase buying power requirements. Therefore, even if the current BP requirement is low, there is a reason to keep extra cash on hand. Therefore, I think that opportunity cost should be factored in to return.

Why would you sell naked puts on a stock you think is "going in the tank"?

@@TommKing13 Dont you buy puts when you think the market is going down, and calls when you think market is going up?

@@livegoodwitherik you said naked put LEAPs which is selling puts.

@@TommKing13 sorry im new to options. I want to buy puts against TSLA next 6 months.

All good. I think selling LEAPs here is a better strategy, but TSLA is getting very enticing.

Simple example. You took in $100 A “1x loss” is -$100 so option is sitting at $200 to buy back A “2x loss” is -$200 so option is sitting at $300 to buy back A “3x loss” is -$300 so option to buy back is $400 You have to discount what you took in as that’s like house money sitting there in the pool either to decay and it’s yours or goes back to house and you have to give money back and then some

@@ssing7113 I think what Tom is doing is setting a 3X (his initial credit) stop limit order GTC upon initial trade setup; so stop out @ $300 for a -$200 loss (or 2X max loss).

I alert members of a Discord on every trade in and and out.

No, I just stay closest to 365

@@TommKing13 So then you'll just add another contract to the original short put?

Tastytrade does not offer ES futures that far out. TOS does.

futures have span margin

It would if Tastytrade would offer LEAPs on Es. But they don’t. I keep writing them.

@@TommKing13 IBKR offers those LEAPS.

@@TommKing13 , just chatted with Tasty, supposed to be adding some more ES contracts soon, getting them closer to the 365 Days.

Its Tastytrade. I use it too , great for options.

Ask away, I am busy and cannot always get to everyone on every video. There are hundreds of videos.

It's 30% of your premium. So you would buy it back at $525, making $225 profit.

@@wheidrich I think this is a wrong calculation. It should be calculated vs. the margin locked for this trade, i.e. 225/4500 which is 5% profit.

@@mirono No when they talk about closing at X% profit it is based on the premium collected. If you hold it to expiration and it is a winner then you would get 100% profit. There is no way you can make 30% of the margin based on the example.

I'm new to TT w/a smaller account as well). As of now (market is closed), selling 1 /ES Sep 24 PUT (longest dated i could see) would bring a $2625 credit (52 x 50 x 1 ct) and take $4600 BP in my margin account. Following Tom's 2% of Net Liq position size limit, you'd be well over that. Assuming Tom's 50% max BPC rule, you're then working with $5K BP, leaving very little room for any span margin increases. Maybe look at /MES...very doable then.

@@Zues64 yes, that's what I'm actually doing now.

Thats nonsense. The answer is: Portfolio Margin Account. I do this trades in my account, it needs only about 1.000 $ margin per Spy Leap sold.

The broker doesn't calculate the full collateral/margin at the beginning. The reason is that there is a long time until assignement or expiry

You look at options with a DTE from 300 to 365. You don't focus on the strike price but on the delta of 12. So you get the strike price "automatically" And the TakeProfit is at 30 %. If you sell an option with 1.00 premium, your takeprofit is at 0.70

I agree with you, to get the 30% would have to be a very risk stock or a way higher delta

Yep, me too. It's unfortunate that he does not reply much to comments

But low liquidity.